The Pension Protection Act of 2006 and Pre-Tax deduction of Long Term Care Insurance Premiums

The Pension Protection Act of 2006 under Section 845 was a piece of legislation passed by the Bush Administration that is great news for people receiving pensions from annuities. This law will allow the premiums for a person’s long term care insurance policy to be paid pre-tax if they are paid straight from the pension.  Police, firemen, state and federal employees may have this tax savings payment method as an option and at the same time protecting your greatest risk you may face in your retirement—needing long term care.  Even teachers may be able to participate so check with your pension department and if they don’t have it set up, demand that they do.  If you think about it if you’re in a 26% tax bracket by using the Pension Protection Act of 2006’s features it will essentially save you 26% on your long term care insurance premiums. 
 

Medicaid (your tax dollars) pays for a whopping 45% of all long term care.  The reason for the high percentage is that people don’t plan and need long term care.  They start paying for their care our of pocket and then run out of money, after exhausting a life-times worth of hard work.  When the government gives tax breaks like this it encourages people to plan for needing long term care during their retirement themselves by buying private long term care insurance with pre-tax dollars.  This is a common sense way the government can encourage action without having to over-step The Constitution and force people to buy health insurance like the current Congress, House, and Administration are trying to do with health care.  That is another subject, but Whole Foods Founder John Mackey wrote a great article in the Wall Street Journal.  Mackey who said he's an Independent fried the circuits of the extreme left wing of the Democratic Party with this stance who frequent Whole Foods.  I applaud his decision on speaking his mind and truly proving he is an Independent.
 

Long term care insurance is the single most important insurance tool that a person can buy during their retirement.  Police, firemen, teachers—all who are receiving pensions should be able to buy long term care insurance pre-tax if paid by your pension department.  Of course when dealing with any tax matter defiantly tax to your CPA and pension department.  If you don't have success finding the answers give us a call and we can help you find the right person in the pension department to get to the facts. 

At LTC Tree we’ve been helping people plan for long term care insurance all over the country and know that this tax savings strategy is possible as we’ve had 100+ clients take advantage of this tax rule.  If you’d like to learn more on long term care insurance please fill in the form below.