Long Term Care Benefits Can Help in Recruiting Key Employees
For over 20 years, employers have been offering long term care (LTC) insurance to their employees as an ancillary benefit to help ease the emotional and financial strain of caring for elderly loved ones or other family members with special health needs. But because of skyrocketing costs and the retirement of the baby boomer demographic, LTC benefits have grown in popularity to the point that more employers are using them as recruiting tools to help lure key employees.
Many employees in the marketplace realize the value of LTC insurance, as a growing number of workers struggle with managing the long term needs of their loved ones. A recent survey done by the AARP and the National Alliance for Caregiving found that over 25% of households nationwide are involved in some level of caregiving, and the majority of these care givers (over 60%) are employed – most of them full time. Because tending to elderly or special needs family members during key wage-earning years can take a huge toll on an employee’s financial well-being and earning potential, several employers are also recognizing the value of LTC insurance – and some are even promoting the coverage as an exclusive benefit for prospective key employees.
Executive Carve Out LTC
Since LTC insurance does not fall under ERISA rules for workplace discrimination, employers can “carve out” this benefit to selected employees. Rather than offering LTC insurance as a group guaranteed issue benefit, many employers and business owners provide multi-life LTC insurance as an Executive Carve Out benefit. By doing this, the employer can offer LTC coverage on a selective basis to current key employees, partners or executive management as a means of retention, or they can promote this as a benefit that the non-included can aspire to attaining upon meeting certain qualifications.
Executive Carve Out LTC benefits carry numerous advantages that are clearly visible to the employee. One is that the coverage is fully portable so the employee can retain it after leaving the company. Some plans also allow for accelerated payments for 10 years – an added incentive for an employee to stay with the company. Individuals are subject to individual underwriting, but it is done on a simplified underwriting basis. Additional credits are applied to the premiums to reflect the multi-life program.
The Executive Carve Out LTC also offers tax benefits to both the employee and employer. Depending on how the business or corporation is structured, the employer premiums could be 100% deductible as a business expense while still providing a tax-free benefit. (Please consult your tax advisor about your specific situation.)
There is additional flexibility in the design of Executive Carve Out programs. The employer can elect to pay 100% of the premium, have the employee pay 100%, or use a split dollar approach where both will share the premium costs. In addition, spouses can also be included and enjoy the benefit of reduced premiums.
LTC Benefits as a Marketplace Differentiator
Either as a true-group or a multi-life carve-out, LTC insurance can help employees address a real need in planning for their financial future – and that in itself is a selling point when seeking new executives. Employers that offer LTC coverage, especially as an “executive perk”, often use the benefit as a way to set themselves apart from competitors. In addition, offering such a benefit can boost workplace loyalty by showing concern for the welfare of employees and their dependents. Regardless of how it is offered, LTC insurance can be a valuable benefit – and it’s one that can easily set companies apart in today’s competitive business environment.
If you would like to discuss whether Executive Carve Out LTC insurance would be a viable option for your organization, please contact our Retirement and Financial Services division at 919-913-0235. For further information, please visit the following links:
Executive Carve Out Long Term Care Insurance
Elder Care Benefits Catching On with Employers
Long Term Care Insurance: The Risks and Benefits
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August 1, 2008
Hill, Chesson & Woody strives to keep our clients' group decision makers abreast of trends influencing the employee benefits market. Look for Eyes on Benefits to bring you news and information affecting you and your employees.
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