In 2019, the Washington State Legislature passed the WA Cares Payroll Tax program along party lines that imposes a $0.58 per $100.00 to all W2 earnings. The long-term care program that HB 1087 created provides a $36,500 maximum benefit (approximately 6 months of long term care), may not be transferred to a spouse, may not be used outside of Washington, and is not available employees within 10 years of retirement. Washington voters voiced their opposition to the program with 63% voting ‘no’ statewide.
I was not here in the House in 2019 when WA Cares was passed. I followed the issue like many families and small businesses. I was not here in 2020 when the Office of the State Actuary released its report on WA Cares that evidenced its insolvency. Many of us have been sounding the alarm for years- without any urgency from the Governor and his Democrat majority in the Legislature. With an actuarial report evidencing insolvency, the exchange of ideas should have been broad and inclusive, and most importantly, bipartisan. That was not the case. So, I am being clear that I will once again introduce legislation for the 2023 session to fully repeal this program as the voters wanted.Rep. Peter Abbarno, State Representative in the 20th Legislative District
In 2021, Rep. Peter Abbarno (R-Centralia) introduced HB 1594 to fully repeal the tax and allow the state to work on better solutions with a private-public collaboration to address long-term care spending. HB 1594 did not receive consideration in committee hearings or on the House Floor. Instead, the Legislature passed two (2) bills; HB 1732 to delay the payroll tax until July 2023 and HB 1733 to exempt Veterans, nonimmigrant visa workers, and employees with permanent residences outside the State of Washington. No further exemptions were granted. Now the WA Cares Payroll Tax Program is more insolvent than before!
As previously reported in the 2020 Base Plan – Milliman:
- The state would need to impose a payroll premium assessment between 0.61% and 0.71% based on investing in U.S. Treasuries, or between 0.051% and 0.67% based on investing in stocks and bonds.
- The current premium rate of 0.58% is set in statute and is only expected to keep the fund solvent until 2075. The Base Plan notes that the premium required to pay for all program benefits and expenses over the next 75 years (the industry standard) is 0.664%.
- Base line projections assume 103,000 wage earners will opt-out of the program in 2022.
Although more updates are expected later this summer, the current 2022 Update to Base Plan – Milliman:
- After incorporating actual opt-out data, the required premium assessment needs to increase from 0.664% (2020 Base Plan) to 0.7% to maintain solvency for 75 years. This does not include the impacts of HB 1732 and HB 1733 which delayed the program and created new exemptions and will likely require another premium rate increase.
- The 2020 Base Plan assumed 103,000 wage earners would opt-out of the program, but approximately 473,000 individuals have opted out.
- The 2020 Base Plan assumed the average age of individuals opting out would be 46.4, but it is actually 41.2 (which decreases wages going into the trust fund).
The WA Cares Payroll Tax program is unpopular, insolvent, and creates a false sense that a person’s long-term care needs will be satisfied. The reality of this program is that most will pay more into the program than they will ever receive in benefits, and those benefits are very limited, short-term, and inadequate. A person investing the same amount of funds privately would have a greater return on their investment and greater flexibility to use those funds on long-term care need. We must work on real solutions. Without a full repeal, an increase in the regressive payroll tax is inevitable on working families.Rep. Peter Abbarno (R-Centralia)
In 2019, only two counties voted in favor of Advisory Vote 20 to maintain the WA Cares Payroll Tax Program; King and San Juan counties. In addition, a majority of voters in 35 of 39 legislative districts voted to repeal the WA Cares Payroll Tax, including the 20th Legislative District where 75% of voters chose to repeal the program.