Company solves the challenges of long-term care for its executives 

Key person long-term care plan

$12M

Long-term care benefit pool ($1M per exec)

PRODUCTS

OTHER SUCCESS STORIES

The company enhanced its broad-based group long-term care (LTC) offering for its executives and senior managers. It was critical to deliver a benefit plan for retirement that did not require benefit accruals and was implemented with no earnings impact.
Challenge

TRC Financial was engaged to evaluate an enhanced company-paid long-term care (LTC) plan for a select group of executives. The objective was a plan design with company-paid premiums designed to comply with the tax code so the premiums are not taxed to the executive and 100% of LTC payments are received tax-free. Long-term care impacts the vast majority of Americans. Studies indicate that 70% of people turning age 65 will need some type of long-term care services in their lifetimes. Other studies show that 24% of people turning age 65 will require long-term care services for more than two years. This reality creates a significant financial cost for nearly all retirees. It is estimated that the average annual cost of long-term care will exceed $125,000 by 2031. 

Solution

TRC Financial implemented a fully insured plan for the company designed to allow the company to fund annual premiums during working years in order to deliver pre- and post-retirement tax-free long-term care (LTC) benefits. The company needed a structure to meet the financial needs of the company while providing vesting features to help executive retention and reward key employees. In order to deliver the most advantageous pricing, TRC Financial leveraged its simplified private underwriting process to protect the plan participants. “Our firm is focused on helping corporate executives insure gaps that are often created by employer-paid insurance and qualified retirement plans. A common financial gap found in virtually all companies is the lack of insurance coverage to help protect the financial risks of a long-term care event,” said TRC Financial Principal Jim Roberson. “The Plan implemented helped the company retain and reward its team by providing a tax-free long-term care benefit in retirement with no earnings impact to implement.”

  • $1,000,000 of a long-term care benefit pool for each executive participant
     

  • The insurance policies were funded by the company during each participant's working years to provide a benefit throughout retirement 
     

  • The premiums paid by the company are not taxable to the participant and 100% of the LTC benefits are received tax-free
     

  • Company had no earnings impact to implement the plan and recovered at least the total premiums paid for each participant upon death

$12M LTC Pool Funded with no Earnings Impact

$12,000,000 of key person long-term care benefits delivered to 12 key executives.

Provides long-term care benefits to help each participant protect their financial plan.

Long-term care benefits are received income tax- free.

Long-term care is a highly valued and visible benefit to retain and reward key employees.

Provides the company with a death benefit on each plan participant.

Tax-free death benefit and long-term care benefits are delivered by the policy.

The above client case study is based on the economic results for one of TRC Financial's clients. The economics associated with each individual client are unique and impacted by the insurance product acquired, the performance of the life insurance policy, timing of premium payments, medical underwriting for the insured(s), and the actual life expectancy of the insured(s). The client case study is not intended to be opinion or advice on legal, tax, accounting or investment matters. Private counsel should be consulted prior to application of this general information to specific situations.