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Life Health > Long-Term Care Planning

LTC commission fleshes out 529 plan proposal

By Allison Bell

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The federal Commission on Long-Term Care (LTC) has given a little more information about its recommendation that Congress consider letting families use 529 college savings plans to pay long-term care expenses.

The commission discusses the recommendation in the full pre-publication version of a report it will be sending Congress.

Congress created the bipartisan commission earlier this year, to mollify critics when it killed off a voluntary LTC benefits program that was part of the Patient Protection and Affordable Care Act (PPACA).

The commission is supposed to disband after it sends its recommendations to Congress. It can try to shape LTC discussions in Congress, but it has no legal authority to introduce bills or to shape bills or regulations.

The commission notes in the full version of the report that it considered proposals for strengthening both private long-term care insurance (LTCI) programs and the LTC benefits at public health programs, such as Medicaid and Medicare.

The 529 plan proposal is the only official recommendation that involves use of commercial financial services products.

Section 529 of the Internal Revenue Code (IRC) lets families use a special investment account to set aside cash for college expenses. A 529 plan account holder can defer paying taxes on the investment earnings, and distributions used for college expenses are tax-free.

The commission considered a proposal to support the Achieving a Better Life Experience Act of 2013 (ABLE) bill. The ABLE bill would let families that are not receiving Medicaid benefits save for the LTC needs of children with disabilities by putting money in ABLE accounts.

The ABLE accounts would be similar to 529 plan accounts, except that families would use the ABLE account assets to pay for LTC services rather than for education.

The commission is recommending that Congress change IRC Section 529 to let families with members with significant disabilities save for current or future LTC services needs.

The commission does not say whether it thinks other families should be able to use the accounts to save for possible future LTC needs.

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