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May 20, 2022

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Washington House sends bill to Senate that would delay long-term care tax

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OLYMPIA — An 18-month delay of the long-term care payroll tax is one step closer to becoming a reality.

The state House of Representatives voted 91-6 Wednesday to send a bill to the Senate that would delay the implementation of the tax to July 2023 . The House also voted 67-29 on a bill that would create more exemptions for the tax, including for those who live out of state but work in Washington.

The Senate has indicated it would likely take up the bills as early as next week.

During Wednesday’s debate, sponsor Rep. Pat Sullivan, D-Covington, said the delay will allow the program to be “as effective and efficient as we can make it.”

After controversy arose in recent months over the long-term care program, also known as WA Cares, lawmakers agreed to delay it so they could fix some concerns. Gov. Jay Inslee announced last month the Employment Security Department would pause the collection of the tax from employers. He did not have the power to delay the tax completely, meaning employers could still collect the tax from their employees.

The Legislature first passed the bill creating the program in 2019. It aims to help residents offset the cost of long-term care. It requires workers to pay 0.58% of their wages into the fund beginning Jan. 1. Those who qualify can access the benefit — up to $36,500 — to use on a number of services, including professional care at home or at a facility, home safety evaluations, equipment, training for caretakers, meals or transportation.

Employees can opt out of the tax, but must purchase a private long-term care insurance plan to do so.

A bill passed in the House on Wednesday would delay the collection of the program altogether until July 1, 2023. It would also delay the date that people could begin collecting the benefit to July 1, 2026.

Republicans filed a number of bills this session that would make changes to the program or completely repeal it. Most have not yet been scheduled for a public hearing.

“Without giving these bills a hearing, the Legislature is locking ourselves into a solution that really isn’t a solution at all,” Rep. Drew Stokesbary, R-Auburn, told reporters Tuesday.

During the debate Wednesday, Republicans asked for floor votes on two of their bills, one to replace it with an optional private plan and one to repeal it altogether.

Both motions to vote on those bills failed on the floor.

Most Republicans voted in favor of the delay but had concerns with the program altogether.

Many cited concerns with the program’s solvency and the inability to opt out without a private long-term care plan. Under the original program, those who live out of Washington but work in the state have to pay for the program but can’t access its benefits. The benefits are also not portable, meaning those who work in Washington but retire elsewhere can never access it.

Rep. Joe Schmick, R-Colfax, voted in favor for the bill, but with the hope that many of those concerns would be addressed over the next 18 months.

“We have some challenges that we need to fix,” he said.

The House on Wednesday did pass the first of what could be many fixes to the program. The bill establishes a list of exemptions to the payroll tax not included in the original program. They include some veterans with a service-connected disability of 70% or higher; spouses and registered domestic partners of military service members; nonimmigrant temporary workers; and employees who work in Washington but live in another state.

Bill sponsor Rep. Dave Paul, D-Oak Harbor, said WA Cares will help many families in the state, but there are some that may not need the option. It makes sense to give them the option to opt out, he added.

Stokesbary said he wasn’t sure why the Legislature was rushing into changes with the program after just voting to delay it for 18 months.

“If we’re going to hit pause for 18 months, we should be serious about that,” he said.

The Legislature should take its time looking at these exemptions and other changes to improve the program, Stokesbary said. Though he agreed there should be exemptions, he added there could be other unintended consequences to the program that could come from rushing these changes now.

As of early December, more than 440,000 people had purchased a private plan and opted out of the state-run plan, according to a presentation from the Long-Term Services and Support Trust Commission. That’s about four times more than the number of people the Legislature assumed would opt out when they passed the bill, State Actuary Matt Smith told the commission at the time.

With an unexpected number of people opting out and the inability of the state to invest the funds from the plan in private stock, critics of the program worry about its sustainability. A constitutional amendment that would allow the state to invest the funds from the plan in private stock failed in 2020. Without the ability to do so, the Office of the State Actuary found the program is fully funded through 2075, assuming the 0.58% tax rate stays the same. By 2076, only 71% of full benefits would be paid out. By 2096, 85% of the benefits would be paid.

Opponents say to keep the program sustainable, the tax rate will eventually have to go up for workers.

Stokesbary said called the program “insolvent on day one.” A delay may help the Legislature address that , but it still may not fix the underlying issues.

The bills will still have to pass the Senate before it becomes law. They could be heard in committee as early as next week.

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