Employer-Paid Coverage... 3 Long-Term Care Insurance Plan Board Resolution... 3 BOARD OF DIRECTORS RESOLUTION... 5 PLAN DOCUMENT... 6 Memo to Eligible Employees Covered Under the Plan... 10 Employee-Paid Voluntary Coverage... 11 Long-Term Care Insurance Plan Board Resolution... 11 Memo to Employees Eligible to Purchase Voluntary LTCi... 13 The attached Board Resolution and Letter to employees should be modified to fit your particular situation. The words corporate and corporation are not appropriate, of course, for partnerships or sole proprietors, although they do apply for both S and C corporations. The term Board of Directors may not apply if there is a different governing body or possibly no Board (sole proprietors). Nonetheless, similar documentation is probably a good idea. We ve inserted some eligibility requirements. Those should be modified/deleted as appropriate for the specific situation. A very significant change lies in the following paragraph in the letter to employees: Your LTCi plan qualifies for special tax treatment from the IRS. Although premiums are paid by the company, the premiums are excluded from your gross income under the tax code provision that excludes, from an employee s gross income, employer-paid premiums for health and accident insurance (IRC 106(a)). Benefits paid by the insurer are also excluded form your gross income to the extent such benefits offset longterm care expenses actually incurred by you or your spouse (IRC 105 (a) and (b)). You ll observe that the sentence about benefits simplifies the situation a bit as it does not address the possibility that indemnity benefits which exceed the cost of LTC may also not be taxable. Our purpose here is not to give detailed tax advice but rather not to communicate clearly without overstating the benefits. An employer might want to be more precise. The second sentence should be followed by a parenthetical statement to address the circumstances of owners of pass through entities (partnerships, S- corporations and sole proprietorships). For non-owners in pass-through entities and for employees in non-profits and entities that pay federal income taxes directly to the federal government, it is fine. For owners in pass-throughs, the following sentence should be added after (IRC 106(a)) : However, if you are considered to be an owner of the company, there is a limit as to the amount of
premium that can be treated in this fashion. To the degree that your premium exceeds that limit, it will be treated as taxable income for you.) The wording requires that the intended Participant satisfy the criteria of the Insurer. Such criteria can include health, age, residence jurisdiction, number of hours of work weekly, relationship to the employee (criteria could vary by state), etc. There is a paragraph about securing coverage for employees who become eligible in the future. An employer might prefer to be silent in that regard to avoid potential liability if the employer forgets to insure such employee prior to the employee or employee s spouse needing long-term care. The employee letter addresses the importance of insuring extended relatives. Insuring extended relatives protects the employer because providing care to those extended relatives can disrupt the employee s productivity. If relatives are not eligible for the program, that wording should be changed.
Employer-Paid Coverage Long-Term Care Insurance Plan Board Resolution Minutes: A meeting of the Board of Directors of (Corporation) was held on the day of, 20, at which the Board considered adoption of a long-term care insurance (LTCi) plan. The following Board members were in attendance, constituting a quorum of the Board: The Board discussed the impact long-term care can have on families in terms of mental and physical burdens, time demands and financial strain. It is attractive to help alleviate this risk by providing LTCi for our most valuable employees and their spouses. The company can benefit not only from employee appreciation and retention but also from maximizing employee productivity if the employee s spouse needs care. The Board discussed the recommendations made by our insurance advisor. The recommended program requires that each person to be insured must demonstrate insurability according to the standards of the insurance company. The LTCi plan would involve applying for LTCi for the following people: all officers of the Corporation and their spouses all active and retired employees who have worked 30 years for the company and their spouses all employees of the Corporation who are earning more than $x per year and their spouses The program will be put in place even if some of the above employees are not insurable based on the criteria of the selected Insurer.
If additional employees qualify under the above criteria in the future, the Corporation intends to arrange coverage for such employees within 12 months of such time, unless the Corporation modifies this program. After the discussion, it was unanimously RESOLVED: 1) That the Board of Directors has determined that a company-paid, LTCi plan would substantially reduce the risk of: financial loss to officers and their families due to long-term care expenses emotional stress for officers and their family members and undesirable life-style changes for officers and their family members whether such loss is due to an inability to perform two or more common activities of daily living or due to severe cognitive impairment. 2) A company LTCi plan would further relieve the officers and their family of anxiety concerning the impact of potential need of long-term care and could help protect the contributions that the employee makes to the success of the company. 3) The Board approves the recommendations and directs staff to implement the program for the Eligible Employees and spouses identified above who are able to qualify under the Insurer s criteria. In Witness Whereof, the Corporate Secretary s name has been affixed hereto this day of,. (Secretary)
LONG TERM CARE INSURANCE PLAN BOARD OF DIRECTORS RESOLUTION (for Attorney Use Only) WHEREAS, (Company) deems it to be in the best interest of the Company to provide long-term care insurance protection to certain participating employees [and their eligible dependents]; and WHEREAS, Sections 105, 106 and 162 of the Internal Revenue Code of 1986, as amended from time to time thereafter, provide an incentive for Company to sponsor long-term care insurance protection for these employees. NOW, THEREFORE, in consideration of the foregoing, it is: RESOLVED, Company shall hereby establish the [Company name] Long-Term Care Insurance Plan, effective [date] (the "Plan"). A copy of the Plan is attached to this resolution and the Board hereby ratifies and confirms the Plan. FURTHER RESOLVED, that the Company's [responsible officer] or such other officer as (s)he may designate is hereby empowered to carry out the terms and provisions of the Plan; and FURTHER RESOLVED, that the Company intends to maintain this Plan indefinitely but reserves the right to amend, modify, suspend, revoke or terminate the Plan, in whole or in part, at any time or times, in accordance with its terms. IN WITNESS WHEREOF, the Directors of the Company have caused this Resolution to be executed this day of, 20. PBW/53581/LTC model plan resolution
LONG-TERM CARE INSURANCE PLAN PLAN DOCUMENT (For Attorney s Use Only) Purpose. This Plan is designed to provide long-term care insurance to participating Employees [and their eligible dependents]. The presence of this Plan will relieve the minds of eligible Employees of some of the burdens and concerns involved in the costs and uncertainties resulting from the occurrence of a chronic illness. This Plan is offered to promote the continued and loyal service of the participating Employees. 1. Name. The name of this plan is the [Company name] Long-Term Care Insurance Plan (the "Plan"). 2. Effective Date. The Effective Date of the Plan is,. 3. Definitions. a. Company means, a corporation [or partnership] organized and existing under the laws of the State of b. Insurer means [xxxxxx]. c. Participant means an employee [or eligible dependent] in an eligible class who has applied for a Policy under the Plan, has agreed to pay the required contributions, has satisfied the criteria used by the Insurer in determining whether to issue a Policy and has been issued a Policy. c. Policy means the individual long-term care policy or certificate issued by the Insurer in the amount and duration upon which a Participant, Company and Insurer mutually agree. It shall be the sole responsibility of each Participant to secure the Policy, as defined in this paragraph. Each Participant agrees to submit to any physical examination and to supply any additional information as may be requested by the Insurer. Neither the Company nor the Plan shall have any obligation to contribute to the cost of a Policy or to provide any other benefit in lieu of such contribution to any employee who fails to satisfy the Insurer's criteria to issue a Policy and does not become a Participant.
4. Eligible Employees. The following class(es) of employees [and eligible dependents] shall be eligible to become Participants if they satisfy the criteria of the Insurer: [describe the eligible class(es) of employees and any eligible dependents. For example, "senior managers with at least 5 years service" or "spouses". 5. Company Contributions. The Company shall contribute to the cost of the Policies issued to Participants under this Plan on the following basis: [describe the intended basis of contributions. If the Company intends to pay the entire cost of the premiums, so state]. 6. Plan Administration, is hereby designated as the Plan Administrator to serve until another Plan Administrator is designated by the Plan. The Plan Administrator shall be responsible for the management, control and administration of this Plan and may allocate to others certain aspects of the management and operation responsibilities of the Plan. The Plan Administrator may arrange with the Company, Participants and Insurer to have the Company pay all premiums for the Policies directly to the Insurer out of the Company contributions and any required Participant contributions. The Insurer is hereby designated as the named fiduciary to determine all claims for benefits and all appeals therefrom. 7. Commencement and Termination of Coverage. A Participant's coverage under the Plan commence in accordance with the terms of the Policy issued to that Participant. A Participant's coverage under the Plan shall terminate immediately upon the earliest of the following to occur: a. the date this Plan terminates or is modified to terminate coverage for that employee's class of Participants; b. the date a Participant ceases to be eligible for coverage; or c. the date a Participant elects to cease making any required contributions to the cost of the Participant's policy; or d. the date of the Participant's death.; or e. the date the Participant's Policy terminates in accordance with its terms. However, if the Company Contribution ceases or the Participant is no longer eligible, the Participant will have the right to continue the coverage at his/her own cost according to the terms of the Policy. 8. Plan Benefits. a. Company Contributions. The Company will provide no benefit to any participating employee under this Plan except to pay the Company contribution toward that participant's Policy. b. Policy Benefits. The Insurer will pay policy benefits to each Participant in accordance with the terms of their Policy.
9. Company Contribution Provisions. The payment of Premium Payments is subject to all other applicable conditions and provisions of this Plan. Further, the Company may withhold from any Policy Premiums, any federal, state or local taxes required to be withheld. 10. Termination of Company Contributions. The payment of Company contributions shall cease upon the first to occur of any of the following events: a. the Participant dies; or b. [the Employee retires]; or c. the Participant fails to comply with the terms and conditions of this Plan; or d. the Plan is amended, modified or terminated so that Company contributions are no longer payable under the Plan for that employee. e. the Employee leaves the Company s employ. 11. Claims. With respect to Policy Benefits, the duty and obligation to notify the Insurer and to furnish any evidence or proof of claim that said Insurer may require lies solely and entirely with the Participant. An explanation of the Insurer s claim procedure will be found in the Policy. The duty and obligation to pay or deny claim requests lies solely and entirely with the Insurer. 12. Summary Plan Description. Unless otherwise specified, the Summary Plan Description shall be the Policy issued by the insurer. 13. Interpretation This Plan shall be construed to comply with Sections 105, 106 and 162 of the Internal Revenue Code of 1986 and the Employee Retirement Income Security Act of 1974, as amended from time to time. The Plan Administrator shall have full and final discretionary authority to determine whether any Employee is eligible to become or remain a Participant or any question concerning Company contributions to the premium for any Policy. The Insurer shall have full and final discretionary authority: (a) to interpret the provisions of the Plan, including whether Policies are issued to Participants in light of their health, (b) to determine whether any Policy is in force at any time for any Participant, (c) the coverage amounts or limits thereof, (d) whether any benefit is payable to any Participant on account of any claim for benefits, and (e) to resolve any appeal from any adverse claim determination. 14. Nonguarantee of Employment. Nothing contained in this Plan shall be construed as a contract of employment between the Company and any Employee, or as a right of any Employee to be continued in the employment of the Company, or as a limitation of the right of the Company to discharge any of its Employees with or without cause. 15. Funding. The premiums for the Policies shall be paid by a combination of Company contributions and Participant contributions on the following basis [state basis]. All Company contributions paid under this Plan shall be paid from the general assets of the Company. 16. Restriction on Alienability. Payments payable to the Employee or beneficiary of the Employee
shall not be subject to assignment, transfer, attachment, execution, or any other seizure under any legal or equitable process. 17. Communications. All communications regarding this Plan by and between the Company and Participants shall be in writing. Communications shall be deemed given, made, delivered or transmitted when mailed first class with postage prepaid. Communications addressed to the Participant shall be sent to the address last appearing on the books of the Company. Communications addressed to the Administrator of this Plan should be addressed as follows: 18. Amendments. This Plan may be amended by proper action of the Company's [designated officer} or such other officer or employee duly authorized to take such action to take effect as determined by that officer or employee, and when so amended shall govern all future rights and actions of the Company, the Plan and the Participants thereunder. The Company shall cause any such amendment to be properly documented and communicated to the Participants, but no failure to so document or communicate any amendment shall invalidate the amendment or delay its effective date. 19. Termination. The Company intends to maintain this Plan indefinitely, but reserves the right to terminate it at any time without further liability to any Participant except for liabilities previously accrued. 20. Governing Law. To the extent not governed or pre-empted by federal law, the Plan shall be interpreted and enforced in accordance with the laws of the State of In Witness Whereof, the Company hereby executes this Plan as of this day of, 20. (title)
Memo to Eligible Employees Covered Under the Plan To: From: Re: Eligible Employees of ABC Company CEO of ABC Company Long-Term Care Insurance Plan We are pleased to announce that ABC Company has decided to provide longterm care insurance (LTCi), at company expense, for all officers of the company and their spouses who can satisfy the criteria to qualify for such coverage with [Insurer]. This valuable benefit will be provided by the company at no cost to you. LTCi helps offset the cost of care in a facility or care at home in the event you or your spouse needs care for 90 days or more due to inability to perform two or more common activities of daily living or due to severe cognitive impairment. Your LTCi plan qualifies for special tax treatment from the IRS. Although premiums are paid by the company, the premiums are excluded from your gross income under the tax code provision that excludes, from an employee s gross income, employer-paid premiums for health and accident insurance (IRC 106(a). Benefits paid by the insurer are also excluded form your gross income to the extent such benefits offset long-term care expenses actually incurred by you or your spouse (IRC 105 (a) and (b)). ABC Company is happy to provide this important benefit to you and your spouse. Long-term care is a critical issue facing families today. We urge you to discuss the risks of long-term care with your families and to prepare yourselves for the possibility that you or a loved one might need long-term care. If a family does not plan in advance, they are likely to find that they have fewer alternatives to resolve emotional, logistical and financial issues when long-term care problems arise. We are pleased that your relatives are eligible to purchase coverage, at their own cost, under this program. If you have questions about this program or about ways to plan for long-term care contingencies, please contact the Director of Benefits of the Human Resources Division.
Employee-Paid Voluntary Coverage Long-Term Care Insurance Plan Board Resolution Minutes: A meeting of the Board of Directors of (Corporation) was held on the day of, 20 to consider adoption of a long-term care insurance (LTCi) plan. The following Board members were in attendance, constituting a quorum of the Board: The Board discussed the importance of planning for LTC. The company, like other companies, will undoubtedly experience a loss of productivity due to employees having to turn their attention to the LTC needs of their relatives. We can ease their burden and protect our interest in the productivity of our staff by sponsoring a voluntary, employee-paid LTCi program. For relatives, the coverage does not have to be purchased by the employee; it can be purchased by the relative. Our investment has been to consider providers. We have settled on an insurance broker who inspires our confidence. We will also create a payroll deduction slot for one of the insurance companies. We ll give our insurance broker opportunities to educate our staff beforehand via a letter from the President, articles in our company newsletter, email messages, etc. The broker will hold group LTCi presentations, then meet with those who are interested, perhaps with their spouses or other relatives as well, on a one-on-one basis during normal working hours. The decision whether to purchase coverage or not and how to select the parameters of any policy lies solely with the eligible person. The insurance broker is responsible for ethical behavior and the eligible person is responsible
for determining whether the insurance broker has acted honorably with respect to that eligible person. The company accepts no liability for having helped employees and their relatives by providing education about long-term care and long-term care insurance and an opportunity to purchase coverage. It is important to remember that applicants will need to satisfy the Insurer s criteria in order to have coverage issued. After the discussion, it was unanimously RESOLVED that the Board of Directors has authorized the Company to initiate a voluntary LTCi program for employees and their relatives. In Witness Whereof, the Corporate Secretary s name has been affixed hereto this day of,. (Secretary)
Memo to Employees Eligible to Purchase Voluntary LTCi To: From: Re: Employees of ABC Company The President, ABC Company Long-Term Care Insurance Plan We are pleased to announce that ABC Company has decided to make long-term care insurance (LTCi) available to you, your spouse, your children, your parents and grand-parents, your siblings and your corresponding in-laws. Educational material will be distributed to you. Any decision to purchase coverage and the choice of any parameters relative to such insurance will be up to you and your relatives and you/they will bear the full cost of the insurance. LTCi helps families avoid having to place loved ones in nursing homes and avoids people having to move into their child s house. Both generations generally prefer that the person needing LTC can stay independent. The presence of insurance helps the family to hire the needed help, thereby retaining living flexibility and generally superior care. People who need long-term care and have LTCi are approximately 50% less likely to move in with their children than similar people lacking LTCi. We urge you to discuss the risks of long-term care with your families and to prepare yourselves for the possibility that you or a loved one might need longterm care. If a family does not plan in advance, they are likely to find that they have fewer alternatives to resolve emotional, life-style and financial issues when long-term care problems arise. We are pleased that your relatives are eligible for the program we ve obtained for our employees. If you have questions about this program or about ways to plan for long-term care contingencies, please contact the Director of Benefits of the Human Resources Division. Alternative, hereby certify that I am the duly elected and acting (clerk or secretary) of a corporation organized and existing under and by virtue of the laws of the State of, and that the following is a true and correct copy of resolutions duly adopted by the Board of Directors of said corporation at a meeting duly called and held on [date] at [city], [state], at which a quorum was present and voting throughout.
WHEREAS, it is the consequence of this meeting that the establishment of an employee long term care plan, which provides the employee with coverage in the event of a loss of two or more Activities of Daily Living or severe cognitive impairment, will advance the best interest of the corporation through the improvement of its relationships with its employees, and WHEREAS, it is desirable to make such long term care insurance available to [all employees or specified classes of employees] for reason of the valuable services performed by said employees, and WHEREAS, the corporation believes that this assistance can be best provided by the adoption of a long term care plan insured by long term care policies issued by [name of Unum company]. Now, THEREFORE, be it resolved that an employee will be a covered employee only if he or she meets [all] of the following requirements as of the effective date of the policies: [list any applicable criteria] 1. Is a full-time employee 2. Has accumulated years of service 3. Is an officer of the corporation 4. Is a manager or supervisor [NOTE: These are only examples of eligibility criteria that might be adopted. Eligibility criteria should not be selected with the intent to specifically limit benefits to the stockholders only, and employees should not be offered the choice to accept the benefit or alternative benefits, such as cash, without the specific advice of a qualified tax advisor.] Resolved, that any officer of this corporation is authorized and directed to take such steps as may be necessary to establish an insured long term care plan, under the provisions of Section 105 and 106 of the Internal Revenue Code of 1986 as amended and the Employee Retirement Income Security Act of 1974 as amended, for the benefit of the aforementioned employees, and be it further RESOLVED, that in order to put the plan into effect, any officer be and hereby is authorized to take steps as necessary to institute such plan and to pay insurance premiums due on a long term care policy or policies issued by [Insurer] to a covered employee to provide the benefits pursuant to the said plan. In WITNESS WHEREOF, I hereunto set my hand and the seal of this corporation this day of 20. [signature of authorized officer]