A new federal law could add stability to the long-term care insurance market, according to a top wealth planner.
Howard Sharfman, senior managing director of NFP Insurance Solutions, said Thursday that the law, part of the Secure 2.0 Act, will give the insurers still in the LTCI market a reason to stay.
"I believe the press associated with Secure 2.0 will increase the awareness of client's need for LTC coverage," Sharfman said in an email interview. "I do not believe that additional carriers will enter the market. However, the current carriers will continue to support their products and market the new benefits."
What It Means
The odds that the clients who take long-term care risk seriously will have sturdy tools for doing that might be improving.
The Law
Congress put the long-term care insurance payment provision in Section 334 of Secure 2.0 — the Setting Every Community Up for Retirement Enhancement 2.0 Act of 2022.
Section 334 will let a client use up to $2,500 in individual retirement account or 401(k) plan account assets per year to pay for stand-alone long-term care insurance.
A client can also use the distributions to pay for life insurance policies or annuity contracts that provide what the law classifies as high-quality sources of long-term care benefits.
A client who uses the provision will have to include the distributions in taxable income but will not have to pay the extra 10% tax on early retirement asset withdrawals.
The History
From the late 1980s through around 2000, the LTCI market boomed.
