Money from your paycheck: Breaking down the new Washington Cares Fund
Starting in 2022, Washington will take more money out of your paycheck.
A new law called the “Washington Cares Fund” requires Washington workers to have a plan for long-term care.
Money from your paycheck can either go into the state’s new Washington Cares Fund or you can opt-out and buy private insurance.
But – it’s not as simple as it sounds.
Whether you make $20,000 or six figures, the state says you need to have a long-term care plan. If you want the state to take care of that plan, it will cost you.
For example, if you make $35,000 per year, you will pay $16.92 a month or $203 a year. It is 0.58 cents for every $100 you make.
“It goes into a fund that’s for long-term care and all of us — our children and grandchildren, will be drawing from that fund,” said Washington Cares Fund Director Ben Veghte.
But what if you don’t want to pay the tax?
You will need to buy private insurance before November 1, which may not be easy to find. Many insurance companies got so overwhelmed, they are not taking any new applicants.
“You might have one left or two left, but almost all of the companies, the insurance companies, the private insurance companies, have left the state of Washington now,” said Financial Planner Eric Christiansen.
Christiansen, who works for Quantum Financial Planning, says many people will likely have to go with the state fund. It may be the best option for some families.
“I would really believe that if you’ve got that lower income, that is going to be a benefit for you, and you may not be able to afford the long-term care private insurance policy anyways,” Christiansen said.
The state fund caps at $36,500 over your lifetime. And you can only use $100 per day, which likely will not cover everything if you are getting long-term care.
“One hundred dollars a day, even if you get a long-term care policy through an insurance company, they get so expensive now that you usually say ‘Well, maybe we need $100 a day and then social security is going to kick in the rest,’” Christiansen explained.
Veghte says the program is similar to Medicare and the lifetime benefit will adjust based on inflation. A state council will meet every year to determine that.
“This benefit is designed to pay for about a year of 20 hours a week of homecare,” he said. “We are going to be working with private insurers to design supplemental coverage so that if people want more insurance they can buy more insurance.”
If you go with the state tax, you cannot take it with you if you move out of Washington and you cannot get the money right away if you need help.
He added that if you move and you come back to Washington for care, you can be eligible for money, if you paid in for the amount of time that would qualify you to take out the money.
“People who start paying this coming January, once they have paid in for three years, everyone is eligible if they need care three years after that,” Veghte said.
But even then, not everyone may get the money when they want it.
To qualify, you must need help doing at least three daily activities, like eating, going to the bathroom and getting dressed.
“The goal of this is to allow you to stay in your home as long as possible so you don’t have to apply to Medicaid. You don’t have to move to a nursing home,” Veghte said. “Most people aren’t able to protect themselves with private long-term care insurance because they can’t afford it.”
You can also use the money if you are in a nursing home or if you are in a rehab facility for a few months, but some people are going to be out of luck.
If you plan to retire in less than three years, you do not qualify for the help, even if you are paying the tax. However, Veghte says the state is working to resolve this.
“The LTSS (Long-Term Services and Supports) trust commission is looking at policy options that would make it easier for people close to retirement to continue paying in if they want to to qualify for this benefit,” Veghte said.
The need for long-term care may look like a distant possibility, but it is critical. Seven in 10 Washingtonians over 65 will need it.
There are a lot of important deadlines coming up.
From now until December 31, 2022, you can apply for an exemption if you plan on buying private insurance.
However, you have to buy it before November 1, 2021.
The state tax starts on January 1 and you can be eligible for benefits in 2025.
For more information about the Washington Cares Fund, click here.
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