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Transcript of What is it?
Long-Term Care Plan Chapter 49Employee Benefit & Retirement Planning
Copyright 2009, The National Underwriter Company 1
What is it?
An employer-provided benefit similar to health insurance:
– covers nursing home or home health care for chronically ill
– employer receives tax deduction for premium payment
– employee is not taxed for premiums and benefits
Long-Term Care Plan Chapter 49Employee Benefit & Retirement Planning
Copyright 2009, The National Underwriter Company 2
When is it indicated?
1. Employer wants to provide benefit that employee might not otherwise be able to afford
2. Have an older employee group
Long-Term Care Plan Chapter 49Employee Benefit & Retirement Planning
Copyright 2009, The National Underwriter Company 3
Plan Design
• Long-term care (LTC) is expensive; employees will have to pay substantial premiums
• Employee tax deductions limited by “floor” for medical expense deductions
• Employee cannot pay premium from cafeteria or flexible spending plan
• Employer may be reluctant to offer, unlike health insurance, LTC insurance needed by only a few
Long-Term Care Plan Chapter 49Employee Benefit & Retirement Planning
Copyright 2009, The National Underwriter Company 4
Plan Design
• For tax purposes, definition of LTC is strictly limited
• COBRA does not apply to LTC insurance
• Employer can make LTC available to any employee or group of employees
• Plan can cover spouses and dependents on same basis as health insurance plan
Long-Term Care Plan Chapter 49Employee Benefit & Retirement Planning
Copyright 2009, The National Underwriter Company 5
Tax Implications
1. A qualified LTC insurance contract:– the only insurance protection under contract is coverage of
“qualified long term case services”– does not pay or reimburse expenses reimbursed under
Medicare– guaranteed renewable– no cash surrender value or other monetary value– refunds of premiums used to reduce future premiums or
increase future benefits– certain consumer protection requirements are met
Long-Term Care Plan Chapter 49Employee Benefit & Retirement Planning
Copyright 2009, The National Underwriter Company 6
Tax Implications
2. Same tax treatment as accident and health contracts
3. Premium paid by employee may qualify as medical expense deduction on income tax, subject to 7.5% of AGI (Sec. 213)
4. A self-employed person may deduct 100% of premiums (subject to age-based limits) for qualified LTC insurance; limited to those eligible for Sec. 213 itemized deduction
Long-Term Care Plan Chapter 49Employee Benefit & Retirement Planning
Copyright 2009, The National Underwriter Company 7
ERISA and Other Requirements
Long-term care is a ‘welfare benefit’ under ERISA