URGENT: First in the Nation Long-Term Care Insurance Tax!

Employees in Washington State must purchase long-term care insurance by November 1st to opt-out of this tax

What is the Tax?

There is a new Washington State long-term care tax that is scheduled to go into effect January 1, 2022. The tax is set at 0.58% and will automatically come out of your paycheck at an amount of 58 cents for every $100 of W2 income you earn, and is subject to change beginning in 2024 and every two years thereafter. So, as an example, if you currently earn $100,000 of W2 income, you will be paying $580 of additional taxes each year for this state benefit. Additionally, there is no cap on the earnings that will be taxed, meaning however much income you earn, that amount will be taxed. To run a calculation on how much you may pay in taxes over your working years, click here for a “Long-Term Care Tax Calculator”.

What Does the State Long-Term Care Program Offer?

The state pays a set benefit regardless of how much your income is and the amount of taxes you pay into this state account. In other words, whether you have paid $10,000 into this tax fund or $100,000 into this tax fund, the benefits will be the same and are as follows:

  • up to a maximum daily benefit of $100 a day
  • a lifetime maximum benefit of $36,500
  • benefits are subject to change in the future

To qualify to receive these designated benefits in the future, you must be unable to perform 3 activities of daily living (ADLs) on your own, which can include things such as eating, dressing, bathing, transferring, toileting, and cognitive impairment (private policies only require you to be unable to perform 2 ADLs to qualify for your benefits to start paying). You also must have paid this tax for a certain number of years and worked above a specified level of hours during that time. Finally, the benefit will only pay out if you are living in Washington State at the time of a claim.

For more information about the Washington State Long-Term Care Insurance Program, click here.

To learn more about the average monthly cost of various long-term care services in Washington State and elsewhere click here (costs can vary from state to state and city to city).

How Do I Opt-Out of the Tax?

If you are a W2 employee, to opt-out of this tax you must be at least 18 years of age at the time you apply for an exemption and purchase a qualifying long-term care insurance policy, as defined by the state under RCW 48.83.020, by November 1st of this year. Also, once you opt-out of this tax you cannot choose to re-enroll, meaning you will no longer have access to the state's long-term care program.

Depending on your income level, and your health, you can likely pay less for a qualified long-term care insurance policy than you will have to pay for the new Washington State long-term care tax. You can also obtain significantly better long-term care insurance benefits that will pay regardless of your employment history and what state you live in at the time of a claim.

If you are interested in opting out of this new state tax by purchasing a private long-term care insurance policy, please contact us right away. Due to the high volume of applications anticipated, we encourage you to start taking steps now to research your options so you will have plenty of time to get a policy in place before November 1st of this year.

What is Long-Term Care Insurance?

With longer life expectancy and the cost of care rising, every person owes both themselves and their families to investigate long-term care insurance. In fact, 52% of those turning 65 this year will require some sort of long-term care during their lifetime.

Long-term care insurance covers a wide range of services and costs in the event of a chronic medical condition, disability or disorder. Qualifying disorders can be Alzheimer’s or other memory impairment, or not being able to do two or more activities of daily living such as bathing, eating or dressing.

Policies can differ but most will reimburse for a variety of different care services including:

  • Home Health Care
  • Nursing Home
  • Assisted Living
  • Adult Day Care
  • Home Modifications

Most of these services are not covered by health insurance, Medicare or Medicaid. Strict rules regarding long-term care reimbursement from these groups are difficult and may not include your first choice of facilities or providers.

The Cost of Not Having Long-Term Care Insurance

Don’t risk your financial security

Without preset income set aside, most individuals will have to dip into their nest egg, or retirement savings, to pay for care. Note that these are just the current prices and will only continue to rise due to availability shortages and rising costs.

  • Home health aide - $50k+
  • Homemaker services - $48k+
  • Adult day care - $18k+
  • Assisted living facility - $45k+
  • Nursing home care - $80k+

Government programs are only available once all savings and income is exhausted. Transferring funds from someone’s account to make their income look lower and qualify for government aide is fraud and closely monitored. Unfortunately for those depending on government programs, there can be a long waiting list.

The costs for care can quickly deplete any savings and looking back you may ask yourself; did I work hard and save as much as I could to pay for something that could have been covered by an insurance policy?

 

The Benefits of Having Long-Term Care Insurance

  1. Protect what you’ve saved. Of course, you saved to take care of yourself so you wouldn’t be a burden to your loved ones. But the costs of full-time care can easily equal almost a million dollars or more over a 20 year period, per person. Did you build up your savings all your life to have that money go to healthcare? Or did you plan to travel, leave an inheritance, or make a charity contribution? Make sure you can enjoy your retirement as well as leave the legacy you had planned.
  2. Freedom of choice. We’ve heard the stories of substandard elder care. No one wants their loved ones or themselves in that position. Long-term care insurance will empower the holder to choose what type of care you receive and where. Having proper funds will provide you with more options when selecting care providers.
  3. Peace of mind. No more worrying about what will happen “if the time comes”. Enjoy the present and have fun with retirement savings without agonizing about saving money for later care.
  4. Age in place. More options for home care means you may choose to stay in your home, your neighborhood and near family, friends and church. Modifications and home health aides can help delay moving into a care facility.
  5. Ease the burden of loved ones. Many adult children become the “sandwich generation” caring for both their parents and their children. Whether financially or physically, the burden can be emotionally draining for everyone.

Call or contact CEG Life Insurance Services to discuss the possibilities in long-term care insurance. Even if you feel long-term care insurance is not right for you now, you can work on a plan for when a policy should be started and you can always begin researching the various options available to you.