This chapter briefly covers group long-term care insurance contracts. Long-term care per se is not given much coverage, with coverage focusing instead on group plans. Plan design and Tax implications are discussed, and there is a note identifying long-term care plans as an ERISA welfare benefit plan. | 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 Copyright 2009, The National Underwriter Company When is it indicated? Employer wants to provide benefit that employee might not otherwise be able to afford Have an older employee group Copyright 2009, The National Underwriter Company 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 Copyright 2009, The National Underwriter Company 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 Copyright 2009, The National Underwriter Company Tax Implications 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 Copyright 2009, The National Underwriter Company Tax Implications Same tax treatment as accident and health contracts Premium paid by employee may qualify as medical expense deduction on income tax, subject to of AGI (Sec. 213) 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 Copyright 2009, The National Underwriter Company ERISA and Other Requirements Long-term care is a ‘welfare benefit’ under ERISA Copyright 2009, The National Underwriter Company | 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 Copyright 2009, The National Underwriter Company When is it indicated? Employer wants to provide benefit that employee might not otherwise be able to afford Have an older employee group Copyright 2009, The National Underwriter Company 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 Copyright 2009, The National Underwriter Company Plan Design For tax purposes, definition of LTC is strictly limited COBRA does not apply to LTC insurance Employer can make LTC available .
