Washington State significantly amended the WA Cares Fund with the passage of SB 5291 on May 20, 2025. The law expands eligibility through three contribution pathways, allows previously exempt employees to rejoin the program, and permits out-of-state workers to maintain coverage. It also introduces automatic exemptions for active-duty military and temporary visa holders, authorizes supplemental private LTC insurance and ensures annual benefit adjustments for inflation. These changes, effective January 1, 2026, have important implications for payroll, benefits strategy and compliance.
Compliance Snapshot
- Employers are not required to contribute to the WA Cares Fund but must collect a 0.58% payroll deduction from Washington employees’ wages (with no cap) and remit premiums to the Employment Security Department.
- Premium collection began July 1, 2023. Employers must track and retain exemption records, including automatic exemptions for active-duty military and temporary visa holders effective January 1, 2026.
- Employees who secured private LTC insurance before November 1, 2021, and applied for an exemption by January 1, 2023, are exempt, but may opt back into the program before July 1, 2028.
- Employers should ensure payroll systems and reporting processes are updated.
Background
In 2019, Washington State established the WA Cares Fund, the nation’s first mandatory, publicly funded long-term care insurance program. Funded by a 0.58% payroll deduction, premium collection began July 1, 2023. Benefits of up to $36,500 (adjusted annually for inflation) will be available starting July 2026 to eligible individuals needing assistance with daily living.
Senate Bill 5291, signed May 20, 2025, introduced major reforms effective January 1, 2026, including expanded eligibility pathways, opt-in options for previously exempt employees, out-of-state coverage continuation, and a framework for supplemental private LTC insurance. Employers should audit payroll systems for compliance with updated WA Cares reporting and premium collection rules, identify employees eligible for new exemptions or opt-in opportunities and evaluate offering supplemental long-term care insurance as part of a competitive benefits strategy.
Frequently Asked Questions
WA Cares Fund requires employers to collect a 0.58% payroll deduction from Washington employees and remit premiums to the Employment Security Department. While employers do not contribute directly, they must maintain exemption records and comply with quarterly reporting requirements. Premium collection began July 1, 2023.
Who is eligible for benefits under the Program?
Employees over the age of 18 may qualify for benefits if they need assistance with at least three activities of daily living and meet one of three contribution pathways:
- Contributed for at least 10 years (no longer requiring five consecutive years), with 500+ hours annually.
- Contributed for 3 of the last 6 years, with 500+ hours annually.
- Contributed for at least 3 years and elected to continue coverage after relocating out of Washington.
Exempt individuals, including those with private LTC insurance, active-duty military, and temporary visa holders, are not eligible unless they opt in. Out-of-state participants may maintain coverage starting July 1, 2026, with benefits available beginning July 2030.
How is the Program funded?
The Program is funded through a “premium assessment” (i.e., tax) on employee wages beginning July 1, 2023. The rate is 0.58% of wages, with no cap. The rate may be adjusted biennially to maintain program solvency. For example, 0.58% of a $100,000 salary would be $580.00. This equates to $0.58 for every $100 of earnings.
Are employers required to contribute to the Program?
No, employers are not required to contribute to the Program, though they are required to collect premiums from employees and remit them to Washington State ESD, as outlined below.
What are employers required to do?
Beginning July 1, 2023, employers (including out-of-state employers) must:
- Collect premiums each pay period through a payroll deduction equal to 0.58% of employees’ wages (employers are not required to take payroll deductions for exempted employees);
- Remit employee payroll deductions to the ESD quarterly (which are due by the last day of the month following the end of the calendar quarter being reported);
- Retain written notifications of employee exemptions; and
- Monitor eligibility for automatic exemptions and opt-in opportunities.
Notice Requirements: While formal notice is not currently required, employers should proactively inform employees about WA Cares deductions and benefits.
Which employees are subject to the tax?
All employees employed in Washington are subject to the tax. Employees are considered “employed in Washington” if their:
- services are performed in Washington; or
- services are not localized in any state, but some services are performed in Washington and the employee bases their operations or directs services from Washington (or, if there is no state where the employee bases their operations or directs services, the employee resides in Washington).
Employees subject to a collective bargaining agreement in existence on October 19, 2017, and self-employed individuals are not subject to the tax (unless self-employed individuals choose to opt into the Program).
Starting January 1, 2026, active-duty military personnel in civilian roles and temporary visa holders are automatically exempt unless they elect to participate.
What wages are subject to the tax?
The tax applies to all wages and renumeration, including salary and hourly wages, stock-based compensation, commissions, bonuses, holiday pay, most paid time off, and severance pay. There is no cap on the amount of wages in which the tax applies.
Can employees apply for an exemption to the tax?
Employees may be exempt from WA Cares payroll deductions under the following conditions:
- Private LTC Insurance: Employees who purchased qualifying long-term care insurance before November 1, 2021, and applied for an exemption by December 31, 2022. These individuals may opt back into the program before July 1, 2028.
- Live Outside Washington: Employees whose primary residence is outside Washington may apply for an exemption.
- Spouses or Domestic Partners of Active-duty Military: Automatically exempt.
- Active-Duty Military in Civilian Jobs: May apply for an exemption starting January 1, 2026. Must cancel exemption within 90 days of discharge.
- Temporary Visa Holders: Automatically exempt unless they opt in. Individuals become subject to the program upon gaining permanent residency or citizenship.
- Veterans with 70%+ Service Connected Disability: Permanently exempt.
Can employers apply for an exemption?
No, employers cannot apply for an exemption on behalf of employees, even if they offer long-term care insurance. Only employees can apply for an exemption.
How do employers know if an employee is exempt?
Exempted employees are required to provide written notification to all current and future employers to notify them of their exemption. Exemptions will take effect on the first day of the quarter after the exemption is approved and employees cannot receive refunds premiums paid prior to the exemption.
What are employers’ obligations with respect to exempted employees?
Employers are not required to take payroll deductions for exempted employees after they are notified of the exemption. Employers are required to retain written notifications of exemptions for six years.
If an exempted employee does not notify their employer of the exemption and the employer continues to take payroll deductions, the employee will not be entitled to any refund of payroll deductions taken before the employer is notified.
If an employer takes payroll deductions after being notified, employers are solely responsible for refunding those amounts to the exempted employee and will not be entitled to a refund from ESD.
Employers should ensure payroll systems are updated to track exemptions, opt-in elections, and reporting obligations.
What happens if an employer is found to be non-compliant?
If ESD finds that an employer is non-compliant with collecting premiums from an employee:
- Past due taxes may be deducted from the employee’s paycheck (alternatively, employers may pay the past due premiums); and
- The employer must file an amended report and pay the past due premiums.
- Interest and penalties may apply, and unresolved delinquencies may trigger enforcement actions.
Is the Program valid under federal law?
A question still remains whether the Program is preempted by The Employee Retirement Income Security Act (ERISA), a federal law that sets rules and standards for plans established or maintained by employers for the purpose of providing medical, surgical, or hospital benefits in the event of sickness, accident, disability, death, or unemployment. Under the doctrine of preemption, when a state law interferes or conflicts with a federal law, the federal law displaces the state law.
Some have argued that the Program conflicts with ERISA because it applies to the same type of plans that the ERISA governs (e.g., employer-maintained long-term care insurance that provides reimbursements for medical benefits in the event of sickness or disability). The Program is “employer-maintained” because employers are required to take payroll deductions and track exemptions. Further, the Program does not fall under an ERISA-exempted voluntary “payroll practice” because it requires participation by most employees.
Litigation may arise challenging its validity, and employers should monitor legal developments that could impact compliance or program implementation.
Employer Action
- Identify employees subject to WA Cares payroll deductions based on Washington work location criteria.
- Update payroll systems to apply the 0.58% deduction and track exemptions, opt-ins, and out-of-state coverage elections.
- Retain exemption records for six years and ensure timely removal of deductions for exempt employees.
- Remit premiums quarterly to the Employment Security Department and monitor compliance deadlines.
Additional Resources
- Official Program Website
- Employer Toolkit
- Employers can sign up for email updates here
- Washington Long-Term Services and Supports Trust Program Statute
- Senate Bill 5291: Amendments to the Program
- HB 1323: Amendments to the Program
- Sequoia Foreword: Get Ready for Washington State’s New Long-Term Care Program
Connect with a Sequoia consultant to learn how Sequoia’s compliance services are integrated in our benefits services and tailored solutions. And if you’re already a Sequoia client, stay on top of your employer obligations with your Compliance Checklist that highlights important compliance dates, action items, and resources.
The information and materials on this blog are provided for informational purposes only and are not intended to constitute legal or tax advice. Information provided in this blog may not reflect the most current legal developments and may vary by jurisdiction. The content on this blog is for general informational purposes only and does not apply to any particular facts or circumstances. The use of this blog does not in any way establish an attorney-client relationship, nor should any such relationship be implied, and the contents do not constitute legal or tax advice. If you require legal or tax advice, please consult with a licensed attorney or tax professional in your jurisdiction. The contributing authors expressly disclaim all liability to any persons or entities with respect to any action or inaction based on the contents of this blog. © 2025 Sequoia Consulting Group. All Rights Reserved.
