There is a lot of talk right now about long-term care (LTC), especially with the upcoming implementation of the Washington State WA Care Fund. And, if you are a W-2 employee in the state of Washington, this is a must read. But before I go there, it is important to know what is long-term care insurance and why it may be important in one’s planning.
Simply put, at some point in the future - often in one’s retirement years - our body is just not able to do what it has done so easily before. Sometimes further personal care is needed, so how does one best prepare?
The answer depends on and should be a decision made on each person’s individual situation.
What is Long-Term Care Insurance:
Long-term insurance coverage can help for various qualifying services, including home health care, helping people stay living in their home as long as possible, nursing home costs and adult day care. Benefits are paid tax-free after qualifying conditions are met. Qualifying decisions are made based on the inability to do two of the following without help (or one in the case of a cognitive diagnosis):
- Bathing
- Dressing
- Eating
- Transferring
- Toileting
- Continence
- Cognitive (Alzheimer's and Dementia)
What is the Washington State’s WA Cares Fund?
Washington State is in the process of implementing the new WA Cares Fund, a state-run LTC plan for W-2 employees.
Some features of the Fund are:
- A maximum lifetime benefit of $36,500 (adjusted annually) for vested individuals
- Beginning January 1, 2022, each W-2 employee will pay a tax through their payroll deduction paid for by the employee.
- Wages will be taxed without limitation or cap.
- The initial tax rate is .58% ($.58 for every $100 earned), RSU and bonuses included.
- Benefits will not be available to those who have paid in less than 10 years, or at the time of need no longer reside in WA.
- For more information go to www.wacaresfund.wa.gov
While public funds for many societal needs can be imperative to the health of a person and community, this fund has some serious short-comings, and many people should consider other options. My concerns are that people will believe they will a decent benefit by participating through their working years, thus not properly planning for incapacity. If skilled nursing in Washington currently costs about $100,000 - $120,000 a year, and the maximum benefit of the program will pay $36,500 for one year (annualized), for most people it will fall way short of their potential need.
Concerns:
- People believing they will actually have a decent benefit by participating.
- The level of tax is significant and uncapped.
- The vesting schedule (must pay in for 10 years to receive benefits).
- Lack of eligibility of benefits in many cases (i.e. if one moves to another state in their retirement years).
- The very short opportunity to opt out (only by having another policy in place by November 1, 2021).
Considerations in purchasing a policy:
- Is there the ability to continue paying the premium for years to come (in a traditional policy)?
- Will you be able to qualify for a policy in your current health and age?
- There are additional ways to pay for long-term care (single and multiple premium, or lifetime premium until benefits are needed). Learn what may be best for you.
- There is an estimated 70% need for long-term (for people over 65).
Opting Out:
There is the ability to opt out of the program if a person has another qualified long-term care policy in place by November 1, 2021. The employment security department will accept applications for the exemption only from October 1, 2021 through December 31, 2022.
Note: Much of the Washington State long-term care legislation is incomplete and subject to different interpretation.
I’m happy to have a conversation on how these changes may affect you. Please don’t hesitate to contact me.
Insurance is a product of the insurance industry. Guarantees are subject to the claims-paying ability of the insurance company and surrender charges may apply if money is withdrawn before the end of the contract. Please keep in mind Insurance companies alone determine insurability, and some people, for their own health or lifestyle reasons, are deemed uninsurable.