OneAmerica Financial is improving Annuity Care. For nearly 2 decades, Annuity Care has transformed tax-deferred accumulation inside of nonqualified deferred annuities or cash value life insurance into tax-free long term care payments.
Remember, this is all made possible because of the Pension Protection Act and only available for annuities that adhere to HIPAA guidelines.
Typically, Annuity Care products are funded via 1035 exchanges.
So, what’s the big deal?
Effective immediately, Annuity Care I and Indexed Annuity Care for base-only policies will be instant issue!
When the annuitant answers the five questions favorably on the application AND the application is submitted vie e-app, they will receive instant approval. (If submitted via paper, the policy will be issued 48 hours after it is received in the OneAmerica Financial home office in Indianapolis.)
There is more to this …
The issue limit for Annuity Care I and Indexed Annuity Care have been increased to $1 million which is fully commissionable. When the annuity amount is in excess of $1 million, please contact me directly. (For annuitants 86 and older, the commission will be lower.)
When you take into consideration that over 70% of annuity owners indicated that their annuity was earmarked as their healthcare emergency fund. you can see the positively impact that this strategy presents.
As a reminder, the instant issue only applies to Annuity Care I and Indexed Annuity Care base-only policies that are submitted via e-app. Any of the Annuity Care products that include a continuation of benefits rider will continue to require a phone interview, MIB review, and prescription check.
If you have forgotten how base-only will work, here is an example …
for a female age 80 with a total value of the nonqualified annuities is $850,000 with a basis of only $400,000.
Presently, her annuities are flush with gains, out of surrender, and not being utilized for income. In reality, they will be passed on to her family or will be liquidated to fund her long term care support & services when they arise.
Let’s assume that she requires long term care support and services using national averages 3 years for care at a cost of $80,000 annually. (national average cost of care derived using the OneAmerica Cost of Care Map) Using these number, the average monthly cost for her care would be $6,667; after 3 years she passes and the overall payout from the annuity would be $240,000.
By repositioning $240,000 from her existing annuity ladder into a base-only Annuity Care I, would generate a monthly tax-free distribution of $6,956 per month for that same 36 month period of time. One last note, since this is a deferred annuity, the account value will increase year over year.
If she were to utilize her annuities in their present state, every dollar distributed from the annuities would be treated as gain and taxed accordingly (last-in first out taxation). This would mean that in order to generate a net distribution of $240,000 over the 3 years, an extra $48,000 would have needed to been pulled to cover the tax obligation (using a hypothetical 20.0% income tax rate).
Along with the higher federal income taxes; there may be a bump a higher tax bracket for the future which will increase the cost for her means-tested programs like Medicare Part B premiums as well as potential taxes to her social security income.
Here is a quick comparison:
Cost of care: $6,667 (monthly) / $80,000 (annually) / $240,000 (3 yr total)
Distribution required:
| Annuity Care | Non- PPA annuity | |
| Monthly | $6,667 tax-free | $8,000 (6,667 plus 20% tax) |
| Annually | $80,000 tax-free | $96,000 (80,000 plus 20% tax) |
| 3 Year Total | $240,000 tax-free | $288,000 ($240,000 plus 20% tax) |
Learn more about base-only Annuity Care I & Indexed Annuity Care … give either my internal Justin Fox or me a call today!
Fridays with Fisher 
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