SEL: Long-term care tax is problematic

The region’s largest private employer has identified numerous shortcomings in Washington state’s new long-term care payroll tax.

Starting Jan. 1, Washington employers must deduct 0.58 percent of their employees’ wages for a fund qualifying Washington residents can use starting in 2025 for long-term care if they can demonstrate they need help with three activities of daily living, such as eating and taking medication.

The deduction is $290 a year for someone with an annual wage of $50,000, said Erik Newman, government affairs director at Schweitzer Engineering Laboratories, the region’s largest private employer, which is headquartered in Pullman.

The maximum lifetime benefit of the program is $36,500 for services such as nursing home stays, in-home personal care and assisted living. The $36,500 compares to an average annual cost of a shared nursing home room of $115,000 in Washington state, Newman said.

Of SEL’s 2,600 Washington employees, 1,000 live in other states, primarily Idaho, and they will not benefit from the fund unless they relocate to Washington.

“We held information sessions and had over 600 employees attend, and nobody wanted to be in the program,” Newman said.

The state allows people to opt out, but it’s difficult to take advantage of that provision.

The rules identifying adequate substitutes won’t be finished until the end of September. But people have to show proof they have purchased the insurance by Nov. 1, giving them, at most, a month to figure out what they’re going to do, Newman said.

As it stands, he said, there is no way to opt out for those who take jobs at Washington businesses after Nov. 1.

“The rules are changing every day,” he said. “They’re still writing the rules.”

The large number of people shopping for an alternative to Washington state’s coverage has overwhelmed insurance providers. National Public Radio recently reported that most, if not all, companies licensed in the state to sell long-term care coverage have suspended sales.

SEL gave its employees, who invent, design and manufacture digital products around the world, the opportunity to purchase an alternative based on the limited information available.

But all of the policies have a disclaimer that they might not meet Washington’s rules for a substitute because they were issued before the state had finalized the requirements. And the vendor SEL used has since ceased selling long-term care insurance in Washington.

The issues with the tax could worsen in the future, Newman said.

For example, right now, the tax is 0.58 percent of people’s wages, but that amount could climb if the needs of the fund change.

The Lewis Clark Valley Chamber of Commerce, a group that describes itself as representing 536 businesses with more than 17,000 employees, shares SEL’s worries. The organization recently sent Washington Gov. Jay Inslee a letter asking for the implementation of the long-term care tax to be delayed so a group of bipartisan legislative leaders could address issues raised by Washington businesses.

“We have concerns about the program’s rollout, the application of taxes and other elements that are frankly very surprising to our members,” according to the letter signed by Kristin Kemak, the chamber’s president and CEO.

Williams may be contacted at ewilliam@lmtribune.com or (208) 848-2261.