LTCI for executives: The missing link

By Allan Checkoway


With an unprecedented healthy economy and the tightest labor market in decades, top level corporate executives are looking for more than high salaries alone. Bonuses, stock options and other executive benefits have become part of the most creative compensation programs. And, the more forward thinking companies provide their executives with a choice of investment vehicles that can lead to wealth accumulation. The majority of Fortune 1000 companies in the United States today now offer supplemental retirement plans and non-qualified deferred compensation programs to their key executive employees.

However, most investment programs focus mostly on asset accumulation. There is little recognition of the importance of asset preservation. Successful investment programs must dovetail to be asset accumulation with asset preservation, followed by the careful distribution of one's assets to their heirs. Regrettably, the most carefully designed financial plans eventually become vulnerable to the expense of long term care and final illness.

Planning for long term care needs to be integrated as part of an executive's estate plan. And, the financial risk of long term care needs to be separated from the estate plan itself with the purchase of long term care insurance.

The case for LTCI:
  • For individuals older than age 65, six-of-10 Americans will be unable to care for themselves over their life expectancy.

  • The average yearly cost for long term care in metropolitan areas is $70,000 to $100,000.

  • The Health Insurance Portability and Accountability Act (HIPAA) now gives tax incentives to those who purchase long term care.
Favorable LTCI tax treatment

HIPAA allows for favorable federal income tax treatment for LTCI policies that are "tax-qualified." HIPAA enables employers to provide LTCI to key executives on a favorable tax basis as follows:
  • Employer premium contribution not treated as taxable income to executive employee

  • Employer premium contributions are generally deductible as a business expense, similar to the treatment of employer provided health insurance

  • Long term care benefits received by executive employee are tax free

  • Employer provided LTCI coverage is not subject to any discrimination rules. Benefits can be offered to "highly compensated" executives.
Corporations can install employer sponsored long term care plans with multiple benefits for their executive staff as well as the corporation.

Employer/employee LTCI benefits

Employer advantages
  • Premium contributions are tax deductible

  • Corporation can reward a select "class" of employees

  • Executive long term care can attract, reward, and retain key executives
Employee advantages
  • An employee benefit that provides asset preservation by protecting a key executive's assets when LTCI assistance is needed

  • Corporate paid premiums not taxable income

  • Benefits received are tax-free

  • Portability for life. Policy is owned by executive

  • Family benefits. LTCI coverage is available to executive's spouse, parents and in-laws at discounted rates
When approaching retirement, the healthier executives are, the longer they'll live. And, the longer they live, the greater the probability of eventually needing long term care. Employers can, and should, provide LTCI programs for key executives and their spouses with portability for their retirement years.

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