Long-Term Care Group Head Yawns at Secure 2.0 LTC Provision

By Allison Bell

News January 17, 2023 at 11:01 AM

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A longtime advocate for long-term care insurance predicted that a new Secure 2.0 long-term care insurance tax break will have little effect on long-term care insurance sales.

Jesse Slome, executive director of the American Association for Long-Term Care Insurance, panned the provision — which is in Section 344 of the Setting Every Community Up for Retirement Enhancement 2.0 Act of 2022 — in a commentary.

"This is truly a rather insignificant and meaningless measure in terms of encouraging more Americans to plan for the real prospect of needing long-term care," Slome concluded.

Section 344 will let retirement savers use up to $2,500 in IRA or 401(k) plan assets per year to pay LTCI premiums. Taxpayers who use the provision will have to pay federal income taxes on the withdrawals but will not have to pay the 10% extra tax on early retirement asset withdrawals, meaning that they could save about $250 per year.

The tax break is better than nothing, and it does keep discussions about the role of private LTCI alive, Slome said.

But people who buy LTCI tend to be people who plan carefully, and "they are unlikely to see value in diminishing their retirement planning growth," Slome argued.

He noted that consumers rarely buy LTCI before age 50, meaning that most will get noticeable help from the elimination of the 10% penalty for only a short period.

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