State LTC payroll taxes are active in Washington and expanding to several other states. Employers with 50+ employees should model their exposure now and consider private alternatives that qualify for exemption.
Key Takeaways
Tax Exposure Is Real
WA Cares Fund imposes a 0.58% payroll tax — NY, CA, and MN have active legislation.
Private Plans Can Exempt
Qualifying group LTC plans allow employees to opt out of state mandates permanently.
Model Your Liability Now
A 100-person firm in WA pays roughly $34,800/year in combined employer-side costs.
Window Is Narrowing
Several states are approaching enrollment deadlines for private plan exemptions.
Frequently Asked Questions
Which states currently have LTC payroll tax mandates?
Washington has an active program (WA Cares Fund, 0.58% since July 2023). California has passed legislation for a 2028 launch. New York, Minnesota, Connecticut, and several other states have active legislation in various stages.
How much does the LTC payroll tax cost employers?
At Washington's 0.58% rate, a 100-person firm with average wages of $60,000 pays roughly $34,800 per year. California's pending rate of approximately 0.9% would be higher. Multi-state employers face cumulative exposure across each state.
Can employers avoid the LTC payroll tax by offering private coverage?
In most states with mandates, employees who have qualifying private LTC insurance can opt out of the state program. Employers who offer qualifying group LTC plans can enable employees to claim exemptions, effectively replacing the payroll tax with a benefits investment.
What should CFOs do now to prepare?
Model your payroll tax exposure across all states where you have employees. Review whether your current benefits package includes a qualifying private LTC plan. Schedule a briefing to assess exemption eligibility and compare the cost of private coverage versus state tax obligations.
Is the exemption window still open?
Washington's original opt-out window closed December 31, 2022, though SB 5395 created narrower exemptions in 2025. California and other pending states are still designing their opt-out frameworks, making now the optimal time to put qualifying coverage in place.
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