Long-Term Care Insurance: A Cost Effective Benefit For Employers and Employees

While the overwhelming number of long-term care insurance policies sold in America today are to individuals, a growing number of companies are participating in long-term care programs and with good reason. “The greatest financial influence on how much income an individual will have for retirement is not how he or she invested beforehand, but how much he or she will have to spend on health care after the age of 65,” notes Susan Jacobs, a long-term care specialist with NYC-based Kornreich-NIA, an NIA Group company. A recent Department of Labor statistic noted that approximately one out of every two individuals over the age of 65 will require long-term care. Currently, less than ten percent of the population is covered by long-term care insurance.

“Long-term care insurance is a smart investment for people who have assets to protect but not enough liquid assets to pay for ongoing, out-of-pocket health expenses like nursing homes or home care, which can cost between $50,000 to $100,000 or more per year,” says Jacobs. “Individuals who would not qualify for Medicaid assistance until all of their assets are depleted are usually the best candidates for this type of coverage.”

Unlike most individuals, employers have the flexibility to pay for long-term care either through their business or out of their personal funds. There are several benefits for employers and their employees who participate in a company program versus an individual long-term care policy.

Employees caring for elderly family members have high stress levels, which can result in stress-related illness, lost productivity and missed work time. This can impact a company’s overall efficiency and profitability, as well as its health insurance premiums. “It makes economic sense for employers to provide long-term care insurance to employees and their families,” says Jacobs. “It’s an attractive, value-added benefit that can help keep top talent on board.”

Employer-sponsored plans also provide key financial and tax benefits that individual programs cannot offer. Employers may be able to deduct the cost of providing long-term care coverage in a similar manner as they deduct health insurance premiums now. Most employees who pay premiums for qualified long-term care insurance may claim a credit against their personal income tax. In addition, benefits received under an employer-sponsored program are not taxable to the employee under IRS Section 105(b).

While long-term care plans can vary in plan design, most insurance companies pay a fixed dollar benefit per day that one receives care. Advisors like Susan Jacobs can provide an unbiased opinion and considerable professional experience in helping employers choose from among several different types of plans.

For example, some plans lump all employees together, while others may have one or more qualifying questions that can be asked to eliminate employees with a disabling or potentially disabling disability or disease. Other plans are modeled after individual long-term care plans, but feature group discounts for a select group or class of employees. Premium payments generally will be fully tax-deductible when the class is based on factors such as a corporate officer's status, salary grade or length of service. These plans are preferential because they can be designed as 10-year paid-up policies that are tax-free to the employee and tax deductible to the employer.

“Needs are going to vary based upon the size and make up of a specific business,” notes Jacobs. “Working with a long-term care specialist can help employers make the right decisions for themselves, their families and their businesses.”

Employers interested in learning more about their long-term care options can contact Susan Jacobs at 212-850-0135 or by email at sjacobs@niagroup.com.