A member of the House Ways and Means Committee is introducing a bill that would let workers use cafeteria plan and flexible spending account funds to pay for long term care insurance.
The Long-Term Care Affordability and Security Act of 2007, proposed by Rep. Earl Pomeroy, D.-N.D., would eliminate the rules that now shut LTC insurance out of cafeteria plans and FSAs.
Cafeteria plans enable employees to exclude income used to pay for voluntary benefits from taxable income.
FSAs give employees the ability to set aside cash to cover dental care, out-of-pocket health care costs and dependent day care. Workers can exclude the FSA contributions from their taxable income.
Pomeroy expects to introduce his bill this afternoon, a Pomeroy spokeswoman says.
Pomeroy has lined up 20 cosponsors. Republicans on the list include Reps. Jim Ramstad, R.-Minn., Allyson Schwartz, D.-Pa., and Kenny Hulshof, R.-Mo.
The American Council of Life Insurers, Washington, is supporting the Pomeroy bill, estimating it would cost as little as $500 million in tax revenue.
Once taxpayers who used FSA and cafteria plan funds to buy private LTC insurance started filing claims, the tax breaks would more than pay for themselves by easing demand for Medicaid-paid LTC benefits, according to the ACLI.
“Cafeteria plans and FSAs have helped millions of Americans protect their families and provide important financial protection,” ACLI President Frank Keating says in a statement about the bill. “Including long term care insurance will add an important piece to Americans’ financial security puzzle.”