CPA & Business Advisory Blog

The Advantages of Offering Long-Term Care Insurance

Part 4 of Jim Sacher’s 12 Great Ideas for Tax Savings series

According to the recently published 2015 Long-Term Care Insurance Price Index, overall costs for new long-term care insurance coverage increased 8.6 percent compared to one year ago. In the future, long-term care is likely to be even more expensive. If costs rise at just 3% a year, a conservative estimate, in 20 years, a one-year nursing home stay will cost approximately $135,133.

long-term careThe Opportunity

If you’re a business owner with the available cash flow, you might want to consider having the business obtain long-term care insurance for yourself and your spouse. You might also consider providing long-term care coverage to key executives as part of their compensation package. The tax laws include tax incentives for employers who purchase long-term care insurance; premiums paid on tax-qualified long-term care policies are tax deductible.

The Benefits

You may provide long-term care insurance on a pre-tax basis to select employees, including yourself, the business owner. The insurance, which can be offered on a discriminatory basis, is tax-deductible to the business and the benefits are tax-free to the insured. For an employee buying long-term care insurance on their own, the deduction is taken as an itemized deduction subject to a number of limitations. Offering a long-term care insurance plan to select employees on a pre-tax basis saves the business and the individual tax dollars. That’s a real win/win. Here’s why:

Employer

  • The plan can include spouse and family members
  • The employer can get discounted pricing
  • The benefit could be included as part of the overall compensation package or could simply be a trade-off for current compensation
  • Stress-free employees are more productive in the workplace
  • The plan can be a powerful recruiting and retention tool
  • The plan can enhance current benefit packages with a voluntary benefit that offers coverage not provided for in medical or disability insurance.

Employees

  • The plan is portable
  • Employees can obtain coverage on a group basis that is less costly than a single policy.
  • Insurers require that individuals meet health standards that can make it harder for some to qualify for insurance protection. When offered on a group basis, the insurer simplified medical underwriting can be available for employees and can be extended to spouses
  • Employees can enjoy the peace of mind and independence that comes with the security of having a plan in place.

For more information on Long-Term Care Planning, attend Skoda Minotti’s Speaker Series session February 18th, Protecting Your Life Savings: Long-Term Care Planning. Register today by clicking here.

Stay tuned for the next article in our series on InvestOhio.  For questions on how you can take advantage of any of these tax savings ideas, please contact Jim Sacher at 440-605-7145 or jsacher@skodaminotti.com.


12 Great Ideas for Tax Savings

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