Should you withhold long-term care premiums Jan. 1?
December 17, 2021
** UPDATED 12/30/2021 **
Many of you likely saw the news reports that Gov. Jay Inslee and legislative leaders were delaying the new WA Cares Long-Term Care program. Those reports were not only misleading, they are confusing for employers and your workers.
Legally, nothing has changed
The truth is the governor has not delayed – and cannot delay – implementation of the program. All he announced was:
- Employers who don’t start collecting the payroll tax in January would not be penalized; and
- He has directed the state Employment Security Department (ESD) not to collect the premiums from employers until April.
Any attempt to delay or cancel the actual WA Cares program requires legislative action and, from what we understand, the Governor and the Legislature lack any such deal granting a delay.
That means all employers have two options come Jan. 1, 2022:
- Delay collecting the payroll tax and hope the Legislature passes a permanent delay at some point in the 2022 Session. Employers who do this risk having to pay employee premiums they failed to collect from employees if a delay isn’t approved by the Legislature. This could mean, come April, the employer has to cover three months of employee premiums to make the required quarterly payment to ESD! (UPDATED per new guidance from ESD, 12/30/2021)
- Start collecting the payroll tax in January, hold on to the funds, and monitor the Legislature. If the Legislature approves a delay, you can refund the premiums to your employees. If they don’t pass a delay, you have the funds collected, as required by law, to make payment in April to ESD.
What BIAW and the State of Washington is Doing
Despite the governor’s announcement, the state of Washington, as an employer, has chosen option 2. State employees have already received notice the state will begin deducting the new payroll tax beginning January 1, 2022. This information is also posted on the Office of Financial Management website (see answer to question 14).
As an organization, BIAW will also start collecting the payroll tax for all non-exempt employees as planned in January. If the Legislature delays the tax or repeals the program, we will refund to employees any taxes they are due. Of course, we will not collect the tax from any employees who purchased a private long-term care policy and received an exemption from the WA Cares program.
Consistent with the advice on the WA Cares website, every business and organization should choose the best option for their own organization.
(IMPORTANT NOTE: If your business chooses to begin collecting the payroll tax in January, DO NOT submit the taxes to the state until they are due in April. The Governor waived all penalties for this new payroll tax until April 2022, so there is no risk to wait until then to pay the state.)
We hope this helps provide some clarity on this issue despite the confusion created by the governor and legislative leaders.