Yesterday, Michael Florio and I hosted a meeting at The Hartford Club where we focused exclusively on the Indexed Annuity Care product.
A reminder, in Connecticut, it is the only PPA compliant deferred annuity; nationally, it is the only PPA compliant fixed indexed annuity. What that means is – when benefits are paid from the annuity for qualified long term care services, they can be received tax-free.
This is a big thing when you look at things through the prism of income and taxation. Simply, when used to pay for long term care expenses, PPA compliant annuities do not impact taxes or any benefits or programs that tied to income such as Medicare Part B premiums. This link to the medicare.gov website does a good job explaining that impact.
But, this is not the biggest concern for many – securing money to pay for a long term care event is. And, as I mentioned last week, 73% of annuity owners plan to tap into their annuity for that purpose.
Remember this – distributions from non-PPA annuities are taxable. It doesn’t matter if it is a withdrawal, a surrender, income from a single premium deferred annuity (SPIA), or a deferred annuity’s income rider being turned on. If it isn’t a PPA compliant annuity – it will be taxed.
On top of that it will run out. Once the money is gone, it is gone.
With this in mind, I want you to listen to what I have to say about what a PPA compliant annuity can provide. I’m not focused on accumulation – I am focused on the distribution.
A PPA compliant annuity like Indexed Annuity Care offers the ability to double, triple, or create an unlimited stream of long term care benefits. This, of course, requires the continuation of benefits rider to be included on the policy but it creates a tax-free benefit stream.
And, it is available for both home and facility-based care.
Most current annuity products offer some nursing home, chronic illness, critical illness, terminal illness, or confinement benefit as part of their policy. Here is what I found after reviewing the policy language of 24 deferred annuities:
- payments from under the rider provision is always taxed as ordinary income
- the money runs out when the annuity runs out of money
- most require the annuity contract to be in-force for one year before benefits are available
- home care is not included
- every company has its own qualifying criteria
- in all but 2 riders, 90 consecutive days in a “qualified nursing facility” are required to qualify for benefits
- a handful use the inability to perform 2 of 6 activities of daily living (ADLs) as qualifying criteria
- only 1 rider included cognitive impairments as a qualifying event
With Indexed Annuity Care or any of our other Annuity Care products (or any PPA compliant annuity for that matter), qualifying criteria is codified as part of HIPAA. To trigger benefits, the insured must be either severely cognitively impaired or unable to perform 2 of 6 activities of daily living. Further, both home-based care and facility based care must be included as qualified care services.
Something else that you should recognize is that once an Indexed Annuity Care (or any OneAmerica Care Solutions product) is in-force. There is no waiting period for the benefits to be available – there is no “after the first policy year language”. The policy is in-force and benefits are available when the insured meets the qualifying criteria (noted above) and completes the policy elimination (waiting) period.
Finally, to the point of benefits – with Indexed Annuity Care, the benefit pool can be unlimited in duration. Simply, the benefits cannot run out when on claim. And, most importantly, benefits paid from Indexed Annuity Care are tax free.
If you would like to discuss more specifics about Indexed Annuity Care or any of the product in the Care Solutions portfolio, you can reach me at (678) 512-9627.
Coming up on LTC Coffee Break – a conversation with Kelly Hall from the OneAmerica Advanced Markets team. We will be talking about taxes, ownership, and long term care funding ideas for businesses.
LTCcoffeebreak.com – the online industry leader in asset based LTC ideas and information.
Fridays with Fisher 