Washington’s New Long Term Care Benefit (LTC)

Jun 17, 2021

IBA, as the premier business brokerage firm in the Pacific Northwest, is firmly established as a respected professional service firm in the legal, accounting, banking, mergers & acquisitions, real estate, and financial planning communities.  Periodically, we will post guest blogs from professionals with knowledge to share for the good of owners of privately held companies & family owned businesses. The following content has been provided by Bareq Peshtaz of the Aistear Group at Morgan Stanley (http://fa.morganstanley.com/theaisteargroup/):

Washington’s New Long Term Care Benefit (LTC)

FAQ – WA Long Term Care Trust ACT

Here are some commonly asked questions we receive from our clients, and our response to them based on information provided by Morgan Stanley:

Although a number of states have toyed with the idea of a publicly-funded Long-Term Care (LTC) benefit, including Hawaii and Minnesota, the state of Washington was the first to succeed, when Governor Jay Inslee (D-WA) signed the LTC Trust Act into law effective July 28th, 2019 following approval in the House (55-41) and Senate (26-22).

What is it?

  • Long-Term Services & Supports (“LTSS”) benefit which is publicly funded by a 58% payroll tax on all wages and remuneration, withheld  quarterly by employers
  • Benefit is vested by individuals who work a minimum of 500-hrs/who pay premiums for at least 10 years (without a break of 5 consecutive years) OR who pay premiums for 3 of the last 6 years
  • Benefits are paid directly to providers at Medicaid-comparable rates.

Who does it affect?

  • Mandatory for all W-2 employees in Washington State
  • Self-employed and independent contractors may “opt-in”
  • Those who are currently retired may not pay premiums or qualify for benefits
  • Those under age 18 may not participate
  • Owners of private LTC insurance may “opt-out” of the program permanently by applying for an exemption between October 1, 2021 and December 31, 2022
    • Private LTC insurance must be inforce by November 1, 2021 to be considered for exemption

When does it take affect?

  • Statewide employer education began 2020 -2021
  • First payroll deductions begin January 1, 2022
  • Public outreach will begin in 2024
  • First claim for benefits can begin on January 1, 2025
  • Trust Act Commission will issue its first report on participation, benefits paid and Medicaid savings beginning December 2026

Where are employees affected?

  • Only Washington residents can qualify for benefits
  • Residents who move out of state for 5 or more years forfeit both benefits and premiums

Why was this ACT passed?

  • Washington will spend $4B/year on Medicaid-funded LTC by 2030
  • The state’s 850,000 unpaid family caregivers face financial insecurity: nationally, 20% of family caregivers spend an average of 20% of their  own income on out-of-pocket caregiving costs¹

How does the Trust ACT work?

  • Benefits are paid in $100 “stackable” units, up to a $36,500 lifetime maximum
  • Beneficiaries must need assistance with a minimum of 3 of 10 Activities of Daily Living (“ADLs”): medication management, personal  hygiene, eating, toileting, transferring, body care, bathing,  ambulation/mobility, dressing, and cognitive impairment
  • Providers must be on a Dept. of Social and Health Services-approved list.

Which kinds of LTSS services are covered?

  • Funds can be spent on nursing facilities, residential settings like assisted living and adult family homes, professional caregiving like home health  care, wheelchair ramps, emergency alert devices, medication reminders,  training for family, Meals on Wheels, rides to doctor appointments,  dementia education, caregiver support, care coordination
  • Family members may qualify upon receiving 21 -35 hours of formal training (depends on situation)

Will benefits increase to keep pace with inflation?

  • Each year, benefits will be reviewed and may be raised at a rate “no greater than the Washington Consumer Price Index”

Will rates increase?

  • Although designed to remain level, there is no guarantee that the payroll tax will remain fixed
  • The first payroll tax review will occur on January 1, 2024 by the Pension Funding Council

Please feel free to reach out to our team if you would like to discuss this topic in more detail.

¹Source: https://www.ltc-associates.com/education-center/who-pays-for-long-term-care/public-programs/washington-state-long-term-care-trust-act/#gs.we7v2d

Information authored by Morgan Stanley and provided courtesy of Bareq A. Peshtaz.

Bareq A. Peshtaz is a Financial Advisor at Morgan Stanley Smith Barney LLC (“Morgan Stanley”) in Seattle, WA. He can be reached by email at bareq.peshtaz@morganstanley.com or by telephone at 206-344-5024. His California Insurance License # is 0L58430.  His website is https://advisor.morganstanley.com/the-aistear-group. Bareq may only transact business in states where he is registered or excluded or exempted from registration FINRA Broker Check site http://brokercheck.finra.org/Search/Search.aspx. Transacting business, follow-up and individualized responses involving either effecting or attempting to effect transactions in securities, or the rendering of personalized investment advice for compensation, will not be made to persons in states where Bareq is not registered or excluded or exempt from registration.  This article has been prepared for informational purposes only.  The strategies and/or investments referenced may not be appropriate for all investors. Tax laws are complex and subject to change. Morgan Stanley Smith Barney LLC (“Morgan Stanley”), its affiliates and Morgan Stanley Financial Advisors and Private Wealth Advisors do not provide tax or legal advice and are not “fiduciaries” (under the Internal Revenue Code or otherwise) with respect to the services or activities described herein except as otherwise provided in writing by Morgan Stanley and/or as described at www.morganstanley.com/disclosures/dol  You should consult with your own tax advisors regarding your potential tax liability on surrenders. Insurance products and annuities are offered in conjunction with Morgan Stanley Smith Barney LLC’s licensed insurance agency affiliates.  Morgan Stanley is not implying an affiliation, sponsorship, endorsement with/of the third party or that any monitoring is being done by Morgan Stanley Smith Barney LLC (“Morgan Stanley”) of any information contained within the website. Morgan Stanley is not responsible for the information contained on the third party website or the use of or inability to use such site. Nor do we guarantee their accuracy or completeness. Morgan Stanley Smith Barney LLC, Member SIPC. CRC 3608554 05/2021

If you have questions relating to the content of this article, the Long-Term Care (LTC) benefit and its implications for business owners and shareholders, or the services provided by The Aistear Group at Morgan Stanley, Bareq Peshtaz would welcome the opportunity to talk with you.  Mr. Peshtaz can be reached at (206) 344-5024 or Bareq.Peshtaz@morganstanley.com.

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