““Key Person”Key Person”Corporate Fringe BenefitCorporate Fringe Benefit

UtilizingUtilizing

Long Term Care

Purchase during high income yearsDEDUCTIBLE as a business expense,

including spouse coverage up to eligible premium

Subsidized premiumBenefit paid TAX FREEDiscriminatory participationPaid up in 10 years CRUCIAL ELEMENT

ModelModel

GenesisGenesis HIPAA (Jan.’97 Federal legislation)

Cost is DEDUCTIBLE, including spouse, with no imputed income

Discriminatory participation TAX FREE benefit

Brought to you by the following IRS Codes: Sec. 106 Sec. 162 Sec. 213

Why?Why?

Cost of Long Term Care may be the biggest social crisis we will face in the next 25 years

Tsunami of baby boomersFICA/Retirement age

AffluentAffluent

Medicaid NeverCurrent Funding100% Dollars

401(k)

Savings/Investments

Largest Silo to fund

Long-Term Care Insurance PlanLong-Term Care Insurance Plan (Provides long-term care insurance for officers and their spouses, if applicable, to cover the costs of an extended stay in anursing home or similar facility.)

Highlights of the Plan  Overview Long-term care insurance protects the insured against financial hardship caused by an extended stay in a nursing home orsimilar facility. It was unclear for some time whether such insurance qualified for favorable tax treatment as health andaccident insurance under Internal Revenue Code (Code) Sections 104, 105, and 106. Legislation passed in 1996 cleared upthe confusion by characterizing qualified long-term care insurance as health and accident insurance, making it eligible forfavorable income tax treatment under Code Sections 104, 105, and 106.  Participants With closely held companies, the plan is typically provided only for officers, but could be provided to a wider range ofemployees. If non top-hat employees are covered under the plan, participation should be limited to fewer than 100employees if ERISA's full reporting and disclosure requirements are to be avoided.

Income Taxation of the Plan Participants in an employer-paid, long-term care insurance plan may exclude from income any premiums paid by theemployer for such insurance. (Code Sec. 106) Employer expenses for long-term care insurance premiums are deductibleunder Code Section 162 as a business expense. The employee’s exclusion of the premium paid by the employer and the employer’s deduction for such premiums arepermitted even if the plan is discriminatory in favor of highly compensated employees. Benefits payable under the policy

areexcluded from taxable income as a medical expense as defined in Code Sec 213 to the extent that such amounts reimbursethe insured for the actual expenses incurred. (Code Sec. 105)

Long-Term Care Insurance Plan Minutes and ResolutionLong-Term Care Insurance Plan Minutes and Resolution Minutes: A special meeting of the Board of Directors of (Corporation) was held on the _______ day of ________,_____ for thepurpose of considering the adoption of a long-term care insurance plan for all officers of the corporation and their spouses, ifthey qualify. A quorum of officers and Boards Members was in attendance, and those who were present are listed as

follows:______________________________________

(Chairman)  ______________________________________

(Secretary)  ______________________________________

(Board Member) The Chairman described to those present the need to increase the security of eligible executives and their families byproviding long-term care insurance to pay the costs of extended care in a nursing home or other similar facility. After theChairman’s presentation and discussion of its merits, it was unanimously Resolved: That the Board of Directors has determined that such a company-provided, long-term care insurance plan would avoidsubstantial financial loss to officers due to the payment of long-term care expenses, whether due to disability or old age, andwould further relieve the officers of anxiety concerning the financial security of their families in the event of long-termillness or injury and That such a long-term care insurance plan shall be provided to all officers of the Corporation and theirspouses. In Witness Whereof, the Corporate Secretary’s name has been affixed hereto this ______ day of ______________,____. 

________________________________(Secretary)

SpecificationsSpecifications

$100/day NHC & HCBCCompound benefit 5%30-day elimination periodLifetime benefits10 pay option15% discountPreferred Non-smoker

Joint RatesJoint Rates Annual Cum. Prem. Benefits/Day

Age Premium 10 yr. Age 75 Age 85 

40 $4,127.96 $41,279.60 $552.00 $899.00 

45 $4,181.56 $41,815.60 $432.00 $704.00 

50 $4,513.12 $45,131.20 $339.00 $552.00 

55 $4,989.83 $49,898.30 $265.00 $432.00 

60 $5,307.37 $53,073.70 $208.00 $339.00 

65 $6,119.75 $61,197.50 $163.00 $265.00 

70 $8,191.89 $81,918.90 $128.00 $208.00

LTC- “Walk away executive fringe benefit”

 

AccountingAccountingAge Eligible Premium 2003

40 or less 25041-50 47051-60 94061-70 251070+ 3130

ExampleSalary 100,000LTC Prem 5,000Insured age 55Spouse age 52

Age Eligible Premium Deduction940 x 2 =

1,880

How to Choose a Long Term How to Choose a Long Term Care CompanyCare Company

Financials Comdex 90 or Higher Highest industry ratings

Engineering 10 Pay – YES (Lifetime Pay or Single Pay??) Indemnity or Reimbursement

Consumer Value Premium Features

Approval ProcessApproval Process

Short Form application (Unique)Telephone CallMedical Records from Primary Physician30-45 day decision process

NO Blood, Urine or Tax Returns!