The Businesses Advantage of Offering an Employer-Sponsored LTC Insurance
Public awareness of the impacts of needing long term care is growing due in part to our aging population as we are seeing close to 10,000 people a day turn age 70 and realizing that the government cannot afford to pay for long term care costs. The sandwich generation in a position of being responsible for the care of elderly family members is another factor prompting employees to look to their employers for help. Many employers are responding by offering long-term care insurance.
Is LTC something you as an employer should be offering your employees and will it make an impact?
The primary goal of LTC is to preserve and protect assets in the event of an illness or injury requiring extended care and protect their family from an emotionally devastating event. Essentially it completes the retirement package and although nearly 40% of large employers offer some form of LTC benefit most only see around 2% employee participation. This is likely due to lack of understanding and poor implementation of the benefit rollout. Working with a knowledgeable partner to help educate and implement your group is important.
Employer Benefits
Adding LTC makes for a more attractive employee benefits package, which can help recruit and retain workers and increase morale.
Employer-paid premiums are tax deductible for employees, with some limitations for owners depending on the type of business entity.
Executive carveouts are allowed. In fact the structure of benefit offer is very flexible to meet the employers goals and be in line with their current benefit structure. LTC is a non-qualified employee benefit therefore is not subject to ERISA or discrimination rules.
Employer Insights
Statistically, only 2-4% of eligible employees continually opt for voluntary employer-sponsored LTC.
Many employees expect the employer to contribute toward the cost of the LTC, which may not be intended by the employer.
Although only 2-4% of eligible employees may purchase if benefit is voluntary an increasing number of employees, closer to 60%, will buy-up benefits with an employer contribution including spousal polices, larger benefits, and inflation riders.
Employee Benefits
Simplified Underwriting makes it easier to get coverage and is a key to a successful LTC benefit rollout.
Costs of a multi-life benefit is typically lower than the open market where rates are unisex and females get a large discount automatically.
Spouses / Partners can apply and often a discount is received for this.
Tax-qualified LTC benefits are not taxable as income, even if premiums are paid by the employer. Also, employer payments of premium are not considered income to the employee.
Premiums paid by the employee may be deductible as a medical expense, subject to the AGI rule.
Employee Insights
Typically Simplified Underwriting is offered only once during the initial enrollment period. There is no AEP.
Policies purchased are yours to keep, delivered to your home upon issue. There are no issues of continuing coverage once you leave employment.
The contributions of the employer or if you are offered this benefit is subject to the employer’s decision.
Working with a knowledgeable partner to help educate and implement LTC for your group is important. If you are considering adding a LTC benefit to your company and would like to know more call us and we will help answer any of your questions and either work with you directly or with your preferred agent.