Top 5 Reasons to Offer Executive Carve Out Plans

July/August 2008



By Tom H. Riekse, Jr., CEBS, ChFC, Managing Principal, LTCI Partners LLC 

Employees look to their employers as a trusted resource for benefits options.¹ However, many companies are still missing a critical piece of their executive benefits package—long term care insurance (LTCI). In fact, 76% of people say the cost of long term care would significantly reduce their assets and retirement income; yet only 12% have actually made financial arrangements for their future long-term care needs.²
    In a day where we understand that Medicare will not cover long-term care expenses, it is clear that LTCI is our best and most efficient option for security. No one needs the anxiety of spending down his or her assets to self-insure—especially when the cost of care continues to sky rocket. The average annual rate for care in a specialized care residence, such as an Alzheimer’s facility, is $68,988, and it is expected to increase to $177,000 by 2026.³
    LTCI should be an essential part of every company’s benefits package. The most common LTCI benefit plan companies purchase is the executive carve out (ECO) plan. The ECO plan allows the employer to select particular employees based on specific criteria, such as tenure, title, or salary, all of which are pre-determined by the employer. The ECO benefits both the employer and the employee. 

   The following are the top 5 reasons why you should add LTCI to your executive benefits package: 

1. Tax benefits gained

      Under The Health Insurance Portability & Accountability Act, many employers can pay for their employees’ tax-qualified LTCI premiums and deduct the full premiums as a business expense. In addition, premiums paid are not considered income to the employees. As a result, many institutions are starting to incorporate LTCI into their benefits package—from the federal government and corporations to nonprofit organizations, LLCs, and partnerships. 

2. Quality coverage for the employer and the employee

      The employer and the employee receive incentives for participating in an ECO:

• The employer’s incentives include:
  • Tax deductions up to 100% of paid premiums
  • Ability to specify which employees may participate without violating discrimination rules
  • Ability to extend policy coverage to spouses and dependents
  • Ability to cover retirees
  • Perk to use as a recruiting feature and a retaining mechanism
  • Rewards key executives for their hard work
• The employee’s incentives include:
  • Premiums are paid by the employer
  • Spouse and dependents are covered
  • Benefits received are usually tax-free
  • Policy is portable
  • Helps protect assets and relieves financial stress
  • Recognition for his or her hard work

3. Catching the best talent…and keeping it

      In today’s competitive market, watching out for your employees’ future by incorporating an ECO plan will help recruit and retain great talent, boost company-wide moral, and set you apart from your competition. Not only will your employees feel grateful that you care about their well-being, studies also show exponential growth in company loyalty results. 

4. Demonstrating compassion and understanding

      Caregiving can be expensive, emotionally draining, time consuming, and usually a burden for the caregiver. When you offer the ECO as a company benefit, it alleviates much of the stress that goes along with caring for a family member or loved one. It also prevents the risk of losing one of your key employees to caring for a loved one full time. U.S. businesses lose as much as $29 billion annually in productivity due to caregiving.⁴ The cost to replace a managerial employee can be as much as 250% of his or her annual salary.⁵ 

5. LTCI is the missing link

      When LTCI is part of their benefit package, 98% of policy holders say they feel more secure about their future.⁶

      Incorporating LTCI into your benefits plan is a win/win situation for both you and your employees. LTCI is the best way to protect your employees and their families from spending down their assets to pay for care in the future. Take advantage of the tax incentives. Encourage your employees to prepare for their future—not just in death, but also while they live. 

LTCI Partners LLC is a Lake Forest, IL-based, nationwide brokerage agency fully devoted to serving the long-term care industry. LTCI Partners offers marketing, sales, and administrative support, as well as a wide variety of long-term care products from the nation’s largest and most respected carriers. For more information, visit www.ltcipartners.com or call 800.245.8108.