‘Ready to go’: State prepares to collect, invest funds for WA Cares program

Washington state prepares to collect and invest funds for its new long-term care insurance program, WA Cares, with premiums set to be deducted from paychecks starting July 1 and benefits beginning in 2026, offering a potential lifetime benefit of $36,500 for in-home nursing care.

Benefits for the first-in-the-nation mandatory insurance program known as WA Cares begin on July 1, 2026

Brett Davis
The Center Square Washington

With employers in Washington set to deduct premiums – 58 cents on every $100 earned – from paychecks starting July 1 for the state’s new long-term care insurance program, the groundwork has been laid to collect and invest those funds.

Benefits for the first-in-the-nation mandatory insurance program known as WA Cares begin on July 1, 2026. Workers required to pay into the system will be vested after 10 years and eligible to received a potential lifetime benefit of $36,500 toward paying for in-home nursing care.

“First, I’m happy to report we are ready to commence with the investment program when the initial funds arrive in November,” explained Christopher Hanak, chief investment officer for WA Cares, at Friday’s virtual meeting of the Long-Term Services and Supports Trust Commission.

Made up of legislators, members of administrative agencies, and stakeholder representatives, the commission makes recommendations regarding WA Cares, including actions needed to maintain trust solvency and monitoring agency expenses.

“As a reminder, we’ll be investing the program assets in a fixed-income portfolio that will include credit investments,” Hanak said. “The portfolio will be actively managed and benchmarked against the Bloomberg U.S. Universal Index. That’s a very large fixed-income index.”

The Bloomberg U.S. Universal Index covers U.S. dollar-denominated, taxable bonds that are rated either investment grade or high-yield.

“My assumption was that, you know, we’d start seeing them [funds] in November,” Hanak continued. “We’re set up and ready to go. As funds become available and can be sent to us, the accounts are established and we can be ready to receive and invest as they arrive.”

According to Hanak’s presentation at the meeting, quarterly performance measurements will be presented to the Trust Commission Investment Strategy Subcommittee following the first full quarter of investing after the fund reaches $250 million, which is expected to occur during the first quarter of 2024.

Sen. Steve Conway, D-Tacoma, asked about a reserve fund for the WA Cares program that got off to a rough start.

“The risk-management framework that was adopted by the LTSS Trust Commission is going to consider and develop a reserve for this program, which is just a margin for adverse experience,” Washington State Actuary Matt Smith said.

He also spoke to the program’s short-term cash flow.

“The three-year period between collecting premiums and paying benefits, it’s my understanding that was, you know, intentionally designed to build the short-term reserve you [Conway] are referring to,” Smith said.

The WA Cares payroll tax was supposed to kick in Jan. 1, 2022, but that plan was derailed by lawmakers concerned about people paying into the program who would not be eligible to receive benefits and many people opting out of the program when they had the chance to do so.

In December 2021, Gov. Jay Inslee announced the payroll tax would be delayed until April, unless the Legislature intervened to set a new date. The governor subsequently announced he had no authority to delay the tax, saying that employers were still legally obligated to pay the state.

Last year, the Washington State Legislature passed a bill delaying implementation of WA Cares until July 1 of this year. Inslee signed the legislation into law.

According to a report released last year by the state actuary, WA Cares is predicted to be solvent through 2098.

The 0.58% payroll tax rate can’t go up unless the Legislature votes to increase it.

This report was first published by The Center Square Washington.

Also read:

Leave a Reply

Your email address will not be published. Required fields are marked *