LONG-TERM CARE INSURANCE
a new employee benefit

LTC insurance is one of the newest and fastest growing employee benefits. There are tax incentives to employers for purchasing long term care insurance for their employees. Employers can pay for part or all the coverage, or have employees pay all the cost. Typically employers are willing to fund part of the plan and then allow the employees to purchase additional coverage.

LTC: The Problems for Employers

When one of your employees needs long term care, or must provide long term care for someone at home, it may put your business at risk because it can have a great impact on your bottom line. You may not notice the cost immediately, but over time it may really add up.

If an employee is providing care for someone at home it is almost as if they have another full-time job. It may affect your business in the following ways:

• Decline in productivity
• Decreased willingness to relocate or travel for work
• Not able to work full-time or must leave job altogether
• Motivation and morale are compromised
• Interruptions during the day to handle phone calls or emergencies
• Absenteeism
• Increased stress which could result in health-related problems
• Replacement costs if employee needs to finally resign

LTC: The Problems for Employees

Financial Ramifications:  When an employee must provide care to someone at home it could end up costing them more money than they ever imagined. A study of caregivers over age 45 was recently conducted by the National Center for Women and Aging at Brandeis University and the National Alliance for Caregivers. The study focused on 30 people who provided unpaid care for over 8 hours per week. Based on their financial records, the average LOSS over their lifetime in wages, pension, and Social Security benefits was $659,000. (Source: "Financial Gerontology." Journal of Financial Service Professionals, March 2000.)

Health Stress:  Employees that are caregivers could end up compromising their own health because providing care can result in health-related problems such as stress or even depression.

Young People Need Long-Term Care: You may think that your employees are too young to need long term care and that only older people need it, but a recent study by the American Academy of Actuaries indicates that 40% of the people that need long term care are under the age of 65!

LTC: The Benefits for Employers

Recent healthcare legislation makes qualified LTC insurance policies more tax advantageous for both employers and employees. Employers that pay for long term care insurance may be eligible for favorable tax treatment. (The exact tax consequences vary depending on the structure of the business; i.e. sole proprietor, partnership, LLC, C-Corporation, etc.)

• Employer-paid LTC premiums for employee, spouse, and retiree coverage may be deducted as a business expense.
• Employers can cover defined classes of workers, making it possible to offer the benefit to only higher-paid employees, such as an executive carve-out.
• Employees with medical and dental expenses exceeding 7.5 percent of adjusted gross income may be able to also deduct eligible LTC premiums they pay.
• Premiums are not classified as taxable income to employees.
• Benefits are not considered taxable income to the insureds or their families (even if the employer paid the premium.)
• Benefits are 100% tax-free to the employees whether the employee or the employer pays the premium.
• Premiums currently cannot be included in a Section 125 cafeteria plan.

LTC: The Benefits for Employees

When an employer offers long term care insurance to their employees it helps provide the following benefits:

• Financial security, responsibility and freedom
• Preserve retirement accounts and savings
• Ability to keep job
• Employer-paid premiums not taxable as income
• Employee-paid premiums may be deductible as a medical expense
• Long-term care benefits are not taxable
• The coverage is fully portable
• Receive high quality care for themselves and/or family

LTC: The Options for Employers

As an employer you have several options regarding offering long term care insurance to your employees:

1. You can offer long term care insurance to all of your employees on a voluntary basis only.
2. You can offer a base plan only, Base meaning a very basic plan that has limited benefits. Then, if the employee is interested in additional coverage they can purchase more coverage.
3. You can offer an employer-paid comprehensive long term care insurance policy to all employees.
4. You can do an executive carve-out. You can legally carve-out classes within your employees and only purchase long term care insurance for them. For example if you only wanted to pay the premiums for your senior management you could do that.

With some carriers, when you offer long term care insurance to your employees they receive discounted premiums. Often, these discounts are available to their extended family members (parents, in-laws, grandparents) as well. This is important because if your employees' family members have long term care insurance this allows your employee to stay on the job rather than having to miss work, or worse, quit work to become a caregiver.

Implementation:  Before taking applications on the employees, a series of educational efforts need to take place to encourage employee participation. One-on-one meetings are also needed to meet the employees and their family members to encourage them to apply for the long term care insurance.

click here for more information

Martha Rothaus is a certified long term care insurance specialist (CTLC) and senior advisor (CSA) serving Greater Miami, Dade and South Florida. As an independent agent, respected broker and trusted financial planner, Rothaus Insurance will assist you in making informed, objective decisions about the tax and other advantages of long term care reimbursement and LTC cash indemnity insurance policies in health care, nursing care management and retirement planning.  For a FREE LTC CONSULTATION, click here.