Group Life Insurance – What is Imputed Income?

Posted on Jul 31, 2015 in Industry & Legislative News, Success ideas

Many employers provide employees with employer-paid group-term life insurance benefits or arrange for employees to purchase group term life insurance benefits. But did you know that in some cases, if an employer pays for more than a $50,000 life insurance benefit, there can be tax implications for the employee?

Must the cost of employer-provided group-term life insurance be included in an employee’s gross income?

Pursuant to Internal Revenue Code (Code) Section 79, an employee may exclude up to $50,000 of employer- provided group-term life insurance from his or her income. This tax exclusion applies only to insurance on the life of the employee. It does not apply to insurance on the life of the employee’s spouse or dependent or other individual.

In addition, the employer may generally deduct the premiums it pays for the coverage as an ordinary and necessary business expense, so long as the employer is neither directly nor indirectly the beneficiary under the policy.

May the employer provide group-term life insurance for its employees in excess of $50,000?

Yes. However, the “cost” of the coverage in excess of $50,000 must be included in the employee’s gross income. “Cost” as used here does not refer to the premium paid by the employer but to the cost determined under the Uniform Premium Table contained in IRS regulations. The “cost” of the coverage added to an employee’s gross income is commonly referred to as “imputed income”.

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How much coverage do I need for Key Person Insurance?

Posted on Jun 24, 2015 in Success ideas

Valuing a Key Employee

It can be hard to put an exact monetary value on how important a key person is to a given business. The goal when valuing a key person for life and disability insurance is to get the correct amount of coverage based on the specific needs of the business, but that also corresponds to the realistic loss associated with the death or disability of the key employee from the insurance company’s viewpoint.

In many cases the amount of key person insurance requested is dramatically higher than is available from the life and disability insurance companies. For example, just because a firm is borrowing $10,000,000 for a project expansion doesn’t mean the insurance company will willingly write $10,000,000 of key man life or disability insurance. Specific details will be required by the insurance company to justify the insurance amount requested.

There are several valuation methods commonly used to determine the proper amount of key person insurance needed from both the business and insurance companies perspective. These valuation methods include: the replacement cost method, the contribution to earnings method and the multiples of income approach. A brief explanation of each valuation method follows below.

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What is a Long Term Care Partnership Program, and why should I care?

Posted on Jun 18, 2015 in Industry & Legislative News, Success ideas

Many people mistakenly believe government programs, like Medicare and Medicaid, will provide all the long-term care services they need. Unfortunately, this may not be the case. Failing to plan how you’ll pay for long-term care services may place you at serious financial risk.

Medicare

Medicare generally does not pay for long-term care services. Instead, it’s designed to help get you back on your feet following an illness or injury.

  • Medicare pays only for “skilled care” you receive in a nursing home, but only if it’s medically necessary and only for a limited period of time
  • Medicare does not pay for “custodial care” services many people receive in their homes – services like assistance with dressing, bathing and using the bathroom. Medicare also does not pay for care received in an assisted living facility

Medicaid

Medicaid provides long-term care assistance to individuals who have exhausted their personal resources.

  • Medicaid pays for both “skilled care” and “custodial care” received in a nursing home, but only after you spend down your assets to meet eligibility guidelines in your state
  • In some states, Medicaid may pay for some services received at home or in an assisted living facility

What is a long-term care partnership program?

It’s a partnership between your state government and private insurance companies. Insurance companies voluntarily agree to participate by offering long-term care insurance policies that meet specified criteria. The state agrees to provide Medicaid asset protection to people who purchase partnership-qualified policies.

How does Medicaid asset protection work?

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Your Most Valuable Asset – A Primer on Long Term Disability

Posted on May 27, 2015 in Success ideas

Do you know what your most valuable asset is? It’s not your car or your home – it is your ability to earn an income. This short, 2 minute video gives a great explanation of how Long Term Disability coverage can protect you. We can help design a plan that fits you and your needs – call us for a consultation!

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The Role of Long Term Care Insurance in Retirement Planning

Posted on May 20, 2015 in Success ideas

As you are planning for retirement, you’ve probably started thinking about where you’ll live and the leisure activities you’ll finally have time to pursue. But have you considered how you’ll pay for the Long Term Care (LTC) services you may need?

According to the U.S. Department of Health & Human Services, 70 percent of people who reach age 65 will need long-term care services at some point in their lives.

The national average cost for a year of nursing home care is approaching $80,000. And that’s just for one person. If both you and a spouse need care, your retirement nest egg could be depleted quickly. Without a plan to pay for Long Term Care services, you could be putting everything you worked a lifetime to accumulate at risk.

LTC Cost chart

How Will you Pay?

When it comes to paying for LTC services, you have several options, including:

The Government – If you plan to rely on government programs, like Medicare and Medicaid, you need to understand that Medicare only provides coverage for a short time – just long enough to help people get back on their feet after an illness or accident. Medicaid is a program for people with limited assets, which means in order to qualify for Medicaid benefits, you may first have to spend down your retirement savings.

Self-Funding – Even if you have sufficient assets to pay for the care you need, there’s a chance those assets won’t be easily accessible when you need them. Liquidating assets – cashing in stocks, selling property or dipping into 401(k) or other savings accounts – can trigger additional costs in the form of capital gains tax, income tax and surrender charges.

Long-Term Care Insurance – An LTCi policy is designed to help pay a portion of LTC expenses. Owning a policy may give you options for care, whether at home or in an assisted living facility or nursing home. It may help prevent you from relying on family members for care. And may be the best way to protect the assets you’ve set aside for retirement. Also, some states, including Texas, have Partnership Programs that allow correctly designed LTC policies to protect even more of your assets should your LTC insurance benefit run out.

SB&K Benefits, LLC can help you design and implement Long Term Care insurance plans to fit your needs and budget. Call us for a consultation at 832-482-2494 or reach us through our contact form on this website.

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