Transcript Lifestyle 2000TM

Lifestyle
TM
2000
CORPORATE LONG TERM CARE
POINT OF SALE
PRESENTATION
Lifestyle 2000TM
C-Corporations & Long Term Care Insurance
The Last Great Tax Advantage
SLTC00-17
Lifestyle 2000TM
LONG TERM CARE INSURANCE
How to use corporate
dollars to fund a federally
tax-qualified employee
benefit.
Lifestyle 2000TM
What is Long Term Care?
Long Term Care is assistance
provided to someone who has a
condition or illness that limits
his or her ability to perform
normal daily activities.
Lifestyle 2000TM
Long Term Care Includes:
Assistance with Activities of
Daily Living (ADL’s)
- Bathing
- Eating
- Dressing
- Toileting
- Transferring
- Continence
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Who Will Pay for Long Term Care?
Lifestyle
TM
2000
Long Term Care Myths
 My
Children Will Take Care
of Me
 Medicare Pays for Long Term
Care
 Medicaid Will Take Care of
the Bill
 I Will Never Go to a Nursing
Home
Lifestyle
TM
2000
What are the chances of needing Long Term
Care?
The total risk of a
65 year old
entering a nursing
home at some
point in life is
49%(1)
(1) Long Term Care: Knowing the Risk, Paying the Price, Health Insurance Association of America
Lifestyle 2000TM
•Protecting Current Assets
>Even younger clients have a current need for Long
Term Care Insurance
>Long Term Care Utilization:
3% are under age 18
40% are ages 18 to 64
57% are over age 65(2)
(2) U.S. Accounting Office, 1995
Lifestyle
TM
2000
Friends and family may not be in
a financial position to help pay
for the care you require when
you need it. Currently, the
national average for one year in
the nursing home is estimated to
cost $41,000(3) as a national
average. If we consider even a
conservative inflation increase of
5% per year, within the next 25
years, one year’s stay in a
nursing home could more than
$100,000.(4)
(3),(4) The American Health Care Association, September 1998
Lifestyle 2000TM
Long Term Care Insurance
Helps You To:
•Maintain Independence
•Control the Quality of Your
Care
•Have Peace of Mind for Your
Future
•Preserve Your Assets
Lifestyle 2000TM
• To help you move pre-tax
corporate dollars out of your
company.
• Deduct those dollars as a usual
business expense.
• Make those dollars available
to your heirs.
• Provide you or your key
employees lifetime protection
against the high cost of long
term care.
Our Purpose
Lifestyle 2000TM
HIPAA
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Health Insurance Portability and
Accountability Act
Mostly aimed at Group Medical
Insurance
Revolutionized corporate executive
benefit Long Term Care Insurance sales
Defined tax-deductible LTC Insurance
premiums
Defined amount of tax-free LTC benefits
Lifestyle 2000TM
HIPAA
Tax Free Benefits
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All reimbursement plan
benefits are tax-free.
All indemnity plan benefits
spent on qualified nursing care
are tax free.
Tax free benefits from an
indemnity plan can exceed
nursing care costs.
However, indemnity benefits
above nursing care expense
AND above $190 per day
(adjusted for inflation) are
taxable.
Lifestyle 2000TM
What the IRS says:
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The IRS has determined that Long Term Care,
as an employee benefit, does not have to
follow ERISA guidelines. This means that
the employer can “pick and choose” who will
participate in this benefit program.(5)
This benefit can create “Golden Handcuffs”
for key employees and a “Golden Parachute”
for business owners.
This benefit allows the Corporation to move
business dollars into the hands of key
executives.
(5) IRS Section 105(b)
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Tax Deduction for Self Employed(6)
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Tax qualified long term care
insurance plans only
Not eligible for cafeteria plans
Eligible for MSA accounts
Deduction limits
–
60% (2000 and 2001)
–
70% (2002)
– 100% (2003)
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Deductible amount is lesser of
premium paid or age related
amount
– 18-40 - $ 220
– 41-50 - $ 410
– 51-60 - $ 820
– 61-70 - $2200
–
71+ - $2750
Per insured person, based upon age at the end of the taxable year. Other 40% is eligible for
the 7.5% of Adjusted Gross Income for un-reimbursed medical expenses. 100% of premium
paid through an MSA is an eligible expense. Consult your tax professional.
(6) IRC Sec. 213(d)(10)(A)
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What is your deduction?(7)
C-Corporation
- 100% Deductible
S-Corporation, LLC,
Partnerships and Sole Proprietorship.
- 60% (2000/2001) Deductible on
the owner(s)
- 100% Deductible on other
employees
- Excess carried over to personal tax
return subject to limitations
(7) IRS Section 162(1)(2)(c)
Lifestyle 2000TM
Qualified long-term care insurance and expenses
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All Qualified Long Term Care
Insurance premiums and
expenses for employees are
fully deductible by employer
without limitation.(8)
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Premiums not included in W-2,
even for owner-employee.(9)
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Benefits are not taxable(10)
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Employer can offer to select
employees.(11)
(8), (9), (10), (11) HIPPA 1996, P.L. 104-49L, IRC Sec. 106(a), IRS Sec. 7702B(a)(2), IRS Sec. 105(b)
Lifestyle 2000TM
The “C-Corp” Advantage
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Exceptional executive benefit
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Uses pre-tax corporate dollars
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Lower age - lower premiums
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Lower age - insurability is less concern
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Tax advantages not available
individually
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Paid-up options fund post-retirement
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Endorsed Group premium discounts
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“C” Corp Tax Qualified LTCI
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LTCI cannot be part of a
Section 125 plan(12)
No C Corp cap on premiums
that HIPAA did impose
upon others(13)
No C Corp limit on limited
payment premium plans(14)
Can be viewed as a way to
increase executive
retirement income
(12), (13), (14) HIPPA 1996, P.L. 104-94L
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Pre-funding Retirement Expense
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Limited-Pay Premium options
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Allows pre-payment of future
premiums during specified
period using pre-tax dollars
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There is a high cost of waiting
to buy
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Example Benefits for a Key Employee
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Lifetime Benefits
5% Compound Benefit Increase
Rider
$200 per day
Indemnity Benefits
Estate is protected by not having to
liquidate estate assets in order to pay
for long term care.
Comprehensive Benefits
10-Pay Premium Option
Retirement income increases since
you are not using retirement dollars
to pay for long term care
Lifestyle 2000TM
Comprehensive Benefits
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Tax Qualified
5% Compound Interest
Inflation rider
Comprehensive Nursing
Facility Care and HCBC
Indemnity benefit option
10-Pay and Single-pay
premium options
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Underwriting related
pricing advantage
Lifetime elimination
periods of 0, 30 and 90
days
Joint Waiver of Premium
Enhanced HCBC option
Endorsed Group Premium
Discounts
Lifestyle 2000TM
C-Corporation LTC Tax Treatment
“LTC Insurance” is health insurance
IRC 7702B
Premiums Deductible IRC 162
Company
Purchases “LTC Insurance” on
Key Employees
Premiums paid for LTC are not
taxable to Executive
IRC 162
Benefits are Tax Free
up to $190 per day
IRC 7702B d(4)
Insured has
Lifetime
LTC
protection
ESTATE gets refund of premium
upon death of insured(s)
IRC 7702B (b)2c(1)(E)
Lifestyle 2000TM
Coverage Provided by Policy Series S-6000-P, underwritten by The
State Life Insurance Company, Indianapolis, IN. Policy benefits
and options vary by state and some of those listed here may not be
available in your state.
For costs and further details of coverage, including exclusions and
reductions or limitations and the terms under which the policy may
be continued in force, contact your State Life agent.
The information provided here is not intended as legal or tax
advice. We recommend that you consult with an attorney,
accountant or tax advisor regarding the tax implications of
purchasing long term care insurance.