Many states are now realizing how important Long Term Care (LTC) planning is, and how few people are prepared for it. For example, the average cost of basic home health care in the country is more than $58,000 per year according to the 2021 Mutual of Omaha cost of care report. Last year Washington was the first state to implement a 0.58% payroll tax that began in January of this year to help defer some of these costs. Other states are preparing to follow suite.
States Considering Their Own Tax
Currently there are twelve other states considering a similar program: Alaska, California, Colorado, Hawaii, Oregon, Illinois, Michigan, Minnesota, New York, North Carolina, Pennsylvania, Utah. Could your state be next?
A committee in California is proposing a new payroll tax share by both employees and employers. If LTC insurance is purchased before the law is passed the person can get a full exemption of the new tax. If LTC insurance is purchased after the law is passed there will be a reduced tax. The committee has also stated that the LTC benefit will be portable, meaning employees could retire in another state and still have coverage. They must provide their recommended program by the end of this year, and in 2023 the legislature will take this up to see if they can pass the law.
The New York Long Term Care Trust Act will look very similar to Washington’s program. Residents would have 0.58% withheld, would need to show proof that they need assistance with at least three activities of daily living to receive benefits, and would be exempt if they purchased a policy before the law becomes effective.
"The average cost of basic home health care in the country is more than $58,000 per year according to the 2021 Mutual of Omaha cost of care report."
Pennsylvania lawmakers are working on implementing a new payroll tax to create a new long term care benefit of $100\day up to $36,500 in lifetime benefits. Currently the proposed deduction would be 0.58% of all income including salary, commission, bonuses, and deferred compensation, meaning if you made $50,000 you’d pay $290 a year, if you made $100,000 you’d pay $580 a year. The tax is scheduled to start January 1, 2023 and benefits would be available in 2026.
The bottom line is that states are noticing what Washington achieved. They’re looking to save their own money by putting into place similar programs – with a few tweaks of their own. The more states that implement these taxes, the most states that will follow. And eventually the federal government will catch up and implement something as well.
For those wishing to opt-out of their state’s payroll tax, most states say that employees must simply demonstrate they currently have a long term care policy inforce when the tax becomes law.
If you’d like to speak to a LTC Specialist about your options to plan for long term care and avoid any new potential tax, click here. Our team offers a variety of insurance carriers, products, and plans to suit your family’s needs and budget.