Long Term Care,
Employee Benefits and
The litmus test of comprehensive employer benefits:
Protects the 401(k)
Extends Health Benefits
Voluntary Enrollment Option
Recruitment, Retention, Reward
Discounts up to 10%
Long term care is now a critical topic because of longevity, lack of social supports and limitations of health insurance coverage. It is beneficial for both large and small companies as a retention and recruitment tool. It can also trim costs and boost productivity. According to research from the MetLife Mature Market Institute, the total cost to employers due to lost productivity of workers who have care giving responsibilities has increased by about $4 billion since 1997 to a total of $33.6 billion today. In the U.S., a working caregiver costs an employer an average of about 4,110/year. Employees and their family members can take part in employer sponsored programs.
Protection of the Retirement Accounts
We all know that the health insurance benefit is near and dear to our employee’s hearts. Unfortunately, health insurance is limited in its coverage and does not cover long term care costs. Long term care insurance is actually an extension of our health insurance. Most companies participate in their employee’s wealth retirement accounts such as the 401(k)’s and yet have nothing to protect this portfolio in the event of long term care costs. Long term care insurance is the wealth preservation part of wealth planning.
Voluntary Benefit with Perks
Long term care insurance can be offered by the employer as a voluntary benefit (non-contributory) and at the same time provide great opportunity and benefit for the employees. The most important of the benefits is education. Most people don’t start thinking about long term care insurance until they have a medical condition. An employer sponsored program can offer benefits that include discounts up to 10% and gender neutral pricing an advantage to females.
Executive Carve Outs
Long term care insurance is also unique employee benefit in that it can be discriminatory; a company can offer long term care benefits to one group of employees and not another based on job description and length of employment. There are options for finite premium payments and return of premium, linked life with long term care riders.
Employers may take the premiums paid for long term care of its employees as a tax deduction. And the employees still get the benefits tax free.
Favorable Tax Treatment
Recent health care legislation makes qualified long term care (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 10 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 insured’s 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 for long term care can be paid with pre-tax dollars from health saving accounts and medical savings accounts up to age based limits.
Free Education to Employees
There are many misconceptions about long term care insurance so
that education is a critical aspect of any offering. Age is not the key
factor in planning; it is the anticipating to be self-sufficient. Long
term care is about planning to protect the retirement savings and directing the
family on how to provide care and fund the significant costs of long term care. Unfortunately,
young people use long term care and being able to maintain their independence
instead of returning home for parents to provide care is a high
If you could offer long term care insurance with all the perks and at no expense to your company, would you?Does the executive team have their retirement plans protected?