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August 12, 2007 at 04:00 PM
A member of the House Ways and Means Committee introduced legislation Aug. 3 that would allow long term care insurance to be treated as a tax-exempt employee benefit.
The “Long Term Care Affordability and Security Act of 2007,” H.R. 3363, proposed by Rep. Earl Pomeroy, D.-N.D., would end restrictions that exclude LTC insurance from cafeteria plans or flexible spending arrangements.
Cafeteria plans, as outlined in section 125 of the Internal Revenue Code, allow employees to pay for voluntary benefits such as health care insurance by reducing their salaries by the premium amounts, in effect allowing them to pay for these benefits pre-tax, reducing taxable income.
FSAs permit employees to set aside specified amounts to cover eligible out-of-pocket expenses for health care, dental care and dependent day care. These expenditures are also deducted from an employee’s pay on a pre-tax basis.
The American Council of Life Insurers, has pushed for the legislation, maintaining that allowing tax-exempt treatment under employer benefit plans would substantially increase LTC insurance sales.
