LTC and the Employer

LTC AdvisoryJuly 2006

Today’s Employer Workplace

• The aging of America is, predictably, having an impact on business

• The child care needs of the 1980s are being replaced with elder care demands of the new millennium

UNAVOIDABLE!• Nearly 29 million people involved in caregiving

in this country are employed, including 35 percent of Boomers. *

• The U.S. Department of Labor predicts that by 2008, 54 percent of the workforce will be involved in caring for an older person.

* Source: AARP Bulletin, 2006

Lost Productivity• Workers caring for elderly

relatives cost their employers as much as $30 billion* annually in lost productivity – an expense likely to grow as the population continues to age.

*Source: Puget Sound Business Journal, 2004

CONSEQUENCES• Employees caregiving

responsibilities ultimately impact the bottom line, and this could be more important than the concern over that employee’s own disability

• Family Medical Leave Act

PRESENTEE-ISM

This is the term for employees who show up for work, but spend an excessive amount of time on the phone – checking on their dependent adults and/or their caregivers.

EMPLOYER CONCERNS

• Disability of the employee• Disability of an employee’s

family member

EMPLOYEE CONCERNS

71 percent of full-time employees worry about having enough money to pay bills during a period of income loss.

Source: MetLife study, 2004

Progress To Date• Workers rate health insurance the

most important employee benefit they receive by a margin of 5 to 1. LTC is sixth on the list.

• LTC has a 1 percent penetration rate in the worksite market.

• Source: Employee Benefit Research Institute

RESOLVING THESE ISSUES

Most Americans access health insurance benefits through the workplace.

• Health insurance covers short-term medical costs.

• What they now need is help with long-term care medical costs.

LTC SOLUTIONS• Long-term care can be offered as

a new employee benefit for employees.

• This would take care of their unreimbursed long-term care expenses if the need arises.

• Money from HSA funds can be used to pay some or all of the premium

LTC SOLUTIONS

• Long-term care insurance can also be offered to: employee’s spouse– parents and grandparents– In-laws

LTC SOLUTIONS

By covering the employee’s family members, there is a chance to dramatically reduce or eliminate the amount of time an employee spends on caregiving.

LTC SOLUTIONS

Employees and their family and extended family members can purchase products through either group or individual long-term care insurance policies.

LTC SOLUTIONS

Should the employer contribute money to a LTC insurance plan?

LTC SOLUTIONS

REMEMBER!Many employees make career decisions based on the relative strength of the employee benefit package.

LTC SOLUTIONS

• Employers can pick and choose who they wish to cover for LTC

• They can single out key employees for whom they may contribute premiums for the LTC coverage

• There are limited pay options to increase attractiveness

LTC SOLUTIONS

FOR EXAMPLE:

The 10-pay premium option means that the employer can make an offer to the key employees that if they stay on for ten years, they will receive a paid-up long-term care insurance policy in exchange for their loyalty.

LTC SOLUTIONS

This 10-pay LTC premium option, combined with a 401(k) plan means the employer can offer key employees both wealth accumulation and wealth protection for retirement.

FOR THE EMPLOYER:• They are not required to contribute

premiums on behalf of employees.• If they do pay premiums, the cost is fully

tax-deductible.• Coverage can be extended to family

members, and can save on employees’ time as a result

• Larger firms may be offered guaranteed issue coverage

• Source: Society for Human Resources Management

Using LTC Insurance

• Employees can often design their own LTC insurance coverage

• Employers assist employees in helping to solve one of their future potential problems: providing caregiving for family members

• Premium contributions are tax deductible if paid on behalf of employees.

• C-Corporations can fully deduct any contributions to tax-qualified LTC insurance policies made on behalf ofofficers, owners, employees, retirees, spouses and dependents

TAX ADVANTAGES

Tax Advantages

• S-Corporations, Partnerships, and self-employed persons can fully deduct any contributions to tax- qualified LTC insurance policies made on behalf of their employees.

Tax Advantages

Partners, sole proprietors and more than 2% S-Corporation owners can deduct premiums for their own coverage – BUT – it is limited to a maximum deduction based on age.

2008 S-Corp Owner, Partner, Sole Proprietor

DeductionsMaximum eligible premium deduction in 2006:

Eligible Premium Attained Age Deduction

40 or less $ 310 41-50 $ 580 51-60 $1,150 61-70 $3,080

70+ $3,850

TAX ADVANTAGES • The premium paid on behalf of any

employee for a tax-qualified long-term care insurance plan is not includable in income by the employee.

• Benefits under a tax-qualified plan are received income-tax free to the claimant.

Funding Solutions

• Group or Individual Tax-qualified plans

• Plan design:– Daily benefit– Elimination period– Benefit period– Inflation option

INDIVIDUAL LTCI

• Voluntary• Underwritten• Tailored-design• Executive carve-out

Group LTC Insurance• Simplified or Guaranteed

Issue underwriting depending on size of business

• Little or no participation requirements

• Product features very similar to individual coverage

LTC IN EMPLOYER MARKET

Adding long-term care insurance to an employee benefit portfolio can help the employer gain an edge in a tight labor market.