Payroll Deductions Are a Popular Option for Long-Term Health Care and Life Insurance

By Shapiro, Joel A. | The CPA Journal, September 1996 | Go to article overview

Payroll Deductions Are a Popular Option for Long-Term Health Care and Life Insurance


Shapiro, Joel A., The CPA Journal


Despite the escalating cost of employee benefits, a growing number of small businesses are adding two additional products to their benefits package. That's because the products, voluntary payroll deductions for long-term health care and for life insurance, enable employees to have the premiums deducted from their paychecks at little or no cost to employers.

In particular, the voluntary payroll deduction concept is serving as a partial solution to the potentially devastating cost of long-term health care. Conservative estimates indicate that one of every three Americans will require long-term care (many before they reach old age), and that two-thirds of those who receive it will consume substantially all of their assets in paying for it during the first year.

With such sobering statistics in mind, 13 U.S. insurance companies now offer group long-term health care policies. Though most are designed for a minimum of 200 participants, a few insurers offer group plans for as few as 25 employees. But even companies too small to meet that minimum can realize savings for their employees by buying individual policies together from the same carrier to quality for so called "list-bill discounts."

Estate Planning Tool

Payroll deduction for long-term health care protection can serve as an important estate planning tool. Even for affluent employees, a few years in a nursing home can wipe out an estate. And though Medicare provides for skilled nursing care at home, it does not cover nursing home care or home custodial care. In fact, Medicaid recipients usually must liquidate and deplete almost all of their assets to receive nursing home benefits.

Employer-provided long-term health care policies require that the employer pay for a specified base amount of coverage-usually a monthly benefit ranging from $500 to $2,000 per month-while offering employees the option to supplement that coverage through payroll deduction.

What does that cost an employer? The answer depends, of course, on the base benefit, but also in large part on the average age of employees. Typically, for a $2,000 per month base benefit, the cost of providing a 40-year-old employee with the basic nursing home and home-care benefit is approximately $12.40 per month. Therefore, minimum coverage for, say, 30 employees and spouses whose average age is 40, would cost $8,928 annually. If the average age were 45, the annual cost would be $12,096.

Because the company is paying for the base amount, an employee can, in effect, double his or her coverage for half the costs or triple it for two-thirds the cost. If that seems excessive, consider the fact that nursing home care now typically costs $50,000 to $60,000 a year in New York.

Although for simplicity's sake "employees" are referred to as the plan participants, most group plans accept not only spouses but other immediate relatives, including parents and grandparents. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Payroll Deductions Are a Popular Option for Long-Term Health Care and Life Insurance
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.