EXECUTIVE/OWNER BENEFITS:

 

Tax Benefits of Executive Long-term Care Insurance

To encourage employers to provide this coverage, the federal government has granted favorable tax treatment

• Insurance premiums may be deducted from gross income of the business when funded for employees

• Reimbursement benefits received are not included in income

• Deductible insurance premiums are not treated as gross income to the employee

• HSAs can be utilized by the employee to pay tax-qualified LTCi premiums

• Spouses and dependents of employees are generally granted the same tax advantages

 

Advantages for Key Executives

• Opportunity for paid up policies prior to retirement

• Premiums may be lower than premiums for policies purchased outside of the employer group

• Premiums paid by the employer are not included in their taxable income

• Reimbursement benefits are received tax free even if employer funded the premium

• If insurability is an issue, group policies may offer more lenient underwriting

• Protects the covered employee’s retirement plan against the high expense of LTC

• Spouses and often other family members may be included in the discounted rates  

 

C-Corporations

• Premium payments are fully (100%) deductible as a reasonable and necessary business expense- similar to traditional health and accident insurance premiums [IRC Sec. 213(d)1]. This can apply to the owners, their spouses and dependents, and all employees

• Employer-paid long-term care insurance is excludable from the employee's gross income [IRC Sec. 106(2)] and the benefits received are tax-free

 

Partnerships, S-Corporations and Limited Liability Corporations (LLC)

• Premium payments purchased for a partner or owner (2%+ shareholder) are subject to the same rules mentioned above for self-employed [IRC Sec. 162(1)]

• Premium payments for non-partner/non-owner or less than 2% shareholder-employee are 100% deductible as a reasonable and necessary business expense -- similar to traditional health and accident insurance premiums [IRC Sec. 162(2)]

• Employer-paid long-term care insurance is excludable from the employee's gross income and the benefits received are tax-free [IRC Sec. 106(2)]

 

This is not tax advice.  Please check with your CPA for all tax-related issues.