Lawsuits filed over long-term care program and document recording fee surcharge

By: Emily Makings
12:09 pm
November 12, 2021

Lawsuits have been filed over the state’s long-term care program (for which premiums will be paid beginning in January) and a document recording fee surcharge enacted this year (to provide funds for housing programs).

Long-Term Care

A class action lawsuit asks a federal court to find the long-term care program “unlawful and unenforceable under ERISA, federal, and state law” and to stop the state from collecting the premium. (The link to the lawsuit is via Opportunity Washington, which has more. We wrote about the long-term care program here.)

The lawsuit argues that the program is a multiple employer welfare arrangement (MEWA) that is preempted by the Employee Retirement Income Security Act (ERISA). Additionally, under the program, people who vest into the program but are not residents of Washington at the time they need benefits are not eligible for benefits. The suit notes that this means they “forfeit the insurance that they paid for with after-tax dollars.” As such, the suit argues that this is “contrary to ERISA, I.R.C. Sec. 7702B, which the state represented would control the taxation of benefits, and state insurance laws governing a MEWA. These laws prohibit the forfeiture of mandatory employee contributions without providing any benefit.” The suit also argues that the program is unconstitutional “because it discriminates against a class of individuals that live out of state.”

The Long-Term Services and Supports Trust Commission met Wednesday to consider recommendations on benefit changes. (The meeting materials note that as of Nov. 8, the state had received 358,751 exemption applications. As we noted in our brief on the program, the state had estimated that about 300,000 people would be eligible to opt out of the program.) According to the Seattle Times, the commission delayed making any recommendations on Wednesday, due to the filing of the lawsuit.

Document Recording Surcharge

This year, the Legislature enacted a document recording surcharge of $100 (E2SHB 1277). The surcharge is expected to increase revenues by $292.0 million a biennium, to be used for the eviction prevention rental assistance program and other housing programs. The Building Industry Association of Washington has filed a lawsuit in Thurston County Superior Court.

The suit argues that this new surcharge and four previously adopted surcharges “are unconstitutional taxes designed to raise funds to finance broad-based public purposes which are unrelated to the recording of instruments and other services provided by the Auditor or the regulatory burdens produced by the fee payer.”

The suit notes, “the primary rationale to fund affordable housing and other related services with these fees was financial expediency.” It quotes Rep. Ormsby as saying, “Because it is a fee it is dedicated to provide affordable housing that doesn’t suffer the vagaries of the up and down revenue and budget decision realm.”

The Legislature appropriated $280.3 million from the surcharge revenues to fund these programs for 2021–23. However, at the time the budget was drawn up, it was unclear if E2SHB 1277 would pass. Had E2SHB 1277 not passed, the operating budget would have still funded the programs. But instead of the surcharge, it would have used $260.3 million from the coronavirus state fiscal recovery fund (general federal COVID relief) and $20.0 million from the Washington rescue plan transition account (the shadow reserve account created with some of the balance of the rainy day fund).

Categories: Budget , Employment Policy , Tax Policy.