Governor Jay Inslee has put a temporary hold on the collection of the WA Cares Fund, Washington State’s new government-run long-term care insurance program. While the program will not start paying benefits until 2025, it currently requires employers to collect a payroll tax to finance the program’s trust fund, beginning January 1, 2022.

Amid discussions with legislators about making important adjustments to the program, the governor issued a letter on December 22, 2021, directing the Employment Security Department (ESD) not to accept premium payments, except in the case of a business closure. The letter also instructs the department not to find employers noncompliant or assess penalties or interest on employers’ accounts. This is all taking place since legislative leaders have stated they intend to make important adjustments to the law when the legislature reconvenes in January, including possibly delaying premium collection until after the 2023 legislative session.

Since the governor cannot suspend or change the law on his own, his directive addresses the fact that “employers must now choose whether to begin collecting premiums on January 1, 2022, according to the current law, and returning the premiums to workers following a change in the law, or delay collection in anticipation of this legislative change.” The governor and legislative leaders are concerned about employees facing unnecessary reductions in their 2022 paychecks, leading the state to take a proactive approach to payroll deductions rather than forcing employees to wait for a refund at some future time.

For those employers concerned about the possibility the legislature will fail to change the law, the governor’s directive further instructs the ESD to work with employers who did not collect the legally required premiums. He instructs the department “to develop plans to address potential payment options, consider administrative waivers, or craft other potential remedies in a way that supports the most equitable outcomes for all parties.”

While the letter directs the ESD not to collect premiums from employers, it does not provide guidance to employers on payroll deductions from employees’ checks beginning in 2022, and until the law is formally amended, the current legal requirements remain in place, leaving employers in an uncertain situation. Employers should reach out to their payroll providers or labor attorney for guidance on how best to address this issue in the meantime.

At Geffen Mesher, we will continue to monitor the legislative changes to the Washington Cares Fund and provide updates as they become available.

Our state and local tax (SALT) professionals are available to assist if you have questions about this new payroll tax. Please contact our SALT Team at SALT@GMCO.com.