There is a unique opportunity for C-Corps to offer LTC on a discretionary basis and receive significant tax deductions. The ideal case involves a closely-held business looking to benefit primarily the owners (and their spouses), or at most create a carve-out LTC plan for 20 or less executives or highly-compensated employees.
Congress has created some very attractive tax incentives to C-Corps to provide LTC plans for their employees. For example, premiums paid by C-Corps are fully deductible. The premiums paid by a C-Corp for LTC are not recognized as taxable income by the employee, and LTC benefits are received tax-free. (See 2020 LTCi Tax Summary for more details). Corporate-funded LTC is a great way to reward and retain talented employees, and one that not many businesses are yet offering. Businesses that offer LTC to their employees can truly set themselves apart from their competitors with a best-in-class benefits package.
One carrier that offers a plan for this market is National Guardian Life (NGL). Their EssentialLTC plan is worksite-friendly and allows a business to sponsor and pay for the plan. They offer Unisex rates on multi-life plans, with multi-life discounts, and a streamlined application process. Their EssentialLTC product has all the flexibility and features one would look for in a robust LTC plan for owners and executives.
While this incredibly favorable tax treatment applies to other traditional LTC plans, NGL ups the ante by offering a single-pay option – creating an opportunity for a much larger tax deduction than available in a continuous pay LTC plan. The tax deduction can be further amplified by adding one of their optional ROP riders. A corporate-sponsored and paid LTC plan could particularly appeal to businesses at fiscal year-end who have retained earnings. Offering a LTC plan allows the corporation to deploy retained earnings and thereby reduce or eliminate any accumulated earnings tax they would otherwise be liable for paying. It’s truly a win-win for all involved.
If you would like more details, please contact us to discuss offering LTC for your business clients.
