Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.
Updated January 4, 2022: On January 3, 2022, the leadership in the Washington State House of Representatives pre-filed a bill that, if adopted, would delay the WA Cares Act tax for 18 months, until July 1, 2023.
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In a statement on Friday, December 17, 2021, Washington Governor Jay Inslee suggested that employers might wait to begin collecting premiums from employees for the new Washington Cares Act (WA Cares), while legislation is under consideration that is expected to delay the effective date of the law. The governor does not have authority to relieve employers from the existing withholding obligation, and the state will begin to collect these premiums from its own employees on January 1. But the governor has directed that “employers will not be subject to penalties and interest [beyond the taxes themselves] for not withholding fees from employees during this transition.” The governor has also stated: “Employers must now choose whether to begin collecting premiums on January 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.”
As a brief reminder, not long ago in April 2021, Governor Inslee signed into effect the WA Cares Act, establishing a first-of-its-kind mandatory, public, state-run, long-term care insurance program for Washington workers.1 The WA Cares Act has a rapidly approaching start date of January 1, 2022—when Washington employers are required to begin withholding mandatory employee premiums to fund the program.
But just eight months after enactment, and two weeks before the start date, both Governor Inslee and legislators acknowledged that there are areas where the WA Cares Act needs to be changed, and said that the legislature will be working on such changes during the legislative session that opens on January 10, 2022. Some of the issues with the law as currently written that will likely be addressed are: the ability of employees to opt out of the program; how the law impacts near-retirees who would contribute but not vest in the program; and how the law impacts Washington-based employees who would not be eligible for the care benefit because they do not live in Washington or do not intend to remain in Washington long term.
What does the governor’s statement mean for employers?
Washington employers that choose not to begin withholding employee premiums starting January 1, 2022, while legislative action is pending, will not be subject to penalties or interest in excess of the premiums themselves, but should stay tuned for developments. The governor ordered the Employment Security Department (ESD) to not begin collecting premiums from employers before they come due in April 2022, but that order did not change the obligation to withhold the premiums or the normal due date for remitting premium withholdings from the first quarter of 2022. Senate Majority Leader Andy Billig and House Speaker Laurie Jinkin stated: “While we cannot direct employers not to collect [the premiums as required by existing law], we strongly encourage them to pause on collecting premiums from employees, giving us time to pass legislation extending implementation dates until next year.” But the governor has made clear that, if the legislature does not act, employers will be obligated to remit the full Q1 tax amounts when they become due in April 2022.
Based on the governor’s and legislative leaders’ statements, the likelihood that the legislature will soon enact a delay, and employee relations and administrative concerns with commencing premium collections under these circumstances, employers may want to consider pausing the upcoming withholding of WA Cares employee premiums. If employers elect to implement such a pause, they should communicate such change with those responsible for payroll as soon as possible so that such withholdings do not begin on January 1, 2022. In addition, although not required, employers may wish to update employees on this recent change and let them know that this new withholding will no longer be coming out of their paycheck starting January 1, 2022, but that it may be reimplemented in the future, and the reimplementation may have to be retroactive.
Littler will continue to monitor this law and provide updates accordingly.
1 For additional background on the WA Cares Act, see our prior article.