Keeping up with the “New Executive” <ul><li>Attracting, rewarding and retaining  key executives is critical to the success...
Who’s offering what? <ul><li>A 2001 survey of Fortune 1000 companies showed which Supplemental Benefits were offered to ke...
Preserving and Protecting Retirement Assets <ul><li>Today’s Americans are living longer and healthier lives thanks to bett...
<ul><li>As for older workers, the “graying” of the U.S. workforce is causing many companies – especially large employers –...
<ul><li>Consequently, these employers predict that the demand for certain employee benefits products will rise.  </li></ul...
What does Long Term Care mean? <ul><li>Long Term Care (LTC)  is the assistance you need when a serious illness or disabili...
What does Long Term Care mean? <ul><li>Long Term Care (LTC)  is the assistance you need when a serious illness or disabili...
<ul><li>Today’s Americans are living longer and healthier lives thanks to better diets, better medical care and safer livi...
Executive Retirement Assets <ul><li>It does not take a long time for an executive’s retirement fund to disappear.   </li><...
Effect of Long Term Care Cost on Retirement Assets <ul><li>Assumptions: </li></ul><ul><ul><li>Number of years of care: 5 <...
Effect of Long Term Care Cost on Retirement Assets
Effect of Long Term Care Cost on Retirement Assets <ul><li>The effect of long term care costs on retirement assets without...
Keeping up with the “New Executive” <ul><li>More than ever, executives are viewing corporate sponsored LTC plans as a viab...
HIPAA 1996 &  Tax-Qualified  LTC Insurance <ul><li>The Federal Government has provided many tax incentives for the establi...
<ul><li>Move  Pre-Tax Corporate Dollars  out of company by purchasing Qualified LTC policies and deducting those dollars a...
<ul><li>Long Term Care is considered Health Insurance  (IRC 7702 B(a)(2)) </li></ul><ul><li>Company establishes criteria f...
Questions & Answers: Tax-Qualified LTC <ul><li>Can I select who will or will not get this benefit?   </li></ul><ul><ul><li...
Questions & Answers: Tax-Qualified LTC <ul><li>Are premiums Taxable to the employee? </li></ul><ul><ul><li>Premiums  for Q...
<ul><li>Qualified LTC policies have tax advantaged status that allows for deduction of premiums to varying degrees.  C-Cor...
<ul><li>Are premiums paid for an LTC policy  taxable to the employee ? </li></ul><ul><ul><li>No.  The amount of premium pa...
<ul><li>What do you mean by a “Golden Parachute”? </li></ul><ul><ul><li>The executive receives a “Paid Up” LTC policy that...
<ul><li>What do you mean by “Golden Handcuffs”? </li></ul><ul><ul><li>Once paid up, the policy would cover the Long Term C...
Return Of Premium <ul><li>What is the “Return of Premium” Rider? </li></ul><ul><ul><li>The “Return of Premium” rider is ex...
Advantages for Key Executives <ul><li>Corporate paid LTC premiums are not included or taxed as income </li></ul><ul><li>LT...
Advantages for your firm <ul><li>Corporate premiums deductible and plan is discriminatory  – </li></ul><ul><ul><li>Deducti...
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Executive Ltc Presentation

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A new Executive Benefit that can help protect future retirement income.

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Executive Ltc Presentation

  1. 2. Keeping up with the “New Executive” <ul><li>Attracting, rewarding and retaining key executives is critical to the success of any company </li></ul><ul><li>Supplemental benefits are KEY management tools </li></ul><ul><li>Owners, Executives, and Key Employees need retirement assets protection </li></ul>
  2. 3. Who’s offering what? <ul><li>A 2001 survey of Fortune 1000 companies showed which Supplemental Benefits were offered to key executives: </li></ul>*Clark Bardes Consulting, Compensation Resource Group, 2001 Executive Benefit Survey 17% Long Term Care 31% Excess Disability Benefits 47% Supplemental Death Benefits 75% Supplemental Executive Retirement Plan 86% Non-Qualified Deferred Compensation <ul><ul><li>% of Companies Offering Benefit </li></ul></ul>* Benefit Program
  3. 4. Preserving and Protecting Retirement Assets <ul><li>Today’s Americans are living longer and healthier lives thanks to better diets, better medical care and safer living and working environments. </li></ul><ul><li>Advances in medical science, increasing life expectancies, and numerous societal changes are causing more and more attention to be given to the — </li></ul><ul><li>NEED AND COST OF LONG TERM CARE </li></ul>“ A study by the U.S. Department of Health and Human Services indicates that people of age 65 face at least a 40% lifetime risk of entering a nursing home. About 10% will stay there 5 years or longer.” -HIAA LTC Guide 1996/1997
  4. 5. <ul><li>As for older workers, the “graying” of the U.S. workforce is causing many companies – especially large employers – to change the way they do business. </li></ul><ul><ul><li>One third (33%) of all employers – and 51% of those with 25,000 or more employees – believe that the aging population will have a big impact on their company. </li></ul></ul><ul><li>Currently, 19% of all employers offer products and services geared specifically to an aging workforce, such as long-term care referral services, caregiver guides and eldercare support groups </li></ul>Aging Work Force Source: The MetLife Study of Employee Benefits Trends, November 2004
  5. 6. <ul><li>Consequently, these employers predict that the demand for certain employee benefits products will rise. </li></ul><ul><ul><li>More than one-third (35%) of all employers (and 51% of companies with 25,000 or more employees) expect worker participation in long-term care insurance programs to increase over the next 18 months. </li></ul></ul><ul><ul><li>One in four (25%) foresees an up-tick in both disability and life insurance enrollment. </li></ul></ul>Aging Work Force Source: The MetLife Study of Employee Benefits Trends, November 2004
  6. 7. What does Long Term Care mean? <ul><li>Long Term Care (LTC) is the assistance you need when a serious illness or disability renders you unable – physically or cognitively – to perform one or more of the activities of daily living (ADLs) for a lengthy period of time. </li></ul><ul><li>LTC can range from help with day-to-day activities in the home - such as bathing, dressing, preparing meals - to more sophisticated services like skilled nursing care. </li></ul><ul><li>Long Term Care can be given in a variety of settings: </li></ul><ul><ul><li>Nursing Home (NH) </li></ul></ul><ul><ul><li>Assisted Living Facility (ALF) </li></ul></ul><ul><ul><li>Adult Day-Care (ADC) </li></ul></ul><ul><ul><li>Community Care Centers </li></ul></ul><ul><ul><li>Your Own Home (HHC) or elsewhere </li></ul></ul>
  7. 8. What does Long Term Care mean? <ul><li>Long Term Care (LTC) is the assistance you need when a serious illness or disability renders you unable – physically or cognitively – to perform one or more of the activities of daily living (ADLs) for a lengthy period of time. </li></ul><ul><li>LTC can range from help with day-to-day activities in the home - such as bathing, dressing, preparing meals - to more sophisticated services like skilled nursing care. </li></ul><ul><li>Long Term Care can be given in a variety of settings: </li></ul><ul><ul><li>Nursing Home (NH) </li></ul></ul><ul><ul><li>Assisted Living Facility (ALF) </li></ul></ul><ul><ul><li>Adult Day-Care (ADC) </li></ul></ul><ul><ul><li>Community Care Centers </li></ul></ul><ul><ul><li>Your Own Home (HHC) or elsewhere </li></ul></ul>
  8. 9. <ul><li>Today’s Americans are living longer and healthier lives thanks to better diets, better medical care and safer living and working environments. Advances in medical science, increasing life expectancies, and numerous societal changes are causing more and more attention to be given to the — </li></ul><ul><li>NEED AND COST OF LONG TERM CARE </li></ul>Preserving and Protecting Retirement Assets “ A study by the U.S. Department of Health and Human Services indicates that people of age 65 face at least a 40% lifetime risk of entering a nursing home. About 10% will stay there 5 years or longer.” -HIAA LTC Guide 1996/1997
  9. 10. Executive Retirement Assets <ul><li>It does not take a long time for an executive’s retirement fund to disappear. </li></ul><ul><li>Nursing homes can cost as much as $100,000 a year for a private room in a quality institution, and Home Health Care can also be significant. </li></ul><ul><ul><li>In some cases, especially when live-in care is desired, Home Health Care can exceed the cost of a Nursing Home. </li></ul></ul><ul><li>Changes in Federal policy continue to shift the burden of long term care cost from the Government to the individual, at the same time life expectancy for a healthy retiree has extended well into the 80’s & 90’s, thus increasing the probability of a Long Term Care need. </li></ul>
  10. 11. Effect of Long Term Care Cost on Retirement Assets <ul><li>Assumptions: </li></ul><ul><ul><li>Number of years of care: 5 </li></ul></ul><ul><ul><li>Care begins in 20 years </li></ul></ul><ul><ul><li>Current Cost of care $190 per day </li></ul></ul><ul><ul><li>Health Care Inflation Rate: 5.5% </li></ul></ul><ul><ul><li>Current Retirement Asset balance of $1,500,000 </li></ul></ul><ul><ul><li>Investment Opportunity Rate: 6.5% (after tax) </li></ul></ul><ul><ul><li>Asset liquidation costs: 15% (income tax, capital gain tax, market timing) </li></ul></ul><ul><ul><li>Couple age 55, Spouse lives additional 6 years </li></ul></ul><ul><li>LTC Insurance Plan Design: </li></ul><ul><ul><li>$220 per day Comprehensive Indemnity benefit </li></ul></ul><ul><ul><li>90 day deductible with a 5 year benefit period </li></ul></ul><ul><ul><li>5% Compound COLA </li></ul></ul><ul><ul><li>$4,821 annual premium </li></ul></ul><ul><ul><li>Includes coverage for spouse and waiver of premium </li></ul></ul>Over half of all women and about a third of all men who live to age 65 will spend some time in a nursing home 4 . The probability of either the executive or spouse needing some form of care can be as high as 65% after age 65. 4 “Long-Term Care Insurance: A special Guide” Kiplinger’s Retirement Report, June 1999
  11. 12. Effect of Long Term Care Cost on Retirement Assets
  12. 13. Effect of Long Term Care Cost on Retirement Assets <ul><li>The effect of long term care costs on retirement assets without an LTC insurance plan can be significant, even for relatively short-term situations. </li></ul><ul><li>Planning involves making decisions based on known facts and unknown assumptions regarding future events and circumstances. </li></ul><ul><li>Factors compounding the effect include: </li></ul><ul><ul><li>Lost Investment Opportunity </li></ul></ul><ul><ul><li>Asset Liquidation Costs (i.e. taxes and market timing) </li></ul></ul><ul><ul><li>Rapidly escalating care cost and demand that could outpace investment returns </li></ul></ul>
  13. 14. Keeping up with the “New Executive” <ul><li>More than ever, executives are viewing corporate sponsored LTC plans as a viable and economically beneficial way to pre-fund this type of need, and at the same time protect retirement assets and income from shrinkage. </li></ul><ul><ul><li>Many options are available to pre-fund this potential expense through pre-tax corporate paid or deferral program dollars. </li></ul></ul><ul><ul><li>Limited-Pay plans and attractive Benefit Indexing riders are available to assure growth of benefits well into the future. </li></ul></ul>
  14. 15. HIPAA 1996 & Tax-Qualified LTC Insurance <ul><li>The Federal Government has provided many tax incentives for the establishment of these plans. </li></ul><ul><li>The one that has had the most impact on these trends is the Health Insurance Portability and Accounting Act of 1996 . This has made providing benefits for long-term care through insurance much more attractive, especially for business organizations providing Executive Benefits. </li></ul><ul><li>Now is the time for all of us to consider insuring this major risk. Recent incentives for the private sector to foster long-term care coupled with the evolution of quality products, Corporate Long Term Care Benefit Plans are fast becoming a desirable option in today’s workplace. </li></ul>“ Choice has always been a luxury for those who could pay for it.”
  15. 16. <ul><li>Move Pre-Tax Corporate Dollars out of company by purchasing Qualified LTC policies and deducting those dollars as a Usual Business Expense </li></ul><ul><li>Provide A “Golden Parachute” as a reward for Key Employees or Executives with Lifetime Protection against the devastating cost of Long Term Care. </li></ul><ul><li>Keep Key Employees from leaving the company with “Golden Handcuffs” </li></ul><ul><li>Pass premium dollars to the Beneficiaries, designated by the company or your Key Executives ! </li></ul>Keeping up with the “New Executive”
  16. 17. <ul><li>Long Term Care is considered Health Insurance (IRC 7702 B(a)(2)) </li></ul><ul><li>Company establishes criteria for plan participants </li></ul><ul><li>Purchases LTC Insurance on Key Employees/Executives </li></ul><ul><li>Premium Is Deductible To Company (IRC 162) </li></ul><ul><li>Premiums Paid for LTC is not Taxable to Executive (IRC 106(a)) </li></ul><ul><li>Benefits are Tax Free (up to $250/day in 2006) (IRC 7702B d (4)) </li></ul><ul><li>Executive’s estate is protected from high cost of Long Term Care </li></ul><ul><li>Estate or Corporation gets a “Refund of Premium” upon the death of insured(s) (IRC 7702 B (b)(2)(c)) </li></ul>Keeping up with the “New Executive”
  17. 18. Questions & Answers: Tax-Qualified LTC <ul><li>Can I select who will or will not get this benefit?   </li></ul><ul><ul><li>Yes, the IRS has determined that Long Term Care as defined by HIPAA 1996 is to be treated as health insurance and does not have to follow ERISA guidelines . This means there is flexibility when creating these plans and deciding who will participate. </li></ul></ul><ul><li>Can Plan design be flexible? </li></ul><ul><ul><li>Yes, the plans can be structured to meet the desired outcome of the corporation and employees. Some examples of available riders are: </li></ul></ul><ul><ul><ul><li>Paid up Options (Single, Five, Ten and To Age 65 payment options are available) </li></ul></ul></ul><ul><ul><ul><li>Return Of Premium option (Returns 100% of Premiums at insured’s death) </li></ul></ul></ul><ul><ul><ul><li>Indemnity (Changes Benefits from a reimbursement to indemnity mode) </li></ul></ul></ul><ul><ul><ul><li>Daily Limits (Daily limits range from $40 to $500 per diem) </li></ul></ul></ul>
  18. 19. Questions & Answers: Tax-Qualified LTC <ul><li>Are premiums Taxable to the employee? </li></ul><ul><ul><li>Premiums for Qualified LTC policies paid by an employer on behalf of an employee will not be treated as income to that employee . Employers can provide any benefit amount for employees as long as premiums are “reasonable compensation” under Section 162 of the Internal Revenue Code , even though the plan is discriminatory. </li></ul></ul><ul><ul><li>The premium may be higher than premiums associated with personally purchased plans </li></ul></ul>
  19. 20. <ul><li>Qualified LTC policies have tax advantaged status that allows for deduction of premiums to varying degrees. C-Corporations allow maximum deduction, while the individual has the least deductibility. </li></ul><ul><li>Following is a brief explanation of deductible amounts. </li></ul><ul><ul><li>C Corporation – Can deduct 100% of premiums for employees </li></ul></ul><ul><ul><li>Sub S, LLC and Partnership – </li></ul></ul><ul><ul><ul><li>> 2% Shareholders: deductibility subject to “eligible premiums” guidelines </li></ul></ul></ul><ul><ul><ul><li>Employees: premiums fully deductible </li></ul></ul></ul><ul><ul><li>Sole Proprietors – Deductibility subject to “eligible premiums” guidelines </li></ul></ul><ul><ul><li>Individuals/Couples – Can deduct up to 100% of “eligible premium” to the extent it exceeds 7.5% of AGI (Un-reimbursed Medical Expense Deduction) </li></ul></ul>Questions & Answers: Tax-Qualified LTC
  20. 21. <ul><li>Are premiums paid for an LTC policy taxable to the employee ? </li></ul><ul><ul><li>No. The amount of premium paid for Qualified LTC policies is not taxable to the employee. </li></ul></ul><ul><ul><li>Any LTC policy payments paid by reason of death of insured under IRC Sec 101(g) and exceed the per diem limit is taxable. </li></ul></ul>Questions & Answers: Tax-Qualified LTC
  21. 22. <ul><li>What do you mean by a “Golden Parachute”? </li></ul><ul><ul><li>The executive receives a “Paid Up” LTC policy that is generally designed to cover the cost of care in a top quality facility. The benefits can be structured to pay regardless of actual expenses incurred for the life of the insured. Benefits can be inflated by a cost of living factor and can be received for care in a wide variety of settings. </li></ul></ul><ul><li>Are benefits received under an LTC policy taxable to the employee? </li></ul><ul><ul><li>No, but there are limitations. The amount of reimbursement not taxable is the greater of the actual cost or $250/day in 2006. (IRC Sec. 7702B (d)(2)) The per diem rate is adjusted annually for inflation. </li></ul></ul><ul><ul><li>Any LTC policy payments paid by reason of death of insured under IRC Sec 101(g) and exceed the per diem limit is taxable. </li></ul></ul>Questions & Answers: Tax-Qualified LTC
  22. 23. <ul><li>What do you mean by “Golden Handcuffs”? </li></ul><ul><ul><li>Once paid up, the policy would cover the Long Term Care needs whether the employee was still with your company, retired, or went with a new company. </li></ul></ul><ul><ul><li>Policies can be structured to control the “return of premium” or “nonforfiture” rider. Through policy ownership and beneficiary designations, your company could negotiate the value of the return of premium rider as part of any termination settlement. </li></ul></ul><ul><ul><li>If an executive has met the criteria set forth by the organization, a “Return of Premium” is paid to the executive’s beneficiary. If the employee chose to leave prematurely, he/she would potentially forfeit this significant asset. </li></ul></ul>Questions & Answers: Tax-Qualified LTC
  23. 24. Return Of Premium <ul><li>What is the “Return of Premium” Rider? </li></ul><ul><ul><li>The “Return of Premium” rider is exactly that, a rider. As such is not part actual Long Term Care policy. Upon the death of the insured, it returns the value of the premiums paid to the designated beneficiary. </li></ul></ul><ul><ul><li>Because the law will not allow cash value to accumulate, the maximum amount that can pass through to the beneficiary is the amount paid for the premium. </li></ul></ul><ul><ul><li>It should be noted if the LTC policy covers both the employee and his/her spouse, both the employee and spouse must die before the “Return of Premium” can be given to the beneficiary. </li></ul></ul>
  24. 25. Advantages for Key Executives <ul><li>Corporate paid LTC premiums are not included or taxed as income </li></ul><ul><li>LTC Benefits are received tax-free </li></ul><ul><li>Policy is portable </li></ul><ul><li>Using “paid up options” (where approved) could pre-pay premiums for post retirement protection </li></ul><ul><li>Cutting Edge Benefit </li></ul><ul><ul><li>Promotes productivity </li></ul></ul><ul><ul><li>Reduces stress </li></ul></ul>
  25. 26. Advantages for your firm <ul><li>Corporate premiums deductible and plan is discriminatory – </li></ul><ul><ul><li>Deduction also applies to the cost of coverage for spouse and dependents of employee </li></ul></ul><ul><li>Opportunity to provide cutting-edge benefits that can be: </li></ul><ul><ul><li>employer-paid for owners, executives and key employees </li></ul></ul><ul><ul><li>employee-paid for the rank and file </li></ul></ul><ul><li>Key tool to attract, retain, reward </li></ul><ul><li>Easy to adopt </li></ul>

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