Long-term care insurance may be one of the newest and fastest growing employee benefits. There are tax incentives to employers for purchasing long-term care insurance for their employees. Employers can pay for all the coverage, part of the coverage, or have employees pay all the cost. Typically employers are willing to fund part of the plan and then allow the employees to purchase additional coverage.

You may be wondering why you should go through the trouble of making additional insurance available to your employees. That's a fair question and we would like to answer it. There can be benefits to both the employers and employees.

Benefits For Employers

Favorable Tax Treatment:

Recent health care legislation makes qualified LTC insurance policies more tax advantageous for both employers and employees. Employers that pay for long-term care insurance may be eligible for favorable tax treatment. (The exact tax consequences vary depending on the structure of the business; i.e. sole proprietor, partnership, LLC, C-Corporation, etc.)

• Employer-paid LTC premiums for employee, spouse, and retiree coverage may be deducted as a business expense.
• Employers can cover defined classes of workers, making it possible to offer the benefit to only higher-paid employees, such as an executive carve-out.
• Employees with medical and dental expenses exceeding 7.5 percent of adjusted gross income may be able to also deduct eligible LTC premiums they pay.
• Premiums are not classified as taxable income to employees.
• Benefits are not considered taxable income to the insureds or their families (even if the employer paid the premium.)
• Benefits are 100% tax-free to the employees whether the employee or the employer pays the premium.
• Premiums currently cannot be included in a Section 125 "cafeteria" plan.

Long-term care insurance is generally available through groups and to individuals. Group insurance is typically offered through employers, and this type of coverage is becoming a more common benefit. By the end of 2002, more than 5,600 employers were offering a long-term care insurance plan to their employees, retirees, or both. America's Health Insurance Plans, 2004

Benefits For Employees

When an employer offers long-term care insurance to their employees it helps provide the following benefits:

• Financial security, responsibility and freedom
• Preserve retirement accounts and savings
• Ability to keep job
• Employer-paid premiums not taxable as income
• Employee-paid premiums may be deductible as a medical expense
• Long-term care benefits are not taxable
• The coverage is fully portable
• Receive high quality care for themselves and/or family

Two-thirds of employees who responded to the 1999 National Council on Aging/John Hancock Survey agree that LTC is the greatest threat to their standard of living in retirement.