The Safety Net of a Group LTC Plan
March 13, 2012Last week, Prudential, the 2nd largest life insurance company in the U.S., announced they were getting out of the individual long term care insurance market. Prudential isn’t the first to exit the marketplace since both Guardian Life Insurance and MetLife also recently abandoned sales of LTC insurance. Although Prudential will no longer be selling any new policies to individuals, they will honor existing contracts and will now be focusing entirely on the group LTC market. With the marketplace for individual policies shrinking, now may be a good time to add group LTC insurance to your benefits menu.
If the first thing that comes to mind is the cost to your employer, don’t let that be an obstacle. The majority of group LTC plans are written as voluntary policies with the employee paying all the cost. The only real cost to the employer would be the time and effort you, as part of the HR team, would have to focus on implementing and managing the program. A group LTC policy offers a great safety net to your employees, especially those who you have been working hard with to get them to save more in their 401(k) plans. With the ever-increasing costs of a nursing home stay, the threat of a LTC bill could be an even worse blow to your retirees’ 401(k) balances than a market downturn. It is very expensive, with the national average rates for a private nursing home room at $87,235 annually in 2011, up 4.4 %, according to a study from the MetLife Mature Market Institute. Adult day services rose by 4.5% to $70 a day and assisted living base rates rose by 5.6% to $3,477 a month.
When you add a group LTC plan to your benefits menu, it is critical to educate your employees about the basics of long-term care. Probably the biggest myth that employees believe is that Medicare will cover the cost of a nursing home stay, which is not true if the underlying need for care is due to just needing custodial care, such as an Alzheimer’s patient. Even in the case where the nursing home stay is for recovery treatment, such as a broken hip or a stroke victim, Medicare will only pay for up to 100 days of care.
Education on your group LTC plan should be rolled into any workplace retirement readiness education you are currently providing to your pre-retirees. With tax season in full swing, you can also add the topic of your group LTC plan to a tax planning workshop or as a tax tidbit in your monthly employee newsletter since your employees may be eligible for a federal tax deduction and possibly even a state deduction. For 2012, the federal tax deduction for the LTC premium can be taken on the Schedule A as an itemized medical expense, up to the following premium cap based on attained age at the end of 2012:
Age 40 or less – $ 350
More than 40 but not more than 50 – $ 660
More than 50 but not more than 60 – $1,310
More than 60 but not more than 70 – $3,500
More than 70 – $4,370
Although none of us ever wants to consider the possibility of spending some of our retirement years in a nursing home or stuck in bed with home care, it can happen to anyone. So along with your wellness program keeping your employees active and fit now, make sure they have access to a group LTC plan that can cover an expense in the future so they age gracefully.