Coverage Designed to Fit Your Situation
Small Business and Corporations
- Executive fringe benefit plan unlike any other
- Key person insurance (individual LTCI – not group coverage)
- Protecting personal assets with pre-tax dollars
- 401K protection
- Pension insurance
- Extended or lifestyle disability coverage
- Selfish sale (lifestyle protection)
- Deductibility, discrimination, and tax-free benefits
- Post-retirement planning to ensure that this type of care is on your terms…you tell your loved ones where you want to be cared for…how…and by whom
With the Health Insurance Portability and Account-ability Act (HIPAA) of 1996, the Government sent a clear message that it will be the responsibility of individuals and business owners to pay for their own Long-Term Care needs.
The government has looked at this baby boom generation as it’s aging & realized that Medicare and Medicaid were not designed to handle chronic or extended healthcare. So they did a few things:
- HIPAA legislation (federal deductions)
- State tax credits
- Group LTCI product offered to 20 million federal employees
- States have created group plans that they offer to their employees
HIPAA legislation allows us to treat LTC unlike any other insurance benefit:
- Deductible premium
- Tax-free benefit
HIPAA enables employers to provide Long-Term Care Insurance to key executives, spouses, parents, or themselves on a favorable basis as follows:
- Employers can deduct (up to 100%) of the cost of providing coverage to themselves and employees (IRC, Section 162)
- Employer contributions to a policy are not taxable to the executive or business owner (Internal Revenue Code, Section 106)
- Benefits received under an employer-sponsored program are not taxable to the employee (IRC, Section 213).
LTC For Your Small Business
We’d be happy to speak with your accountants/advisors/CPAs.
If employers buy for themselves or key executives, the premium is not counted as income. The premium is a deductible business expense – including spousal premium.
Tax-free benefit on indemnity plans for 2019 (anything over $370/day is taxed).
An employer can take a business expense deduction for employer-paid premiums for an employee, employee’s spouse, or retiree in the same manner as accident or health insurance (IRC, Section 213).
There are flexible discrimination rules for employer-funded LTCI coverage.
It is possible to create a class of select corporate employees that are eligible for this corporate-paid benefit. This class must be based on such factors as length of service, salary, title, or exempt vs. non-exempt (Section 105/106 Medical Reimbursement Plan).
Carve-outs – you do not have to follow the same ERISA guidelines when it comes to other types of health or major medical insurance. This can be just for “key executives”.
Compliment this with limited payment options (10-Pays) and this becomes a tool to have a business owner in his/her high-income earning years pay for this plan and have it fully paid-up before retirement…with pre-tax dollars.
A walk-away fringe benefit using the corporate checkbook.
This can be a “golden-handcuffs” benefit (tool to attract, retain, and reward key employees).
Limited payment options are crucial (10-Pay and Paid up at 65) :
- Rate increases on lifetime payment plans
(normal with health insurance)
- Peace of mind
- Pay using pre-tax dollars
- Pay during high-income years
- Great for clients 40-65 Small business discount are available (groups as small as 3-10 lives)
There are some underwriting concessions on larger cases (15 lives and up)
C-Corporations and Professional Corporations
The LTCI Premium is fully deductible (100%) without regard to the eligible premium limitation or the self-employed health insurance percentage limitation. If employer purchases for non-owner, then premium is 100% deductible.
(Return of Premium) – Companies that are nearing the end of a fiscal year, who are trying to reduce retained earnings. You can load up this health insurance contract, purchase 10-Pays, return of premium options, and rich benefits plans. The premium is 100% deductible, benefits are tax-free, and all premiums are returned to the corporation tax-free.
- IRS Forms & Where to Deduct:
- Self-Employed – 1040, line 29
- S-Corporation – 1120S, line 18
- LLP/LLC – 1065, line 19
- You do not have to meet the 7.5% medical expense threshold – you can deduct based on age alone (not income & medical expenses)
- Each year, these figures are indexed for inflation
- All types of business entities above are handle the same way
- Key point – if employer of an S-Corp/LLC/LLC purchases for employee or employee and spouse, then premium is 100% deductible
- Limitation has to do with business owner him/herself
- LTCI cannot be offered as part of a Cafeteria Plan (Section 125)
- Penalty-free withdrawals from retirement accounts to fund LTCI coverage are not allowed
- The tax-free exchange of Life Insurance to purchase LTCI coverage is not allowed