New York State follows Washington State in creating a publicly funded long term care insurance program that will provides residents of the State an opportunity to vest into a basic level of LTC benefits.
The program will be financed with a payroll tax from NYS employees who will pay a premium through a payroll deduction. OF PARTICULAR INTEREST is the short time frame for those who own long term care insurance to opt out and apply for an exemption.
Overview of the New York State Program
If passed, the legislation is projected to take effect on or before January 1, 2024. A maximum LTC benefit of $36,500 will be available five years after effective date of the article which will require proof of assistance with at least three ADLs (Activities of Daily Living).
An employee who has maintained private long term care insurance on an uninterrupted basis beginning no later than January 1 of the year in which the article takes effect may apply for an exemption of premium contributions to the state plan.
Lessons Learned from Washington State
Karp Loshak LTC Insurance Solutions was selected by WA State to be a trusted LTC Insurance provider and included on The Washington State Insurance website as professionals with the highest credentials and training to assist WA State residents. As such, we are very familiar with the mechanics and ramifications of the laws.
The writing is on the wall for NYS residents and the solutions are plentiful now.
Those who are intentional will be successful. Those who wait, will wish they didnt.
Here is an example of what the Washington State mandated employee payroll tax of 0.58% looked like for a workers total wages. This is an annual tax with no salary cap. A salary of $100K would pay a tax of $580 per year. A $400K annual salary would pay a tax of $2,320 per year.
Lessons Learned from Washington State
- Unprecedented interest in private LTC Insurance given the limited state benefits:
- Private LTC Insurance plans are far more robust than a payroll tax would offer
- Easier to qualify for benefits with private insurance.
- No vesting period with private insurance.
- People are eligible for State benefits once they need assistance with three or more daily activities.
- State plans are NOT portable outside the state.
- Get well ahead of the curve as carriers limit offerings and availability due to overwhelming LTC applications
- Once legislation is passed carriers were unable to fulfill and underwrite for those who wanted coverage.
- Be proactive. DO NOT WAIT for details of any state plan to be announced. We are being advised that states may not have an opt out period.
- Younger people in the work force will want and need coverage. They may have family members that could not qualify due to health. It is especially important to reach out those with family history.
- Only 7720B policies (true LTC triggers in policies with standard federal language) were approved for the exemption. This means that most life insurance with chronic illness riders (101g contracts) do NOT qualify.
- 1035 Exchanges are ideal for Life with LTC Riders. However, given the process of this transaction getting a head start will be paramount if a 1035 is involved. There is no luxury of time once the mandates hit.
- Regardless of the payroll tax, we encourage people to obtain meaningful coverage, not just coverage that qualifies for an exemption.
The next states with proposed plans for public financed LTC plans include Arkansas, California, Colorado, Hawaii, Illinois, Missouri, Montana, Oregon, North Carolina, and Utah.
Positioning proactively, in advance of legislative mandates will ensure the most comprehensive set of options and carrier availability. The lessons learned from Washington State will be most beneficial to those who front run the tax.
Who will benefit from the NYS Plan?
The NYS plan is appropriate for those who are unable to health qualify for private LTC Insurance, or unable or unwilling to afford modest premiums and expect to remain in NYS.
Karp Loshak LTC Insurance Solutions will continue to release an update on the states currently considering similar legislation. For more information on the NY act, please read the full draft attached.
Karp Loshak LTC Insurance Solutions is a trusted source of information on Long Term Care Insurance that includes traditional (stand-alone) Long Term Care Insurance, Asset Based and Hybrid LTC, and Life Insurance using LTC Riders to create customized plan designs and maximize financing options for tax and estate advantages. As national and independent brokers, Natalie Karp, MBA, CLTC and Rona Loshak, MBA, CLTC are fiercely client focused and affiliate with the leading LTC Insurance carriers and myriad options in todays marketplace. They navigate the LTC marketplace to optimize successful outcomes and confident decisions. KarpLoshak.com 516-801-1419.