Washington's payroll tax is already live. California, New York, and Pennsylvania are next. Organizations that act before mandates take effect can offer opt-out programs that eliminate the liability entirely.
Long-term care is the single largest uncovered risk in most employer benefit stacks. It's not on the radar until a state mandate forces it there -- and by then, opt-out windows may have closed.
State LTC payroll taxes are calculated per employee. The larger your workforce, the bigger the annual liability. A 500-person organization in Washington is already paying over $250,000 per year.
Every quarter without a voluntary LTC program is a quarter closer to a mandate with no opt-out. The math is straightforward: program cost versus payroll tax liability.
Washington's opt-out deadline has passed for most employees. California and New York are designing their programs now. The window to act is before legislation finalizes, not after.
Long-term care insurance has historically been a personal financial planning decision. That changed in 2022 when Washington became the first state to impose an LTC payroll tax on every W2 employee. The tax is small per person -- 0.58% of wages -- but it compounds fast across a workforce.
A 500-person organization with an average salary of $90,000 is paying over $260,000 per year in WA Cares payroll taxes. A 2,000-person organization is paying over a million. And Washington is just the first.
California, New York, Pennsylvania, and several other states have active legislation in progress. The question is no longer whether your organization will face an LTC payroll tax -- it's when, and whether you'll have an opt-out program in place before it happens.
Which states do you have employees in? Which of those states have active or pending LTC mandates? What are the projected tax rates and timelines? For multi-state organizations, the aggregate liability across three or four mandate states can be significant.
Based on your headcount, average compensation, and state footprint, what would your organization pay annually if mandates take effect with no opt-out program in place? This is a straightforward calculation, but most executive teams haven't run it.
In every state mandate passed so far, employees who secure qualifying private LTC coverage before the deadline can opt out of the payroll tax. A voluntary LTC program -- where employees choose to participate and pay their own premiums -- creates that qualifying coverage. The cost to the organization is near zero. The payroll tax savings are substantial.
Opt-out deadlines don't align with your benefits calendar. Washington's initial opt-out window closed in late 2021 -- before most employers even understood the program existed. Employees who missed it are now paying the tax indefinitely with no way to reverse it.
The states designing programs now are watching Washington's rollout carefully. The expectation is that future mandates will have tighter opt-out windows and stricter qualifying coverage requirements. Organizations that move early have more flexibility. Those that wait get fewer options.
Hollowtree launches LTC programs off-cycle. There is no need to wait for your annual enrollment period. From initial eligibility review to live enrollment takes four weeks. The program runs independently of your existing benefits infrastructure.
We analyze your workforce demographics, state footprint, and existing benefits landscape to design a program that maximizes participation and opt-out eligibility.
Every eligible employee can participate regardless of health status. No medical underwriting, no declinations. This is a significant advantage over individual LTC policies, where health-based underwriting excludes a substantial percentage of applicants.
Compliance note: All programs are underwritten by A-rated carriers and are contractually designed to meet or exceed state-specific opt-out requirements.
We handle employee communications, enrollment support, premium collection via ACH direct debit, and ongoing reporting. No payroll slot is required. No IT integration. Your HR and finance teams stay focused on their core responsibilities.
Compliance note: Because we use ACH Direct Debit, there is zero impact on your payroll systems and no requirement for Finance to manage new tax deduction codes.
Annual program reviews, participation reporting, claims advocacy, and monitoring of new state mandate developments. As new states pass legislation, we flag opt-out windows and recommend action.
Compliance note: Hollowtree monitors legislative updates in real-time to ensure your opt-out strategy remains valid as state laws evolve.
Avoid the 0.58% (or higher) permanent payroll tax for every participating employee, protecting your total rewards budget from legislative erosion. In states with employer-share taxes (under consideration in several pending bills), the direct savings are even larger.
Forward-thinking benefits packages differentiate you in competitive hiring markets. LTC coverage signals that your organization thinks long-term about employee wellbeing -- a message that resonates particularly with mid-career and senior professionals.
73% of caregivers report that caregiving responsibilities affect their work. Employees with LTC coverage have a plan for when care needs arise, reducing the absenteeism, productivity loss, and early retirement that unplanned caregiving creates.
The program is 100% employee-paid via ACH. There are zero employer contributions, zero implementation fees, and zero ongoing administrative costs to the organization.
We handle the distribution of qualifying coverage documents and provide employees with the necessary certification to file for state tax exemptions.
We act as a technical sub-advisor. We provide the specialty LTC infrastructure and state-mandate tracking that generalist brokers typically do not provide.
Implementing now future-proofs your organization. It allows you to lock in guaranteed issue rates before state legislation creates tighter restrictions or higher participation requirements.
We work with organizations of 300 or more employees. The payroll tax math becomes compelling at that scale -- but the employee benefit of guaranteed issue LTC coverage is valuable at any size.
A 20-minute call is enough to map your state exposure, estimate your annual payroll tax liability, and outline what an opt-out program would look like. We'll bring the data. You bring the questions.
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