Group Long-Term Care Insurance
As our population continues to age, many of your employees have personal experience with loved ones needing long-term care (LTC). And many understand they may be responsible for caring for their parents or themselves. This makes them willing to buy long-term care insurance. Most employees like the idea of buying this protection where they buy their other benefits – at work. One study shows that four out of five Americans want the option of buying long-term care insurance at work.
Benefits of group long-term care insurance
➤ Guaranteed issue or simplified underwriting, depending on group
➤ Tax incentives for employees and businesses
➤ Available to family members
➤ Simplified Enrollment
➤ Discounted Premiums
Want to explore options available to your group?
Why businesses participate in group LTCI programs
- Simple Underwriting – This type of simplified underwriting is available to groups with as few as 10 eligible employees. Because of the growing number of health restrictions with individual LTC insurance underwriting, this can be a great benefit to offer employees. Any group with only ten people would need at least five applications approved.
- Tax Deductible – Group LTC insurance premiums can be 100% Tax Deductible for C-Corporations. It can also be partially deductible for other types of corporations. The employer can also buy coverage for key employees.
- Retain Key Employees – The popularity of group LTC insurance makes a more competitive benefits package. This can help you keep important employees.
- Protect Family Members – Coverage is also available to the employee’s spouse and family members. This allows them to take part in the discounted group long term care insurance (Multi-Life) rates. Simplified underwriting can also benefit family members in obtaining long term care protection.
Tax incentives for group long-term care insurance
C-Corporation
Your C-Corp can take advantage of 100% tax deductible group long term care insurance premiums as a legitimate business expense. Group long term care insurance (LTCi) can be purchased for both owners of the corporation and its employees.
- Employer paid premiums are not included in the employee’s gross income
- Long term care protection is available to spouses/domestic partners and even retirees
- Premiums paid are not subject to payroll taxes
- Executive carve-outs may be used to pay all or part of the premiums for key employees
S-Corporation partners or more than 2% shareholders
- Premiums paid for an owner are included as individual gross income.
- A self-employed health insurance deduction can be taken for tax-qualified group long term care insurance premiums paid. Group long term care insurance premiums are considered a medical expense. This is subject to the standard IRS limits based on age.
Self-employed individuals
- Self employed can deduct tax-qualified premiums as a trade or business expense. This is like regular health and accident insurance payments. Tax deductions are allowed for self employed individuals, their spouses and other tax dependents. The maximum deductible amount for each insured person is limited to the IRS age based amount.
Enrollment and payment options
Group LTCI Enrollment
- Voluntary – Voluntary enrollment means the employee pays for the entire premium
- Defined Plan Design – The employer pays the entire premium amount for a defined plan design. If the employee wants a higher level of long term care benefits, they can apply for and pay the extra premium amount. The employer typically deducts the extra premium from the employee’s paycheck.
- Carve-out – The employer pays for part of, or the entire premium, for the employees or executives (or other defined class) LTC insurance.
- Multi-tiered – A separate contribution level is offered based upon various tiers of employees. A tiered contribution could look like the following:
Tier A: The employer pays 100% of the insurance premiums for three top executives
Tier B: Seven key managers are given $100 per month toward their group LTC insurance premium
Tier C: Employer pays $50 per month for remaining 13 employees
Employer Paid Vs Voluntary
Participating employers may contribute to group long term care premiums for its employees. Or, the employer can choose to offer a voluntary (employee pays entire premium) program.
If the employer does not want to pay group long term care insurance premiums for all employees, an executive carve-out (or other defined class) can be a good solution.
Group long term care insurance in the workplace has no discrimination guidelines. Long term care insurance benefits can enhance an executive compensation package. This gives the employer better recruiting and retention of its key executives.
Group long-term care insurance discounts
Besides discounted multi-life rates, an extra 5% discount may be available to those receiving an Employer Contribution.
A Spousal Discount up to 30% can be applied when both spouses, or partners, apply for and are issued group long term care policies.
Associations, credit union members, unions and others
- Association Discounts are available to qualified non-employer groups and other types of qualifying associations.
- Non-employer groups and other qualifying associations must meet the following qualifications:
- The group must exist for a purpose other than to buy insurance
- There must be an active membership rule of at least 200 members
- The organization must have a set of by-laws
Note: Discounts vary by state and insurance carrier
About the Author: Craig Matesky
Reviewed by: Mike Berger