Opting out of the long-term-care payroll tax is more complicated than necessary, suggesting it’s just a nice gesture
During the last legislative session, lawmakers approved exemptions for four new categories of people who won’t benefit from the WA Cares Fund. (Many Washingtonians won’t benefit, but these groups are told that the payroll tax they’ll be paying won’t bring a benefit for them from the outset.) They include workers who live out of state, military spouses, veterans with a 70% or higher service-connected disability and workers on non-immigrant visas.
The WA Cares Fund is a mandatory long-term-care program created, in large part, to help the state’s increasing Medicaid costs with a new tax stream. Some workers paying the new payroll tax that begins in July 2023 for 10 or more years, and who need long-term care, might benefit from the program, though they still need to be planning for the potential life-need. That’s because the program benefit is inadequate for most people who need assistance with activities of daily life, such as bathing, meal-making, taking medicines and so on.
WA Cares is also designed to be a taxpayer-financed jobs program of sorts: Program beneficiaries can use the money to pay caregivers, including family caregivers, if they have training that is yet to be determined by the state. Service Employees International Union 775, a union representing caregivers and collecting dues, has enthusiastically supported the bill. Read more here.
According to federal filings, SEIU 775 collects 3.2% of members' wages each year, OptOutToday.com tells. ”Beginning in 2003, state-paid individual provider home care aides were required to pay union dues to SEIU 775 as a condition of employment,” the site explains. Individual providers of home care can now choose to disallow SEIU 775 from withholding money from their state paychecks, given a U.S. Supreme Court ruling in 2014. The court ruled for providers’ First Amendment rights to freedom of speech and association.
Back to opting out of the program: While creating new exemption categories was the right thing to do by some of the workers who will never benefit from WA Cares, it’s problematic for them, too, as they aren’t just exempted. They have to apply for exemption, knowing to apply and how to apply.
The legislative change is also problematic for the state program.
“Providing a larger pool of potential employees eligible for exemptions from the program will likely reduce the amount of premiums collected and may affect the Long-Term Services and Support (LTSS) Trust Fund solvency,” the fiscal note for the legislation related to exemptions says. The fund already has solvency concerns, with the state actuary once pointing to a $15 billion shortfall.
The fiscal note continues, “The bill's impact on cash receipts are indeterminate because the Employment Security Department (ESD) does not know the wages that the potential pool of exempted employees would have contributed to the LTSS program had they not received an exemption.”
The state assumes more than 200,000 workers in these four groups will seek exemption between 2023 and 2025. (See Page 35 of the note.) “How those flow annual is more difficult to track,” it also reads. That’s because the bill creating these new exemption pathways, unlike the exemption language in the original legislation for people who had private long-term-care insurance, has no application end date. It will require applicants to submit documentation showing that they qualify for the exemption, unlike the original exemption group, “and certain events will cancel the exemption,” the fiscal note reads.
Agricultural workers might slip through cracks
An ESD spokesperson tells me that with an 80% exemption uptake rate, which is assumed, just under 44,000 non-immigrant visa holders will apply for an exemption in the first year.
Right now, I’m especially interested in how many H-2A workers (temporary agricultural workers) will seek an exemption — and how easy or hard that will be for them, given language barriers and their often brief time in the United States.
A 2022 story in the Yakima Herald-Republic says that in 2021, there were 28,727 H-2A positions certified in Washington state, an increase of 7% from 2020. The executive director of Wafla, an Olympia-based organization that assists growers in bringing H-2A farmworkers to the Pacific Northwest, told the paper that the state “experienced double-digit growth of the H-2A program from 2015-2019, but since that time growth has stabilized.” Agriculture-rich Washington state has more H-2A workers than most states — ranked fourth in the number of H-2A positions in 2021, behind Florida, Georgia and California.
H-2A workers are just one of many different groups of people with non-immigrant visa classifications that could be seeking out WA Cares’ exemption. U.S. Customs and Border Protection explains, “A nonimmigrant visa (NIV) is issued to a person with permanent residence outside the United States but wishes to be in the United States on a temporary basis for tourism, medical treatment, business, temporary work, or study, as examples. There are more than 20 different categories of nonimmigrant visa classifications.“
It looks like every temporary agricultural worker will have to seek exemption on an individual basis. And I’m concerned they will need to apply for an exemption from a tax they won’t fully know about in a timeframe that is unrealistic. ESD, which is currently making rules for how the new exemption process will work, should allow H-2A workers to be exempted as a group and automatically. All the groups should be automatically exempted, with an option to opt in.
Scott Dilley, communications director for Wafla, is also concerned. When he saw the proposed rules for this process, he thought, “Why does it have to be this complicated?” He said, “They (the state) shouldn’t put up artificial barriers. “
That’s the thing. This long-term-care law has a pattern of barriers, from vestment and qualification criteria to exemption allowances. That’s why I see the law as a new revenue source for the state and not a solution for individuals’ long-term-care needs in our graying population, as is being touted by aggressive marketing for the WA Cares Fund.
Legislative attempts to fix a poorly written, misguided law that will harm state workers are missing the mark. The law should be repealed before lawmakers do more window dressing.