New “Partnership” LTC Policies Help Protect Your Assets

Medicare and Medicaid may not deliver what you think.
By Mike Ashley, Senior Benefits Consultants, Inc.

According to AARP, long-term care (LTC) expenses represent the single biggest threat to your retirement nest egg. This is driven, in large part, by statistics that show 70% of those over the age of 65 will require some sort of "care" in their lifetime. Most care will be received at home or in an assisted living facility. Medicare covers only short-term rehabilitative care in a nursing home or at home leaving a big gap for funding long-term expenses.

Currently, over 50% of nursing home residents are on Medicaid.  It is certainly possible to qualify for Medicaid, but not until you have spent almost every penny of your own money (leaving only $2,000 in Kansas, or $999.00 in Missouri). After that, Medicaid can pay for nursing home care, provided you are in a nursing home that accepts Medicaid.  Forget home care.  And here’s the kicker!  If you qualify for, and receive funds from Medicaid, the state will try to recover these funds from your estate at your death.

The cost to Medicaid of paying for this care has the program teetering on the brink of insolvency.  In an effort to alleviate some of this burden,  and encourage people to take some responsibility for their own care, most states, including Kansas and Missouri, have approved the use of “State Partnership Long Term Care Policies”.  These policies are available from a variety of insurance companies and they must meet certain criteria set forth by the Federal Government.

How do “Partnership” policies work?  If you exhaust your benefits of, lets say, $400,000 and still need care, the “Partnership” policy allows you to exempt $400,000 from Medicaid spend down and still qualify. This is a far better plan than relying totally on Medicaid. Under most projected scenarios, Medicaid will be out of funds in the near future.

Long Term Care Insurance that covers home care, assisted living, and nursing home care is not for everyone. It is, however, important to at least consider it as part of your retirement planning.  Contact your SRA Benefits representative for more information.

Don't use it? Don't lose it!

IRS Open to Comments on FSA Use-or-Lose Rule

by David Wetzler, Senior Business Consultant

It’s a fact. If you never use the muscles in your biceps, they’ll eventually disappear.   Use It or Lose It, as the saying goes.  With a little help from the IRS, however, the Use It or Lose It rule may not be a universal truth.

On May 30, 2012, the Internal Revenue Service issued Notice 2012-40 providing guidance on the $2,500 Health Flexible Spending Account (FSA) requirements. In the notice, the IRS requested comments on whether the "use-or-lose" rule should be modifed in light of the $2,500 limit. 

Currently, employees who participate in FSAs must estimate the amount of money they will need in the coming year to cover healthcare-related expenses not covered by their health plans.  They can stash away a maximum of $2,500 per year to pay for things such as  co-pays, deductibles, eye glasses, braces, etc. -  items not covered under their other insurance plans.  The money contributed to their Flexible Savings Accounts is tax exempt, thereby reducing the employee’s taxable salary.  That’s the good news.  But there’s a downside as well:  the Use-or-Lose requirement. Employees must accurately project what they think they will spend or lose the unspent amount in the account every plan year.

Not only does this rule inhibit employee participation, it creates spending behaviors in the last month of each plan year that may or may not be the best use of an employee’s money.  

So now’s your chance to let the IRS know what you think.  Written comments about the Use-or-Lose Rule are being requested by  August 17, 2012.   Refer to page 10 of Notice 2012-40 to find out how and where to submit your comments. 

For a summary of all the requirements on Notice 2012-40 regarding FSAs, check out Healthcare Reform on the SRA Benefits web site.  And contact an SRA Benefits consultant about how FSAs may be a great addition to your employee benefit plan offerings.