Executive Carve Outs

EXECUTIVE CARVE OUTS - LONG TERM CARE

 

Unlike many other employer provided benefits, employers are allowed to “carve out and create a class of select employees to offer long term care insurance

  • Enhances recruitment and retention of talent needed for key executives
  • Fully portable business insurance for the covered employees and/or their families

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 employees 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.

 

 

 

Contact Us Today!
508-315-3210

Social Social
© Copyright. All rights reserved. | Powered by Insurance Website Builder