LONG-TERM CARE - WA CARES ACT TIPS & INFORMATION
REQUESTING AN EXEMPTION FROM WA CARES
Once you have your policy, the next step is to wait for the state to come out with its exemption form – expected to be available in October. The form will be available at http://www.wacaresfund.wa.gov, and employers will likely also make it available to their employees.
You will file with the state to request the exemption and the state will issue you a confirmation regarding your exemption. At this time, it is unknown if that will be immediate or will take time for them to process. You will present that confirmation to your employer, so they will not withhold the tax.
IMPORTANT: This must happen by your first paycheck in January. Due to the potential millions of people filing for the exemption, your employer will have a large number of updates to process in their payroll system. The state has made it clear there are no refunds. For example, if your exemption is not processed by your employer until February, while you wouldn’t pay taxes going forward, you wouldn’t get a refund on what you paid in January.
December 31, 2022, is the last day the state will issue approvals for the exemption. If you are not exempt by that date, you will remain in the WA Cares program.
WHAT OWNING COVERAGE CAN MEAN TO A LOVED ONE
Many people purchased without spending time considering the value this coverage provides beyond tax avoidance. If you are unfamiliar with this important planning, we encourage you to learn more about long-term care here.
CAN I JUST CANCEL THIS POLICY ONCE I AM EXEMPT?
As currently written, the Act states the exemption is permanent. However, we caution that the state has the authority to change the rules and require future proof of coverage to keep you exempt. There is increasing awareness of the implications the exemption will have to rob the WA Cares Trust of funding. Further, it is counter to the intention of having people either own private coverage or be covered by WA Cares.
Future legislative sessions can change the rules, which were put in place by the pen and can be changed by the pen. The Act has already been amended once.
If your intention is more about tax avoidance and less about the insurance benefits, our recommendation is to hold on to the policy at least until the end of 2025. At that time, assess the legislative environment, then decide on your best course of action. 2025 will be the first year WA Cares begins to pay benefits. If the state hasn’t acted by then to adjust the rules, that could be the year that causes them to do so.
If you don’t want long-term care insurance, think of it as “tax insurance,” and hold it a few years to allow the state to better understand if WA Cares is adequately funded. While changing the tax rate could be an option, given the number of people who opted out, adjusting exemption rules could provide a greater impact on funding. A few years of paying for your policy may be well worth it if it helps you avoid a tax for your remaining working years.
Simply stated, cancel at your own risk regarding maintaining the exemption.