Life with Long Term Care: What are the Compliance Requirements and Do They Apply to Me?
When looking for a new job, people want competitive pay, flexible hours, and top-of-the-line benefits to complement their lifestyle. In some instances, voluntary benefits can be a make-or-break factor when individuals consider signing an offer with a company.
As a business, it's your job to provide a competitive benefits package employees can benefit from in their current lives and beyond. That's where the long-term care (LTC) rider comes into play.
LTC products, designed to protect employees from the negative effects of chronic illnesses, have been a popular choice since the 1990s. Long-term care allows the leveraging of life insurance funds for medical treatments.
We're here to walk you through some of the benefits and tax advantages of offering LTC plans to employees.
How does Long Term Care apply to my employees?
Planning for retirement is never easy. There are a ton of questions and concerns individuals have when they're preparing and planning for life after work.
- Will I outlive my income?
- What if I encounter an unforeseen health problem?
- Am I financially prepared for what's to come?
While most employees rely on their 401(k) for future financial stability, there are more optimal strategies for critical health-related expenses.
An employee developing Alzheimer's, Parkinson's Disease, or other life-threatening conditions can result in their placement in assisted care, which can rapidly deplete their savings. Unfortunately, many government-sponsored health insurance programs, like Medicare, don't cover long-term care. Leaving many individuals hit with hefty bills or needing to pay for this coverage out of pocket.
Long-term care insurance is a supplemental benefit that protects employees' retirement plans when faced with high-cost chronic illnesses and conditions. LTC includes those not covered by government programs or standard health plans, including memory care. With long-term care, your employees can move into their next life stage without worrying about future financial stress.
Long-term care programs help individuals cover services and care, providing the support they need to meet the requirements of their activities of daily living. It is typically an add-on to life insurance, allowing them to use their death benefit and live a higher-quality life in later years.
Unfortunately, there are not many long-term care options available on the market. Even though the product has been available for over 30 years, employers are only sometimes combining a long-term care rider with employee universal life insurance options.
What compliances currently exist?
Every state has different rules and regulations for life with long-term care programs. Now that the US population over age 65 is expected to outnumber individuals under 18 by 2030, many states are pushing to make LTC riders a requirement for all life insurance policies or creating state-sponsored solutions.
Where are long-term care plans available?
Many states are moving to make long-term care plans more readily available for their residents. For example, Washington's new WA Cares Fund focuses on providing residents with long-term services and support to help with memory care, dementia, transportation, and more. The new state-run long-term care adds .06-.07% payroll tax for employers. However, residents don't have to pay the tax if the business provides the product.
Following Washington's new plan, over 13 states have considered implementing similar tax incentives to encourage businesses to invest in their own long-term care products for employees. California may start enforcing its payroll tax as soon as 2023.
While every state is different, we will see more payroll taxes, laws, and regulations enforced to ensure individuals have the LTC coverage they need. Many states are proposing to have a private insurance opt-out option for businesses.
As a business owner or leader in the workplace, it's best to consider what options you have available for your business before you're hit with an additional payroll tax soon.
What is required to enforce Life with LTC
Many states are establishing minimum standards for LTC policies and services. These minimum standards determine what is and aren't eligible for the tax opt-out. Some of these different standards can include coverages for:
- Long-term care insurance for services only
- Nursing home and home care insurance
- Nursing home insurance only
- Home care insurance only
The truth is: The cost of care will be much higher in the future than today. Studies suggest that anyone 65 or older has a 70% chance of needing long-term care in the future. As we get closer to 2030 and the older generation starts to outnumber the younger, we will see more states and legislations take action.
How do you take action?
Employees can gain peace of mind and reassurance with Life with Long-Term Care options. This type of insurance protects individuals from the negative consequences of chronic illnesses. It helps them take advantage of their tax benefits when they're most needed.
At Corestream, we help businesses find affordable, long-term care solutions for their employees. We provide a flexible enrollment process, employee education and engagement opportunities, and a reliable partnership for your business. We offer a variety of voluntary benefits that will help keep your employees happy, safe, and secure in their futures.
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