'Must Pass' Spending Bill Includes 401(k) LTCI Premium Provision
Certified Long-Term Care Insurance
The CAA 2023 LTCI premium provision would let workers use retirement plan money to pay for “certified long-term care insurance,” with the term “certified long-term care insurance” being based on the definition of “qualified long-term care insurance” given in section 7702B(b) in the Internal Revenue Code.
Practical Implications
One question is how many insurers will be interested in selling 401(k) participants long-term care insurance.
Many issuers have pulled out of the LTCI market in recent years because of concerns about problems with forecasting benefits obligations and low-interest earnings on the portfolios of bonds supporting the benefits.
The U.S. Office of Personnel Management recently suspended new enrollments in the Federal Long-Term Care Insurance Program.
In recent years, however, some insurers, including New York Life, Northwestern Mutual, Thrivent, Mutual of Omaha and National Guardian Life, have emphasized their commitment to the LTCI market.
Other CAA 2023 Long-Term Care Provisions
The omnibus also includes long-term care provisions aimed at police officers, firefighters and military veterans.
Section 328, which is based on the Police and Fire Health Care Protection Act of 2022, a draft bill developed by Sen. John Thune, R-S.D., would let retired first responders exclude retirement plan distributions used to pay either health insurance or LTCI premiums from taxable income, regardless of whether the distributions were sent to the insurers or paid to the retirees.
Today, to qualify for the exclusion, retirees must have the distributions sent directly to the insurers.
Subtitle E of Division U of the CAA 2023 bill calls for the government to develop a strategy for long-term care for aging veterans, to improve state veterans homes and to pay for medical foster homes for veterans even when the foster homes are outside of the Department of Veteran Affairs medical foster home system.
Pictured: Sen. Pat Toomey, R-Pa. (Photo: Toomey)
