As more states explore legislation requiring payroll taxes to fund long-term care (LTC) programs, employers and benefits brokers need to stay informed and ready. During a recent webinar, our team shared key developments, trends, and strategies to help brokers and employers prepare for the evolving LTC landscape.
What’s Driving This Movement?
In 2025, interest in state-run long-term care programs is accelerating. Several states are actively reviewing or drafting legislation that could mirror or build upon Washington State’s WA Cares Fund. With rising care costs and an aging population, lawmakers are looking for sustainable funding models, and payroll tax-based LTC programs are gaining traction.
Key webinar takeaways included:
- Rising demand from employees: Over 50% of employees say they would enroll in LTC if offered by their employer.
- Sales growth: Carriers such as Transamerica, Trustmark, and Allstate have seen double-digit increases in LTC product sales, primarily driven by employer demand and tax-prep planning.
- Broad age appeal: Younger workers value low premiums and cash accumulation. Mid-career professionals appreciate long-term savings and security. Those nearing retirement prioritize coverage and guaranteed acceptance, even with pre-existing conditions.
States to Watch
Washington’s WA Cares program is live and expanding exemptions. Other states—including New York, California, Vermont, Massachusetts, Hawaii, Pennsylvania, and Oregon—are at varying stages of exploration, feasibility analysis, or bill drafting. While no two proposals are identical, many include mandatory payroll taxes for employees without qualifying private LTC coverage.
Legislation in these states often follows a common structure: a state-run trust fund to pay for basic LTC services, with exemptions granted to residents who hold approved private LTC insurance. That’s where brokers and hybrid policies come into play.
Hybrid Life with LTC: Your Client’s Best Defense
Hybrid life insurance with LTC riders remains the most strategic product for exemption readiness—and for offering long-term financial value. Here’s why:
- Dual benefits: Policies offer both a death benefit and long-term care coverage. If LTC is never needed, the life insurance benefit is still paid out.
- Guaranteed acceptance: Many carriers offer simplified underwriting, making it easier for employees to enroll without medical exams.
- Portability and flexibility: Unlike employer-tied coverage, these plans are portable and continue even if the employee changes jobs.
- Cash value accumulation: Many policies build cash value over time, adding another layer of financial security.
- Indemnity-based payments: Benefits are paid regardless of the cost of care, including informal caregiving situations.
- State tax exemption alignment: Some carriers offer policies with true LTC riders (7702(b)-compliant), which are more likely to qualify for state exemption requirements.
What Benefits Brokers Need to Know
If your clients are not yet offering LTC solutions, they could be putting their employees at risk of a new payroll tax. Here’s how you can help them prepare:
- Review clients’ benefits portfolios now to ensure they include LTC-qualifying policies.
- Educate employers and employees about state legislation and the benefits of opting out via private coverage.
- Recommend carriers with strong track records and flexibility, such as Transamerica or Allstate, which offer options for both small and large groups.
- Utilize outside enrollment platforms, such as Selerix, which can manage age-based pricing, multi-policy tracking, and late entrant underwriting. Not all HR tech platforms are LTC-ready.
- Monitor state-specific updates and align private offerings to meet compliance as legislation changes.
Looking Ahead
The momentum for LTC payroll taxes is growing—and fast. While each state’s timeline and approach may differ, the direction is clear: mandatory LTC programs funded by payroll taxes are becoming a reality. The good news? Employers and brokers have the tools to stay ahead by offering private LTC insurance that meets exemption criteria.
At The VB Shop, we specialize in implementing Life Insurance with Long-Term Care benefits in a way that’s simple, scalable, and built for today’s market. Whether your clients are in Washington or just waiting to see what happens in New York, we’ll help you lead the conversation.
For help evaluating the right LTC options for your clients or preparing for upcoming state mandates, contact us today at thevoluntarybenefitsshop.com.
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