1. Long-Term Care Plan Chapter 49 Employee Benefit & Retirement Planning Copyright 2011, The National Underwriter Company1 What is it? An employer-provided benefit similar to health insurance: –covers nursing home or home health care for chronically ill –employer receives tax deduction for premium payment –employee is not taxed for premiums and benefits

2. Long-Term Care Plan Chapter 49 Employee Benefit & Retirement Planning Copyright 2011, The National Underwriter Company2 When is it indicated? 1.Employer wants to provide benefit that employee might not otherwise be able to afford 2.Have an older employee group

3. Long-Term Care Plan Chapter 49 Employee Benefit & Retirement Planning Copyright 2011, The National Underwriter Company3 Plan Design Long-term care (LTC) is expensive; employees will have to pay substantial premiums Employee tax deductions limited by “floor” for medical expense deductions Employee cannot pay premium from cafeteria or flexible spending plan Employer may be reluctant to offer, unlike health insurance, LTC insurance needed by only a few

4. Long-Term Care Plan Chapter 49 Employee Benefit & Retirement Planning Copyright 2011, The National Underwriter Company4 CLASS Act Community Living Assistance Services and Support Act recently enacted as part of Health Care Act, implementation in 2010 or 2013 Voluntary payroll-deduction program for employees that provides long term care benefits

5. Long-Term Care Plan Chapter 49 Employee Benefit & Retirement Planning Copyright 2011, The National Underwriter Company5 CLASS Act Eligibility –Available to all employees “actively at work” –includes part time workers –No exclusions for disability or health status Benefits –Cash payment no less than average of $50/day –Forthcoming regulations will establish specific criteria –Favor home-based health care

6. Long-Term Care Plan Chapter 49 Employee Benefit & Retirement Planning Copyright 2011, The National Underwriter Company6 CLASS Act Premium costs –Premiums expected to be lower for younger plan participants –Reduced premiums for those below federal poverty level

7. Long-Term Care Plan Chapter 49 Employee Benefit & Retirement Planning Copyright 2011, The National Underwriter Company7 Plan Design For tax purposes, definition of LTC is strictly limited COBRA does not apply to LTC insurance Employer can make LTC available to any employee or group of employees Plan can cover spouses and dependents on same basis as health insurance plan

8. Long-Term Care Plan Chapter 49 Employee Benefit & Retirement Planning Copyright 2011, The National Underwriter Company8 Tax Implications 1.A qualified LTC insurance contract: –the only insurance protection under contract is coverage of “qualified long term case services” –does not pay or reimburse expenses reimbursed under Medicare –guaranteed renewable –no cash surrender value or other monetary value –refunds of premiums used to reduce future premiums or increase future benefits –certain consumer protection requirements are met

9. Long-Term Care Plan Chapter 49 Employee Benefit & Retirement Planning Copyright 2011, The National Underwriter Company9 Tax Implications 2.Same tax treatment as accident and health contracts 3.Premium paid by employee may qualify as medical expense deduction on income tax, subject to 7.5% of AGI (Sec. 213) 4.A self-employed person may deduct 100% of premiums (subject to age-based limits) for qualified LTC insurance; limited to those eligible for Sec. 213 itemized deduction

10. Long-Term Care Plan Chapter 49 Employee Benefit & Retirement Planning Copyright 2011, The National Underwriter Company10 ERISA and Other Requirements Long-term care is a ‘welfare benefit’ under ERISA