Broker Check
Is a mandatory Long-Term Care “Tax” coming to your state?

Is a mandatory Long-Term Care “Tax” coming to your state?

May 03, 2023

The PA House of Representatives are attempting to put through a mandatory Long-Term Care “tax” on all employees. This is virtually the same program Washington State implemented in 2022, as well as 11 other states (Alaska, California, Colorado, Hawaii, Oregon, Illinois, Michigan, Minnesota, New York, North Carolina, and Utah) have or are planning on implementing.

The PA HB844 – Long Term Care Trust Act would implement a mandatory tax of $0.58 per $100 of income earned, to pay for future Long Term Care expenses. This would be based on ALL your income, including salary, commission, bonuses, and deferred compensation.

Don’t be fooled. Although it may sound good, here are the potential pitfalls with this type of program:

  1. First, you must pay into the system for 10-years before you receive any benefits (3 years for catastrophic disabling events).
  2. The maximum payout is $100/day. By long-term care cost standards, this is a drop in the ocean considering at home care / assisted living / nursing homes can range from $3000-$10,000 per month or more, depending on your area.
  3. In PA, you must work a minimum of 500 hours per year in order to qualify
  4. The lifetime payout limit is $36,500.
  5. If you relocate out of state, you do not get any refund or return of what you paid.
  6. If you relocate out of state, you won’t be able to claim any benefits that you’ve already paid for in your prior state.
  7. If you relocate to another state that has a similar “tax”, you would be starting all over again from ground zero.
  8. Since it’s a tax, the government can increase it at any time they deem necessary. They could also decrease the benefit payout as well. Remember, the program must be financially sustainable, so adjustments are expected over time.
  9. No word as to having an option to “opt out”. Washington State provided a 12-month window of time for individuals to obtain their own personal policy, to avoid having to pay this tax. If you didn’t have a private policy by this time, you would pay the tax, even if you obtained a policy after the deadline.
  10. Individuals with higher incomes will obviously pay more in taxes for the same level of coverage as those with lower wages. 
  11. In general, benefit recipients must meet the requirement of needing assistance with at least three Activities of Daily Living (ADLs), rather than two that private individual LTCI typically requires.

So, what does this mean to you? This is your wake-up call for you to obtain your own personal Long-Term Care policy. Remember, the younger and healthier you are, the less expensive a personal policy could be. Just like life insurance, Long-Term Care protection is a crucial part of your financial planning.

Contact us so we can start a discussion and show you the benefits of having a dedicated, personal policy of your own.