Class action lawsuit filed against new WA long-term care tax
Opponents of a mandatory payroll tax to fund Washington state’s new long-term care program filed a class action lawsuit Tuesday in federal court seeking to stop the January start of the payroll premium for most employees in the state.
The suit, filed with the federal court for the Western District of Washington, was filed on behalf of three businesses in the state and six individuals. None of the individuals purchased a private, long-term care insurance plan before Nov. 1, the deadline to qualify for an exemption.
Under the program, called WA Cares Fund, workers will pay a premium of .58% of total pay per paycheck, meaning an employee with a salary of $50,000 will pay $290 a year. Starting Jan. 1, 2025, people who need assistance with at least three “activities of daily living” such as bathing, dressing or administration of medication, can tap into the fund to pay for things like in-home care, home modifications like a wheelchair ramp and rides to the doctor.
The benefit also covers home-delivered meals and reimbursement to unpaid family caregivers. The lifetime maximum of the benefit is $36,500, with annual increases to be determined based on inflation.
“The state simply does not have the power to mandate an employee benefit,” Richard Birmingham, a partner at Davis Wright Tremaine LLP, said in a written statement announcing the lawsuit.
As of Nov. 4, the Employment Security Department had received more than 344,000 applications for an exemption, and just over 140,000 had been approved. Last week, agency spokesman Nick Demerice said that people seeking an exemption are being told that as long as they submit their exemption request by Dec. 1, ESD is guaranteeing that it will be processed it before the end of December.
Even though a private policy had to be purchased before Nov. 1 to opt out, people have until Dec. 31, 2022, to apply for an exemption — which means they may pay a year of the premium unless they opt out before the payroll deduction starts. No rebates are offered for any premiums already paid, and once a person receives an exemption, they are not able to opt back into the state program, even if they change jobs.
A spokeswoman for Gov. Jay Inslee said the office had not yet seen the lawsuit. Officials at the Employment Security Department and the Department of Social and Health Services, also named in the lawsuit, did not immediately respond to emails seeking comment.
According to AARP of Washington, 70% of residents 65 and older will require some type of assistance to live independently.
To be eligible for the state benefits, workers will have had to have paid the premium working at least 500 hours per year for three of the previous six years in which they’re seeking the benefit or for a total of 10 years, with at least five of those paid without interruption.
The benefit is not portable, so people who pay into the program but later move out of state will not be able to access it, and it only covers the taxpayer, not a spouse or dependent. The benefit also isn’t available to those who work in Washington and will pay the deduction but live in neighboring states, like Oregon.
One of the named plaintiffs, Melissa Johnston, lives in Eagle Point, Oregon, and works in Vancouver, Washington, and said in a written statement that she has no plan to retire in Washington.
“And yet the state is requiring that I buy a long-term care insurance product that can only be used if I retire in Washington—it just doesn’t make any sense,” she wrote.
Among the arguments made by the suit is that the WA Cares Fund violates a federal law that forbids the state from passing any law that requires employees to participate in a plan that provides sickness or medical benefits. It also says that the disparate treatment of people paying the tax but not receiving benefits if they are not a Washington resident violates the Equal Protection and the Privileges and Immunities clauses of the U.S. Constitution.
Additionally, the fact that people who are within 10 years of retirement will pay into the fund but not receive benefits is a violation of the Older Workers Benefit Protection Act, the suit contends.