Washington Cares Fund

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The Washington Cares Fund (previously known as the “Washington Long-Term Care Trust Fund Act”) imposes a payroll tax of $0.58 per $100 of W-2 income, now scheduled to begin July 1, 2023. This tax is intended to assist in defraying the state’s Medicaid costs.


  • All W-2 income earners over the age of 18 will be subject to the payroll tax
    • This includes RSUs and stock options vesting in a given year
  • Self-employed individuals, independent contractors, sole proprietors, partners and joint venturers may choose to pay the tax, but are not required to do so
  • Federal employees who work in Washington will not participate in the program, and employees of tribal businesses will only contribute if the tribe has elected to opt-in
  • Those who are currently retired are not able to participate
  • Long-Term Care (LTC) insurance policyowners and certain other eligible individuals may be able to opt-out (see additional details below)


  • The tax will be used to fund LTC policies with a lifetime maximum benefit of $36,500 per person(adjusted annually with inflation)
    • Lifetime access to the full benefit is available to those who work a minimum of 500 hours per year and pay in for at least 10 years (without a break of more than 5 consecutive years)
      • Those who pay the tax for at least 3 of the last 6 years and worked at least 500 hours per year will be eligible for temporary coverage, which provides coverage for ongoing care if needed while working or soon after leaving the workforce
      • Those who were born before January 1, 1968 and contribute to the fund for at least 1 year will have access to a partial benefit, earning 10% of the full benefit amount for each year in which at least 500 hours are worked
    • To qualify to use the benefit, you must be a resident of Washington state and need assistance with at least 3 of 10 Activities of Daily Living
      • If you move out of state for 5 consecutive years, you forfeit both your benefit and the premiums you paid
      • Activities of Daily Living include personal hygiene, medication management, eating, toileting, mobility, bathing, body care, dressing, transferring (e.g. getting in and out of bed, moving from a sitting position to standing), and cognitive skills
    • The benefit includes a 45-day elimination period
  • The first claims for benefits will be accepted beginning in July 2026


  • In 2022, the Washington legislature made some changes to the program, expanding the opt-out eligibility for select groups. For Washington residents who do not fall into one of these newly defined groups, the prior regulations still apply:
    • You must be covered under a LTC insurance policy in order to opt-out of the payroll tax
      • Eligible policies include individual or partnership LTC policies, tax-qualified group policies and life insurance policies offering accelerated death benefits for LTC needs
      • Medicare supplemental policies, policies providing coverage for under 12 months, terminal illness riders and policies offering lump sum cash indemnity are NOT eligible for the opt-out
    • Your policy must have been placed in-force by November 1, 2021
    • You must submit your application to opt-out by December 31, 2022
  • Additional groups now eligible to opt-out include:
    • Workers who live out of state, temporary workers on non-immigrant visas, and military spouses or registered domestic partners will be able to apply for an exemption beginning January 1, 2023. For these individuals, if their situation changes in the future, they will no longer qualify for the exemption and will be subject to the tax
    • Veterans with a 70% or higher service-connected disability have access to some LTC benefits through the VA, and therefore will be eligible to apply for a permanent exemption beginning January 1, 2023

Action Items

  • If you have a qualifying private or group long-term care insurance policy that was placed in-force prior to November 1, 2021, apply for a permanent exemption to the payroll tax before December 31, 2022
  • If your permanent address is out of state, you are a military spouse or registered domestic partner, are a veteran with 70% or higher service-connected disability or are a temporary worker on a non-immigrant visa, complete your exemption application as early as possible beginning January 1, 2023


Important Disclosures: Nothing in this article is intended to provide, and you should not rely upon it for, accounting, legal, tax or insurance advice or recommendations. We are not making any specific recommendations regarding any long-term care tax strategy or insurance policies, and you should not make any financial planning or decisions based on the information in this article. The intention of this article is educational, and it is intended only to discuss a few limited aspects of very complex legislation. This article is not a comprehensive or complete summary of considerations regarding its subject matter. Each individual is in a different situation and has different items to address, and the options in this article are not appropriate for everyone. Please consult your Freestone client advisor and a lawyer regarding options specific to your needs.

Posted By: Freestone's Wealth Planning Team