12/2009For agent/broker use only. Pension Protection Act & LTC Planning Bill Comfort, CLTC Comfort Assurance Group, LLC St. Louis, MO

12/2009For agent/broker use only. PPA ’06 Generally Pension reform LTCi for retired public safety officers Linked-benefit LTC charges 1035 Exchange rules New opportunities to fund traditional LTCi

12/2009For agent/broker use only. LTCi for Retired Public Safety Officers Effective January 1, 2007 Public agency - police, sheriff, fire, rescue, ambulance, DAs, investigators, forestry “Qualified Health Insurance Premiums” (including LTCi) paid from retirement funds tax-free up to $3,000/year. Must be direct from plan to carrier

12/2009For agent/broker use only. Linked-Benefit LTCi Life insurance or annuity with INTERNAL LTCi benefits LTCi benefits must have HIPAA tax- qualified definitions Before January 1, 2010: LTCi benefit payments from life-linked LTCi have been tax-free, BUT internal LTCi charges taxable LTC benefit payments from annuity-linked LTCi have been taxable

12/2009For agent/broker use only. Life-Linked LTCi $100,000 single-premium $200,000 death benefit $400,000 LTCi benefit Cash value with minimum guarantee plus interest earnings Life and LTCi risk charges deducted internally from cash value Benefit if surrender, die or LTC

12/2009For agent/broker use only. Life-Linked LTCi – Pre 2010 $100,000 single-premium $200,000 death benefit $400,000 LTCi benefit LTCi benefits tax-free Internal LTCi risk charges taxable E.g., $1,000 charged against CV for $300,000 LTCi generated a % tax bracket = $333 in additional taxes

12/2009For agent/broker use only. Life-Linked LTCi – 1/1/2010 $100,000 single-premium $200,000 death benefit $400,000 LTCi benefit LTCi benefits tax-free Internal LTCi risk charge tax-free (no 1099) BUT reduces the basis Only impacts tax on surrender Death & LTCi benefits remain tax-free E.g., $1,000 cost reduces basis to $99,000

12/2009For agent/broker use only. Life-Linked LTCi – 1/1/2010 $100,000 single-premium $200,000 death benefit $400,000 LTCi benefit PLANNING OPPORTUNITY: Self-insuring with leverage Additional benefits at death if care not needed Negatives: Life & LTCi costs deducted from CV

12/2009For agent/broker use only. Annuity-Linked LTCi - Pre 2010 $100,000 single premium $300,000 LTCi benefit Internal risk costs taxable as income withdrawal – basis + gain AND LTCi benefits taxable as income withdrawal – basis + gain Excess LTCi benefit treated as gain

12/2009For agent/broker use only. Annuity-Linked LTCi – 1/1/2010 $100,000 single premium $300,000 LTCi benefit Internal risk costs tax-free But reduce the basis as with life-linked LTCi LTCi benefits tax-free LTCi benefits treated as a separate policy (PENDING ISSUE)

12/2009For agent/broker use only. Annuity-Linked LTCi – 1/1/2010 $100,000 single premium $300,000 LTCi benefit PLANNING OPPORTUNITY: Less CV than a traditional annuity due to internal LTCi charges More money without taxes compared to a traditional annuity A self-funding alternative Negative: Higher taxes at death if no LTC

12/2009For agent/broker use only Exchange Tax-free exchanges allowed from: Life Insurance to Life Insurance Annuity to Annuity Life Insurance to Annuity NOT ALLOWED: Annuity to Life Ins NO changes by PPA Beneficial to fund Linked-Benefit LTCi

12/2009For agent/broker use only Exchange - NEW Life Insurance to LTC Insurance Annuity to LTC Insurance Funding TRADITIONAL LTC Insurance Complete 1035x must be to single- pay LTCi BUT Partial 1035x allowed!

12/2009For agent/broker use only Exchange to LTCi Partial 1035x Must be carrier to carrier Owner must be the same Single owner annuity can not fund joint LTCi Allowed, but insurance companies must be willing to administer Tax-free and reduces original contract proportionally – basis + gain Annuity must be non-qualified

12/2009For agent/broker use only Exchange – SPIA Income from a Single Premium Immediate Annuity Assigned to LTCi carrier under 1035x Tax-free income payment

12/2009For agent/broker use only. PPA LTCi Opportunities Creating additional benefits for self- insurers without tax consequences Life-linked Annuity-linked New funding sources for traditional LTCi Tax-free 1035x from life or annuity CV Even partial exchanges

12/2009For agent/broker use only. PPA LTCi Opportunities Non-qualified deferred annuity Partial 1035x to fund LTCi Use existing annuity May be able to avoid surrender charges if free withdrawals New annuity New $ then 1035x to LTCi 1035x into annuity with 1035x to LTCi Be aware of surrender charges

12/2009For agent/broker use only. PPA LTCi Opportunities SPIA New $ to fund SPIA 1035x into SPIA from life or annuity SPIA income 1035x to LTCi Guarantees income to fund LTCi premiums CAUTION: Future rate increase possibility

12/2009For agent/broker use only. QUESTIONS?