Long-term care insurance (LTC) can feel overwhelming to both HR departments and employees. It’s all about preparing for situations most people don’t even like to consider, and all the jargon in provider pamphlets and on provider websites can make LTC products seem complicated, even daunting. But LTC plans are making a comeback in a lot of benefit packages, and as more Americans plan their retirement, it’s easy to see why.
LTC pays benefits to employees who can’t perform any two qualifying activities of daily living, such as feeding, toileting, dressing, bathing, and transference. LTC expenses include assisted living, nursing homes, home health aides, and continuing-care retirement communities. People use LTC to avoid self-insurance and maintain quality of life when they need assistance or supervision due to chronic illness.
“When you offer LTC to your employees, you’re giving them a chance to protect any retirement income they’ve been building. You’re also giving them a chance to protect that income at much lower rates than the rates available outside of the office. For people facing serious health issues as they’re looking to leave the workforce, LTC can be a lifesaver.For people facing serious health issues as they’re looking to leave the workforce, LTC can be a lifesaver.
1. Retirement Fund Protection
An unexpected long-term care event can pose a big threat to retirement savings. According to LTCI Partners, long-term care services in 2017 cost between $47,934 and $97,455, which is way more than most Americans have in their regular savings account. According to the Department of Health & Human Services:
(Source)
As a result, when people are faced with paying for chronic health issues, they reach into the largest savings account they have: their retirement account. LTC provides customers with funds they can use to pay for home health aides, assisted living, or other services, so they don’t have to drain the nest egg they’ve spent their lives building.
2. Potential Tax Benefits
Health Saving Accounts (HSA) have been booming lately, and it’s no wonder. They provide unique tax savings and low monthly premiums. When people have both an LTC and an HSA plan, they get another perk too.
Employees can pay their LTC premiums with the pre-tax dollars in their HSA up to the annual tax limit. The tax limit goes up based on age, so older customers get a larger tax break. For employees looking to keep more pre-tax income, HSA plans and LTC plans go together like peanut butter and jelly.
3. Premium Discounts for Employees and Their Spouses
The premium that LTC providers charge to customers who pay through their employer is lower than the premium charged to individuals. Think of it as a bulk discount that gives people a chance to protect their retirement funds for less. Even better, employees’ spouses can receive this benefit as well, so if a worker’s spouse falls ill, the family is still covered.
4. Gender-Neutral Rate Structure
Women often live longer and require more long-term care services than men do, which means they often pay more when purchasing LTC in the individual marketplace. But employer-sponsored LTC plans have gender-neutral premium rates, giving female employees a chance to save through their benefits package. These rates also help employers because they create a strong retention incentive.
LTC is no longer the redheaded stepchild of the benefits world. It’s now a shield that employees can use to guard their retirement income from the costs of long-term health issues.