Lifestyle 2000 TM

1. Lifestyle 2000TM CORPORATE LONG TERM CARE POINT OF SALE PRESENTATION

2. Lifestyle 2000TM C-Corporations & Long Term Care Insurance The Last Great Tax Advantage SLTC00-17

3. Lifestyle 2000TM LONG TERM CARE INSURANCE How to use corporate dollars to fund a federally tax-qualified employee benefit.

4. Lifestyle 2000TM What is Long Term Care? Long Term Care is assistance provided to someone who has a condition or illness that limits his or her ability to perform normal daily activities.

5. Lifestyle 2000TM Long Term Care Includes: Assistance with Activities of Daily Living (ADL’s) - Bathing - Eating - Dressing - Toileting - Transferring - Continence

6. Lifestyle 2000TM Who Will Pay for Long Term Care?

7. Lifestyle 2000TM Long Term Care Myths • My Children Will Take Care of Me • Medicare Pays for Long Term Care • Medicaid Will Take Care of the Bill • I Will Never Go to a Nursing Home

8. Lifestyle 2000TM What are the chances of needing Long Term Care? The total risk of a 65 year old entering a nursing home at some point in life is 49%(1) (1) Long Term Care: Knowing the Risk, Paying the Price, Health Insurance Association of America

9. Lifestyle 2000TM • Protecting Current Assets • Even younger clients have a current need for Long Term Care Insurance • Long Term Care Utilization: • 3% are under age 18 • 40% are ages 18 to 64 • 57% are over age 65(2) (2) U.S. Accounting Office, 1995

10. Lifestyle 2000TM Friends and family may not be in a financial position to help pay for the care you require when you need it. Currently, the national average for one year in the nursing home is estimated to cost $41,000(3) as a national average. If we consider even a conservative inflation increase of 5% per year, within the next 25 years, one year’s stay in a nursing home could more than $100,000.(4) (3),(4) The American Health Care Association, September 1998

11. Lifestyle 2000TM • Long Term Care Insurance Helps You To: • Maintain Independence • Control the Quality of Your Care • Have Peace of Mind for Your Future • Preserve Your Assets

12. Lifestyle 2000TM • To help you move pre-tax corporate dollars out of your company. • Deduct those dollars as a usual business expense. • Make those dollars available to your heirs. • Provide you or your key employees lifetime protection against the high cost of long term care. Our Purpose

13. Lifestyle 2000TM HIPAA • Health Insurance Portability and Accountability Act • Mostly aimed at Group Medical Insurance • Revolutionized corporate executive benefit Long Term Care Insurance sales • Defined tax-deductible LTC Insurance premiums • Defined amount of tax-free LTC benefits

14. Lifestyle 2000TM HIPAA Tax Free Benefits • All reimbursement plan benefits are tax-free. • All indemnity plan benefits spent on qualified nursing care are tax free. • Tax free benefits from an indemnity plan can exceed nursing care costs. • However, indemnity benefits above nursing care expense AND above $190 per day (adjusted for inflation) are taxable.

15. Lifestyle 2000TM What the IRS says: • The IRS has determined that Long Term Care, as an employee benefit, does not have to follow ERISA guidelines. This means that the employer can “pick and choose” who will participate in this benefit program.(5) • This benefit can create “Golden Handcuffs” for key employees and a “Golden Parachute” for business owners. • This benefit allows the Corporation to move business dollars into the hands of key executives. (5) IRS Section 105(b)

16. Tax qualified long term care insurance plans only Not eligible for cafeteria plans Eligible for MSA accounts Deduction limits 60% (2000 and 2001) 70% (2002) 100% (2003) Deductible amount is lesser of premium paid or age related amount 18-40 - $ 220 41-50 - $ 410 51-60 - $ 820 61-70 - $2200 71+ - $2750 Lifestyle 2000TM Tax Deduction for Self Employed(6) Per insured person, based upon age at the end of the taxable year. Other 40% is eligible for the 7.5% of Adjusted Gross Income for un-reimbursed medical expenses. 100% of premium paid through an MSA is an eligible expense. Consult your tax professional. (6) IRC Sec. 213(d)(10)(A)

17. Lifestyle 2000TM What is your deduction?(7) • C-Corporation - 100% Deductible • S-Corporation, LLC, Partnerships and Sole Proprietorship. - 60% (2000/2001) Deductible on the owner(s) - 100% Deductible on other employees - Excess carried over to personal tax return subject to limitations (7) IRS Section 162(1)(2)(c)

18. Lifestyle 2000TM • All Qualified Long Term Care Insurance premiums and expenses for employees are fully deductible by employer without limitation.(8) • Premiums not included in W-2, even for owner-employee.(9) • Benefits are not taxable(10) • Employer can offer to select employees.(11) Qualified long-term care insurance and expenses (8), (9), (10), (11) HIPPA 1996, P.L. 104-49L, IRC Sec. 106(a), IRS Sec. 7702B(a)(2), IRS Sec. 105(b)

19. Lifestyle 2000TM The “C-Corp” Advantage • Exceptional executive benefit • Uses pre-tax corporate dollars • Lower age - lower premiums • Lower age - insurability is less concern • Tax advantages not available individually • Paid-up options fund post-retirement • Endorsed Group premium discounts

20. Lifestyle 2000TM “C” Corp Tax Qualified LTCI • LTCI cannot be part of a Section 125 plan(12) • No C Corp cap on premiums that HIPAA did impose upon others(13) • No C Corp limit on limited payment premium plans(14) • Can be viewed as a way to increase executive retirement income (12), (13), (14) HIPPA 1996, P.L. 104-94L

21. Lifestyle 2000TM • Limited-Pay Premium options • Allows pre-payment of future premiums during specified period using pre-tax dollars • There is a high cost of waiting to buy Pre-funding Retirement Expense

22. Lifetime Benefits 5% Compound Benefit Increase Rider $200 per day Indemnity Benefits Estate is protected by not having to liquidate estate assets in order to pay for long term care. Comprehensive Benefits 10-Pay Premium Option Retirement income increases since you are not using retirement dollars to pay for long term care Lifestyle 2000TM Example Benefits for a Key Employee

23. Tax Qualified 5% Compound Interest Inflation rider Comprehensive Nursing Facility Care and HCBC Indemnity benefit option 10-Pay and Single-pay premium options Underwriting related pricing advantage Lifetime elimination periods of 0, 30 and 90 days Joint Waiver of Premium Enhanced HCBC option Endorsed Group Premium Discounts Lifestyle 2000TM Comprehensive Benefits

24. Lifestyle 2000TM C-Corporation LTC Tax Treatment “LTC Insurance” is health insurance IRC 7702B Premiums Deductible IRC 162 Company Purchases “LTC Insurance” on Key Employees Insured has Lifetime LTC protection Premiums paid for LTC are not taxable to Executive IRC 162 Benefits are Tax Free up to $190 per day IRC 7702B d(4) ESTATE gets refund of premium upon death of insured(s) IRC 7702B (b)2c(1)(E)

25. Lifestyle 2000TM Coverage Provided by Policy Series S-6000-P, underwritten by The State Life Insurance Company, Indianapolis, IN. Policy benefits and options vary by state and some of those listed here may not be available in your state. For costs and further details of coverage, including exclusions and reductions or limitations and the terms under which the policy may be continued in force, contact your State Life agent. The information provided here is not intended as legal or tax advice. We recommend that you consult with an attorney, accountant or tax advisor regarding the tax implications of purchasing long term care insurance.