Washington (WA) Long Term Care (LTC) Tax to Begin July 1, 2023

WA passed a LTC payroll tax law back in 2019 which was originally set to begin at the start of 2022. However, the tax was subsequently delayed which we wrote about here.

The WA LTC tax must begin on July 1, 2023, for employees who work in WA, receive wages reported on a Form W-2, and work at least 500 hours per year.

The WA Cares Fund has created a website with a section for employers that includes a toolkit with calendars, sample communications and FAQs. While there is no requirement for employers to notify its employees of the new tax, WA Cares strongly recommends notifying affected employees.

Employees who had private LTC insurance on or before November 1, 2021, were able to apply for an exemption from October 1, 2021 to December 31, 2022. This opt-out provision is no longer available.

It may be helpful to remind employees that they must provide their employer with an exemption approval letter to be excluded from the WA LTC tax on payroll starting July 1.

While the private LTC opt out is no longer available, employees may also apply for an exemption if any of the following apply:

• Live outside of WA
• Are the spouse or registered domestic partner of an active-duty service member of the US Armed Forces.
• Have a non-immigrant work visa
• Are a veteran with a 70% service-connected disability rating or higher

If the exemption is approved, the employee must present the exemption approval letter to the employer. Employers can direct its employee to apply for an exemption here.

Note: Employees must apply for an exemption via the WA Cares exemption account. Instructions to apply are included in the link previously provided. Employers are unable to apply on behalf of employees.

For more information on which employers must comply, please review the previously posted IMA blog.

In summary, employers with employees working in WA, including those working remotely from their home in the state of WA, must work with payroll to collect the tax starting July 1, 2023, and remit to the state of WA. Employers must collect the LTC tax from covered employees unless the employee provides an exemption approval letter. In that event, the employer should keep a copy of the employee’s approval letter on file.

IMA will continue to monitor regulator guidance and offer meaningful, practical, timely information. This material should not be considered as a substitute for legal, tax and/or actuarial advice. Contact the appropriate professional counsel for such matters. These materials are not exhaustive and are subject to possible changes in applicable laws, rules, and regulations and their interpretations.