Seyfarth Synopsis: A class action lawsuit has been filed against the Washington State Long Term Services and Support Act (the “Law”) which requires every worker in Washington to pay $ 0.58 per $ 100 (0 , 58%) of wages to a trust set aside to provide long-term care benefits to its residents. The lawsuit challenges the law and seeks a declaratory judgment that the law is unenforceable because it violates ERISA and federal and state laws governing employee benefit plans. See Pacific Bells LLC et al v. Inslee et al, No. 2: 21-cv-01515, (W. Dist. WA). November 9, 2021.
The law was enacted in 2019 to plan for the expected long-term care needs of residents of Washington state. By law, employers must remit a payroll tax of 0.58% (adjusted for the Washington CPI) of Washington employee wages (no cap) on a quarterly basis to a trust established by the state. The maximum benefit payable is $ 100 / day up to a maximum lifetime benefit of $ 36,500. For more information on the Act, see our blog post here, and our webinar on the Law here.
The law is the first of its kind in the United States and has been controversial since its enactment. This is due to several provisions of the law, such as the scope of employees who must pay tax. By law, generally all employees who work in Washington state will pay tax starting in 2022, regardless of their state of residence, although only residents of Washington state can use the advantage.
Another sticking point has been the timing of the acquisition of benefits. Under the Act, the benefit is only available to residents who contribute to the trust for: (i) a total of ten years with a maximum break of five years; or (ii) three of the six years preceding the date on which the resident submits his claim for benefits. In addition, the resident must have worked at least 500 hours per year during the ten or three year measurement period, as the case may be. Older workers approaching retirement will need to contribute to the trust, although they may not be working long enough to qualify for the benefit. Other residents may lose their vesting entitlement if they do not contribute to the trust for at least ten years.
The plaintiffs’ main argument for banning the Act is that it is preempted by federal law. Long-term care benefits are subject to the Employees Retirement Income Security Act 1974 (ERISA) and, as a federal law, ERISA takes precedence over all state laws relating to a benefit plan. to employees. The complainants allege that the employer’s involvement in the administration of the Act (which includes determining what salaries are subject to the Act, which employees are subject to the Act, whether any employees are exempt from the Act, and the coordination of the payment of benefits under the Act with any employer-maintained long-term care plan) is so important that it makes the Act an employer-sponsored benefit plan. If so, the law would be pre-empted by ERISA, which does not require an employer to provide long-term care benefits.
The complaint also alleges that the Act violates:
- The equal protection clause of the Fourteenth Amendment to the Constitution because it charges a premium to out-of-state residents working in Washington, but denies them the benefit of the premium because they must be residents of the State to receive benefits;
- The fundamental right to travel under the privileges and immunities clause of the Constitution, as people who retire and leave the state will no longer be eligible to receive benefits;
- The Age Discrimination in Employment Act 1967 and the Older Workers Benefit Protection Act, as older workers must contribute to the trust but can never benefit from it; and
- Washington State Insurance Laws and Multiple Employer Social Protection Plans (MEWA) as the law does not meet state underwriting requirements for long term care plans and no certificate MEWA authority has only been issued as required for plans that provide benefits to employees of more than one employer.
Because of these issues, the class action lawsuit asks the U.S. District Court for the Western District of Washington to prospectively ban the state from collecting payroll tax and enforcing the law. In addition, the lawsuit demands that the state return to employees all bonuses paid to the trust.
Currently, the law is still “in force”, which means that employers must be prepared to collect the tax from January, despite the filing of this lawsuit and a pending citizens’ initiative (I-1436) that would make participation optional. to Washington Long Term Care Insurance.
We will continue to monitor and alert you to developments regarding the Act. In the meantime, please contact the authors of this alert or the employee benefits lawyer you work with for additional information.