While companies look to their benefits advisors for their executive benefits package options, many companies might still be missing a critical piece of their executive benefits package -- long term care insurance (LTCI). While 76 percent of people say the cost of long term care would significantly reduce their assets and retirement income, only 12 percent have actually made financial arrangements for their future long term care needs.
Long term care insurance should be an essential part of every company's benefits package. In a day where we understand that Medicare will not cover the bulk of long term care expenses, it is clear that LTCI is the most sensible and most efficient option. No one needs the anxiety of spending down their assets to self-insure -- especially when the cost of care continues to skyrocket.
Currently, the average annual rate for care in a specialized care residence, such as an Alzheimer's facility, is $68,988, and it's expected to increase to $177,000 a year by 2026.
Today, the most common LTCI benefit plan companies purchase is the executive carve-out (ECO) plan. The ECO plan allows the employer to select particular employees based on specific criteria, such as tenure, title, or salary, all of which are pre-determined by the employer. The ECO benefits both the employer and the employee.
Following are the top five selling points that will help you advise your clients on why it makes sense to incorporate LTCI into their executive benefits package.
#1: Tax benefits gained
Under the Health Insurance Portability & Accountability Act (HIPAA), employers can pay for their employees' tax-qualified LTCI premiums and are able to deduct the full premiums as a business expense. Additionally, premiums paid are not considered income to the employees. As a result, many institutions are starting to incorporate LTCI into their benefits package -- from the federal government and corporate companies to small-business owners, nonprofit organizations, and associations. S-Corporation owners, LLCs, and partnerships are also able to deduct premiums up to scheduled limits.
#2: Quality coverage for the employer and the employee
The employer, as well as the employee, receives incentives for participating in the ECO. The employer's incentives include:
o Tax deductions up to 100 percent of paid premiums
o Allowed to specify which employees may participate, without violating discrimination rules
o Ability to extend policy coverage to spouse, dependents, or retirees
o Perk to use as a recruiting feature, as well as a retention mechanism
o Ability to reward key executives for their hard work
The employee's incentives include:
o Premiums are paid for by the employer
o Benefits received are usually tax free
o Policy is portable
o Helps protect assets and relieves financial stress
o Recognition for their hard work
#3: Catching the best talent -- and keeping it
An ECO plan can be a terrific recruiting tool for your corporate clients and can also help retain current key executives. In today's competitive market, incorporating an ECO plan into a corporate benefits package will help your corporate clients set themselves apart from their competition. Not only will the employees feel grateful that their company is watching out for their well-being, studies also show exponential growth in company loyalty.
#4: Showing compassion and understanding
Caregiving can be expensive, emotionally draining, time consuming, and a burden on the caregiver. Companies that offer ECO as a company benefit alleviate much of the stress that goes along with caring for a family member or loved one. ECOs also prevent the risk companies run of losing a key employee who leaves the company to care for their loved one full time. U.S. businesses lose as much as $29 billion annually in productivity because of caregiving. The cost to replace a managerial employee can be as much as 250 percent of their annual salary, while the cost of replacing a non-managerial employee can be as much as 150 percent of their annual salary.
#5: LTCI is the missing link
When competing for the best talent in an industry, watching out for employees' futures will help employers recruit and retain that talent, as well as boost morale. In fact, 98 percent of policyholders say they feel more secure about their future when LTCI is part of their benefits packages.
Advising your corporate clients to add LTCI to their corporate benefits packages is a win/win situation for both the employer and the employee. LTCI is a sound avenue with which your corporate clients can protect their employees and their employees' families from spending down their assets to pay for care in the future. Encourage your clients to prepare for their employees' future -- not just for when they die, but also for when they live.
Tom Riekse Jr. is a managing principal at LTCI Partners LLC. He can be reached at 800-245-8108.
