The Journal’s View: Legislators should address long-term care fund flaws
~September 9th, 2021
The state’s Long-Term Services and Supports Trust Program is flawed and poorly timed. The Washington state Legislature should delay the program before it gets further along, at its earliest opportunity.
Some businesspeople already have been outspoken in their concerns about the program, known more commonly as the WA Cares Fund, and more could be joining that chorus of opposition soon. They’re on the right path.
Barring an unforeseen action, the trust program will go into effect at the beginning of the year, with individuals paying a new, 0.58% payroll tax. Through the program, the payroll tax will be set aside to fund long-term care for those who contribute, starting in 2025.
While the overarching goal of funding long-term care is somewhat admirable, the system, as constructed, is riddled with problems.
Before discussing those flaws, though, let’s start with the premise that the payroll tax is essentially a poorly disguised income tax—in a state that constitutionally prohibits an income tax. There’s no limit on how much an individual pays into the fund, even though the potential, maximum benefit is the same for every individual.
A professional who makes $52,000 a year will pay just over $300 into the fund annually, and a person who makes $520,000 a year will pay more than $3,000. In that scenario, if both people paid in for at least five years and if they stayed in Washington state, each would be eligible for the same maximum benefit of $36,500 in a 12-month period.
One doesn’t need a calculator to figure out that neither of those individuals come close to paying in enough to cover their potential benefits after five years. The program projects to be woefully underfunded, which is highly likely to lead to hikes in the payroll tax.
And what does that benefit get them? At best, it’s a small subsidy, as that amount wouldn’t come close to covering the actual cost of long-term care in today’s market, much less in the future.
Then there’s the issues of fairness. Anybody who retires in the next five years won’t be eligible for the benefit they are paying for. Anybody who moves out of Washington state won’t be able to use the benefit, even if fully vested in the program. Finally, anybody who works in Washington but lives in a border state will pay in but won’t benefit.
As Schweitzer Engineering Laboratories founder Edmund O. Schweitzer III points out, one size doesn’t fit all when it comes to financial planning. A select few would benefit from WA Cares Fund, but many others don’t want or need it.
The timing might be awkward if the Legislature has to fix the flaws in this program at the beginning of its next session in January, since the program will be underway already. But it’s important to address the program’s issues before it gets too far along.
Besides, the Legislature created this mess. It should have to clean it up.
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