Washington Long-Term Care Trust Act: What Employers Need to Know

Washington Long-Term Care Trust Act: What Employers Need to Know

Washington employers face a critical decision by December 31, 2025: participate in the state's WA Cares Fund or provide qualifying private group long-term care insurance. This choice carries significant financial and strategic implications for your organization and workforce.

The Washington Cares Fund imposes a 0.58% payroll tax on employee wages starting in 2026. For a $60,000 salary, this equals $348 annually per employee. The program provides approximately $36,000 to $50,000 in lifetime long-term care benefits - coverage that may prove insufficient for actual care needs.

Understanding Your WA Cares Compliance Options

Employers have two paths to compliance with Washington's Long-Term Care Trust Act:

Option 1: Participate in WA Cares Fund

Your organization withholds the 0.58% payroll tax from employee wages. Employees become eligible for state benefits after paying into the system for a qualifying period. Benefits are limited to the state's maximum payout and tied to Washington residency requirements.

Option 2: Offer Private Group LTC Insurance

Provide qualifying private group long-term care insurance that meets state opt-out criteria. This eliminates the payroll tax obligation while typically offering superior coverage options.

Cost Comparison: WA Cares vs Private Group LTC

The financial comparison strongly favors private group coverage for most employers:

WA Cares Fund Costs:

• 0.58% ongoing payroll tax
• $348 annually for $60,000 salary employee
• $36,000-$50,000 maximum lifetime benefit

Private Group LTC Insurance:

• Typically $15-$40 monthly premium per employee
• $200,000-$500,000 benefit pools common
• Inflation protection riders available
• Portable coverage not tied to state residency

For a 100-employee organization with $5 million annual payroll, WA Cares participation costs $29,000 yearly in payroll taxes. Private group coverage often costs less while providing significantly better protection.

Private LTC Insurance Opt-Out Requirements

To qualify for WA Cares opt-out status, your private group long-term care insurance must meet specific state criteria:

• Provide benefits for all covered long-term care services
• Include inflation protection or benefit increases
• Offer minimum benefit periods and amounts as specified
• Cover employees working in Washington
• Maintain continuous coverage without gaps

Implementation Timeline and Deadlines

December 31, 2025: Final deadline to establish qualifying private group LTC coverage and complete opt-out procedures.

January 1, 2026: WA Cares payroll tax collection begins for non-opted-out employers.

Missing the December 2025 deadline locks your organization into WA Cares participation, with no subsequent opportunity to opt out once the program launches.

Strategic Considerations for Employers

Workforce Impact: Private group LTC insurance provides portable benefits that follow employees beyond Washington employment. WA Cares benefits require ongoing state residency and program participation.

Cost Predictability: Group LTC premiums offer multi-year rate stability. WA Cares tax rates can increase through legislative action as program costs evolve.

Competitive Advantage: Superior long-term care coverage differentiates your benefits package in talent recruitment and retention, particularly for mid-career and senior employees who understand LTC risks.

Compliance Process for Private Coverage

Employers choosing private group LTC insurance must:

1. Select qualifying coverage that meets all state opt-out criteria
2. Enroll eligible employees before the December 2025 deadline
3. File required documentation with Washington State
4. Maintain continuous coverage to preserve opt-out status
5. Handle ongoing compliance reporting and premium management

Next Steps for Decision-Making

Evaluate your organization's total cost exposure under both scenarios. Calculate the ongoing payroll tax burden against private group premium costs, factoring in the superior coverage levels private insurance provides.

Review your current workforce demographics and benefits strategy. Organizations with employees approaching retirement age or those prioritizing comprehensive benefits packages typically find private coverage aligns better with broader talent management objectives.

Consider implementation complexity and administrative requirements. While private coverage requires initial setup and ongoing management, many employers find the superior employee value and cost control justify the administrative investment.

The December 31, 2025 deadline makes this decision time-sensitive. Employers who wait risk losing the opportunity to opt out and being locked into the more expensive, less comprehensive state program.