Transcript White Color Resource - Brokerage Services International

Long Term Care Insurance
Opportunities Under The
Pension Protection Act
Presented by:
BSI, Inc
Long Term Care Insurance Underwritten by
Genworth Life Insurance Company,
Richmond, VA
FOR PRODUCER USE ONLY. NOT FOR PUBLIC USE OR DISTRIBUTION.
©2010 Genworth Financial, Inc. All rights reserved. Genworth, Genworth Financial and the
Genworth logo are registered service marks of Genworth Financial, Inc.
50127 01/19/10
Agenda
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The Pension Protection Act of 2006
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New Opportunities
All guarantees provided by insurance products are based on the claims paying ability of the issuing
company.
Long Term Care Opportunities Under The Pension Protection Act of 2006
For Producer Use Only. Not for public use or distribution.
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Long Term Care Insurance Opportunities Under
The Pension Protection Act of 2006 (PPA)
Long Term Care Opportunities Under The Pension Protection Act of 2006
For Producer Use Only. Not for public use or distribution.
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Long Term Care Insurance Under the PPA
Provisions Of The PPA Affecting Long Term Care Insurance (LTCI)
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Retired Public Safety Officers
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Qualified LTCI Within A Linked Benefit Product
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Tax-free Exchange Rules Under IRC Section 1035
Long Term Care Opportunities Under The Pension Protection Act of 2006
For Producer Use Only. Not for public use or distribution.
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Long Term Care Insurance Under the PPA
Linked Benefit Products
•
Prior to 1/1/2010
– LTC Benefits and Charges
From Annuity-LTC Are
Taxable
•
Key Changes Beginning 1/1/2010
– A Tax Qualified LTCI (QLTCI) rider
under a non-qualified annuity
contract will be treated as a separate
contract, thus QLTCI benefits paid
from these riders are tax free
– LTCI rider charges against the
account value are not a taxable
distribution, although they reduce the
client’s cost basis (but not below
zero)
Long Term Care Opportunities Under The Pension Protection Act of 2006
For Producer Use Only. Not for public use or distribution.
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Long Term Care Insurance Under the PPA
Current 1035 Rules*
Life

New 1035 Exchange Rules
Life
1035 New Tax Free Options:
Annuity 
Annuity
• Annuity

LTCI

Annuity
• Life

LTCI
• QLTCI

LTCI
Life
Annuity to Life is not Allowed
New, Tax Advantaged Opportunities For LTCI Planning
Non- Qualified
Annuity With
Gain
LTCI**
LTCI Benefits
Tax Free LTCI
Benefits
Tax Free Exchange
*Endowment Contracts may also be exchanged for other endowment contracts, annuity contracts or QLTCI, but are mostly legacy contracts.
**Traditional LTCI or Linked Benefit Annuity Products with a QLTCI Rider11
Long Term Care Opportunities Under The Pension Protection Act of 2006
For Producer Use Only. Not for public use or distribution.
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PPA – LTCI Planning Options
Non-Qualified Annuity Funding Of Traditional LTCI
Non-Qualified
Deferred Annuity
Gain
•
Before
2010
Basis
Non-Qualified
Deferred Annuity
Gain
•
2010
Partial Withdrawal (Annual)
– Portion of withdrawal that is
gain is taxable as ordinary
income *
– Additional 10% penalty on
gain may apply if younger
than age 59½ *
Partial 1035 (Annual)
– No taxable event to owner
Basis
Traditional
LTCI
Traditional
LTCI
– Gain/Basis is pro-rated
Fund LTCI Without Immediate Tax Consequences
*Partial withdrawals from non-qualified deferred annuities bought after August 13, 1982 are taxed as ordinary income to the extent of gain in the contract
(LIFO). Partial withdrawals from contracts entered into before that date may be treated as first coming from principal (FIFO).
Long Term Care Opportunities Under The Pension Protection Act of 2006
For Producer Use Only. Not for public use or distribution.
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PPA – LTCI Planning Options
SPIA Funding Of Traditional LTCI
SPIA
Income
Gain
•
Before
2010
Basis
– Income may be part gain and
part return of premium
(Exclusion Ratio) until the
premium is recovered
Traditional
LTCI
– Portion of income that
constitutes gain is taxable as
ordinary income
SPIA
Gain
•
2010
Basis
Income
– Payments sent from SPIA
carrier to an LTCI carrier are
tax-free*
Traditional
LTCI
* Based on our interpretation of current tax law, we will report SPIA payments directly funding long term care
insurance as taxable amount $0.00 (zero), unless the IRS issues instructions requiring different reporting.
Long Term Care Opportunities Under The Pension Protection Act of 2006
For Producer Use Only. Not for public use or distribution.
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PPA – LTCI Planning Options
Using An Annuity To Pay For Long Term Care Expenses
Self Funding w/
Non-Qualified
Annuity
Gain
Basis
Withdrawal
– Gain withdrawn to pay long term
care cost taxed as ordinary
income*
Long Term Care
Expenses
– Limited to Account Value
Linked Benefit
Annuity
Gain
Basis
LTC Benefits
– Benefits paid to reimburse for
LTCI expenses are not taxed
LTC Rider
Long Term Care
Expenses
– Many linked benefit annuity
contracts allow the contract
holder to leverage initial premium
for larger LTC benefits
Exchange A Non-Qualified Annuity With Substantial Gain For Income Tax
Free LTC Benefits
*In some cases, long term care expenses paid out-of-pocket may be deductible as unreimbursed medical expenses for federal income tax purposes
Long Term Care Opportunities Under The Pension Protection Act of 2006
For Producer Use Only. Not for public use or distribution.
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PPA – Linked Benefit Life Changes
Using A Life Policy To Pay For Long Term Care Expenses
Linked Benefit
Life
Gain
Basis
Tax Free LTCI Benefits
Long Term Care
Expenses
LTC Rider
•
As of 2010, long term care insurance rider charges reduce
the cost basis but not below zero.
•
Before 2010, such charges may have been taxable.
Any LTC benefit paid from a linked benefit life contract will reduce both the contract cash value and death benefit.
If You Use For Life Or Long Term Care Benefits, Then No Tax
Consequences
Long Term Care Opportunities Under The Pension Protection Act of 2006
For Producer Use Only. Not for public use or distribution.
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The Opportunity
Long Term Care Opportunities Under The Pension Protection Act of 2006
For Producer Use Only. Not for public use or distribution.
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Consumer LTC Strategy
All Consumers Fall into One of 3 Categories
Long Term Care Insurance Purchasers 7% Market Penetration*
–
–
Recognize need for LTCI protection and willing to purchase a traditional
policy as solution
Solution = traditional LTCI policy
Self-Insuring
–
Expect to use existing assets to fund LTC need
Don’t like idea of paying premiums if they never have a long term care event
–
Solution = Linked Benefits Product
–
Medicaid
–
No private insurance solution
93% of the Market is Uncovered by Traditional LTCI
*SRI Macro Monitor 2006 - 2007
Long Term Care Opportunities Under The Pension Protection Act of 2006
For Producer Use Only. Not for public use or distribution.
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2
Annuity Linked Benefit Market Assessment
Nonqualified Fixed Annuities
• $300 Billion Assets as of 2007
• $96 Billion Outside the
Surrender Charge Period
$96
$204
•Source – LIMRA, 2008 “The 2007 Individual Annuity Market”
•Outside of Surrender Charge figures based on Genworth Financial companies’ experience. Actual industry may be different.
Long Term Care Opportunities Under The Pension Protection Act of 2006
For Producer Use Only. Not for public use or distribution.
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Important Information
Long term care insurance underwritten by:
Genworth Life Insurance Company, Richmond, VA
Genworth Life Insurance Company of New York, 666 Third Avenue, 9th Floor, New York, NY 10017. Only
Genworth Life of New York is licensed to conduct business in New York.
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•
•
Annuities Issued by:
Genworth Life and Annuity Insurance Company, Richmond, VA
Genworth Life Insurance Company, Richmond, VA
•
•
•
Genworth Life Insurance Company of New York, 666 Third Avenue, 9th Floor, New York, NY 10017. Only
Genworth Life of New York is licensed to conduct business in New York.
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All guarantees are based on the claims-paying ability of the issuing insurance company.
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The Genworth Financial companies developed these materials to help you understand the ideas discussed. Any
examples are hypothetical. They may not reflect your client’s particular circumstances. Your clients should carefully
read their contract, policy and prospectus(es), when applicable. What we say about legal or tax matters is our
understanding of current law. We are not offering legal or tax advice. Tax laws and IRS administrative positions may
change. We did not develop these materials for use in avoiding any IRS penalty and neither you nor your clients may
use it for that purpose. Your clients should ask their independent tax and legal advisors for advice based on their
particular circumstances. We reserve the right to change the information reporting described herein to comply with
forms and instructions issued by the Internal Revenue Service.
•
Genworth, Genworth Financial and the Genworth logo are registered service marks of Genworth Financial, Inc.
Long Term Care Opportunities Under The Pension Protection Act of 2006
For Producer Use Only. Not for public use or distribution.
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Long Term Care Opportunities Under The Pension Protection Act of 2006
For Producer Use Only. Not for public use or distribution.
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