Knotty Not Nice – Untangling the WA Cares Fund Announcements

The flurry of announcements out of Olympia in advance of the WA Cares Fund implementation have done nothing to fix the inherent problems of the program, but have created a snowstorm of questions and confusion. Here's our take.

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​Governor Inslee’s office has been pushing out press releases and statements with regards to the WA Cares Fund over the last two weeks. Unfortunately, the Governor and legislative representative statements only served to muddy the LTC waters.  Just when agents thought it was safe to celebrate the holidays in peace, the phones started ringing and emails clogged their servers with employers and employees wanting to know what to make of the mixed messages.  

A TIMELINE OF THE STATEMENTS
Those who know me know that I don’t hold back the sarcasm, especially when it is completely warranted. Here’s my take on the messaging coming out of Olympia with regards to the WA Cares Fund taxation.
 
December 17th

• A joint statement from the Governor, Senate Majority Leader Andy Billig, and House Speaker Laurie Jinkins was released.
• The Governor “took measures within his authority” to order the Employment Security Department not to collect the premiums for the WA Cares Fund until April.
  As the original submission date for Q1 2022 was always April of 2022, I am not sure why he felt the need to announce that he was doing anything here. His proclamation of his “authority” changed nothing.
• Senator Billig and Speaker Jinkins announced that the legislature would look at delaying the premium assessment and further stated that they support employers pausing premium collections from employees while the legislature considered tweaking the program.
  What they failed to mention was that only a vote of the legislature can make a change to the start date of the tax collection. Just stating it in a press release does not “make it so”.

 
December 22nd

• The Governor sent a letter to the Employment Security Department directing them not to accept WA Cares Fund premiums from employers in advance of quarterly taxes due in April.
  I am not aware of any employers who would be clamoring to pre-pay their quarterly taxes.
• He goes on to state that “while the legislature lacks authority to direct employers not to collect premiums, legislative leadership has strongly encouraged” employers to pause collection of the tax.
  Isn’t this stating that the legislative leadership has overstepped their authority?
• Now it falls to employers who must “…choose whether to begin collecting premiums on 1/1/2022 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… If the Legislature fails to change the law, employers will still be legally obligated to pay the full amount owed to [ESD]”.
  Either way, the employer ends up being the bad guy. Begin the payroll deductions and have employees upset because others aren’t seeing a reduction in their paychecks yet or delay the payroll deductions and possibly risk having to collect three months’ worth of taxes from all employees in April to remit to ESD.
• His last statement in the letter reads: “My expectation is that, if the Legislature fails to act to change the…law in early 2022, [ESD] will work with employers who did not assess…premiums during the first quarter of 2022, 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.”
  Um, thanks? An “expectation” is not a guarantee and the Governor has no authority to compel the legislature to act. To me this is another non-statement.

 
December 23rd

• The Governor issued a statement that “There seems to be some inaccurate reporting and misinformation” out there.
  Nice, blame the messenger when the original statements were muddled.
• He went on to say that “The legislature has committed to changing the law in January 2022, including delaying the premium collection timelines.”​
  But have they? I have seen nothing from the legislature stating that they will do this in January. They have stated that they will work on this during the legislative session. The session in 2022 will span from January into March. I am hoping that they quickly vote in January to delay the collection of the tax until at least 4/1/2022, and then deal with the other tweaks during the session. But when have you ever seen a legislative body act that quickly?
• Finally, he delivered the bad news for state employees that “…the state of Washington is following the law and will have to begin collecting money from state employee paychecks as of January 1st.”
  This is contrary to the original press release from Billig and Jinkins, who recommended employers not collect the tax. I understand that the state is required to follow state laws, but do those reading all these statements understand this? Or will they deem this move as the state not having confidence that the tax will be pushed off?
  
  

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WHAT YOU REALLY NEED TO KNOW
Unfortunately, all of these statements have caused a great amount of confusion with agents, employers, and employees.  Here is a rundown of what you really need to know:

1. When the state talks about premiums, what they are referring to is the WA Cares Fund tax
2. If you purchased coverage in order to opt out of WA Cares, the delay of the STATE premium collection has nothing to do with your insurance coverage premiums -- you must continue to pay those premiums or your coverage will lapse
3. Whether or not tax collection begins, the WA Cares Fund tax will start accruing on 1/1/2022
4. Withheld January, February, and March taxes have always been, and will (for now), continue to be due in April 2022
5. The only way the start date of the tax can be delayed is if the legislature passes a revision to the WA Cares Fund law and the Governor signs it
6. If an employer starts deducting the tax and the legislature delays the premium start date, the employer can return those deductions to their employees
7. If an employer does not start deducting the tax and the legislature does not delay the premium start date, the employer will need to remit January, February, and March taxes in April (they will either need to cover these taxes for their employees, collect three months of premiums all at once, or some other still unknown “potential remedy”)
8. The WA Cares Fund tax is not being repealed – they are only looking to “tweak” it
9. As far as LTC insurance coverage is concerned
   1. If you purchased coverage prior to 11/1/2021, you can opt out of the state tax
   2. If you drop your coverage, it looks like you’ll end up paying the state tax (since one of their “tweaks” is to require you to continue your insurance coverage in order to continue opting out)

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​MY HUMBLE OPINION
I am boggled as to why the original press statement was even released in the first place. It was totally unnecessary. Nothing changed. Except it seems that more constituents are now upset.
 
ESD was already slated to collect Q1 premiums for the WA Cares Fund in April under the current law. If the legislature pushed off the date, then any collected tax in January, February, and March could easily have been paid back to employees by their employers.
 
Anyone following the Long-term Services & Supports Commission knows that they are providing the legislature with recommendations to tweak the WA Cares Fund program. There was no need to restate this.
 
Most importantly, nothing under the current law can be altered until the legislature actually votes to pass a change and the Governor signs it into law.  This was finally outlined in the Governor’s statement on the 23rd.
 
One of the most frustrating things for me is to watch the state continually work within a vacuum with regards to long-term care – both in regard to the development/changes to the law itself and the garbled last-minute communications these past two weeks. The LTSS Commission has rebuffed suggestions and input from agents, brokers, and insurance companies (yours truly included) from the beginning. Heaven forbid, when crafting the law, they gather insight from those who have been working in the long-term care space for decades.
 
To add insult to injury, with these latest statements, it was quite evident that the communications went out without any regard for the practical realities the statements implied or how the news would be construed by an increasingly frustrated public. We in the industry are left to pick up the pieces and answer the mostly unanswerable questions that these proclamations wrought. 
 
In my humble opinion, the original press release was a “feel good” for the Governor and the Democratic Caucus. A perfunctory “we hear you” moment in response to public outcry about the flawed tax’s impending start. Too bad these statements coming out of Olympia are tone deaf and for nearly everyone working in the state, the outcome is still tied up in legislative knots.

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