The just released final text of the Enhancing American Retirement Now (EARN) Act maintains the positive feature that will increase sales of long-term care insurance predicts the American Association for Long-Term Care Insurance.
“The bipartisan measure passed the Senate committee in June and the just-released final text maintains the advantageous provisions to encourage long-term care planning,” explains Jesse Slome, director of the organization. The final draft will be used to negotiate the final text with the U.S. House of Representatives.
“The EARN Act allows the use of tax-exempt retirement plan distributions to pay for long-term care insurance premiums,” Slome explains. “Specifically, it excludes such distributions from the gross income of an insured individual up to $2,500 per individual starting in 2024.” Subsequent amounts will be indexed annually to track inflation.
Roughly 60 million Americans have 401(k) plans in place according to AALTCI data. The average 401(k) balance for individuals between ages 55 and 64 is $232,000. The average balance for those 65 and older is $255,000 according to recently reported data.
“Using a small portion of your retirement plan to protect your full retirement savings will be seen as a very smart financial move,” Slome suggests. According to the Association’s 2022 Long-Term Care Insurance Price Index, a 65-year-old male could pay between $1,700 and $3,135 yearly for future benefits of $296,000 when they reach age 85. Insurance costs more for women.
According to Slome, the tax-exemption benefit will apply to both 7702(b) traditional LTC insurance plans as well as those meeting 101(g) IRS provisions. “That’s welcome news for the linked-benefit long-term care policies that meet the 101(g) provisions,” Slome notes. Not all linked-benefit or hybrid long-term care plans meet these provisions he adds.
The American Association for Long-Term Care Insurance (AALTCI) advocates for the importance of long-term care planning and supports insurance professionals who market both traditional and hybrid long-term care solutions. To learn more about long-term care insurance tax information, go to https://www.aaltci.org/long-term-care-insurance/learning-center/tax-for-business.php.
To learn more about long-term care planning or for insurance costs from a national specialist, go to https://www.aaltci.org or call the organization at 818-597-3227.