Comparing retirement communities and considering whether or not they are a good option when compared to living at home, is a big decision. One of the first questions people want to know is “How much does it cost?”
No matter where you live, there are costs involved. At home, you may have a mortgage, yearly taxes, utility costs, and then of course, maintenance, ranging from keeping all your appliances working to taking care of the outside of your home. When you move to a retirement community, many of these costs are included in a monthly fee.
Some Life Plan Communities, provide for your long term healthcare needs as part of the contract. Part of your monthly fee covers the costs of healthcare and your long term care, which makes a portion of each month’s fee tax deductible for many people. That’s something important to note and to compare when comparing fees between retirement living communities.
Understanding the differences
In many fee-for-service retirement communities, there are attractive monthly fees when you move in, but costs can escalate and can even double from the initial monthly amount as you require more care over time. If you and your family haven’t budgeted for this cost, there could be problems as care needs expand. What seemed like an affordable option can quickly deplete your assets.
With some (not all) Life Plan Communities that offer a traditional Life Care Contract, your care is already factored into your monthly fee. While fees do increase by a small percentage to keep up with rising salary, utility, and food costs, you will never have to pay additional fees above your monthly fee for higher levels of care. That means when you may need to move to the assisted living/personal care or skilled nursing areas, there are no additional fees. You pay your current monthly fee only. With rates for skilled nursing care beds running at $13,000 per month per person or more, you can easily see how a traditional Life Care Contract provides you peace of mind and protects you from unexpected costs if you have health concerns.
Submitted by SCCCC Member:
The IRS recently announced in Revenue Procedure 2019- 29 that the Affordable Care Act (ACA) affordability indexed amount under the Employer Shared Responsibility Payment (ESRP) requirements will be 9.78% for plan years that begin in 2020. This is a decrease from the 2019 percentage amount (9.86%).
Rev. Proc. 2019-29 establishes the indexed “required contribution percentage” used to determine whether an individual is eligible for “affordable” employer-sponsored health coverage under Section 36B (related to qualification for premium tax credits when buying ACA Marketplace coverage). However, the IRS explained in IRS Notice 2015-87 that a percentage change under Section 36B will correspond to a similar change for affordability under section 4980H ESRP requirements.
Determining Affordability in 2020
An employer will not be subject to a penalty with respect to an ACA full-time employee (FTE) if that employee’s required contribution for 2020 for the employer’s lowest cost self-only coverage complies with one of the following safe harbors.
1. The W-2 safe harbor. The employee’s monthly contribution amount for the self-only premium of the employer’s lowest cost coverage that provides minimum value is affordable if it is equal to or lower than 9.78% of the employee’s W-2 wages (as reported on Box 1 of Form W-2). Application is determined after the end of the calendar year and on an employee-by-employee basis. Box 1 reflects compensation subject for federal income taxes, which would exclude amounts such as employee contributions to a 401(k) or 403(b) plan, and towards other benefits through a cafeteria plan.
2. Rate of pay safe harbor. The employee’s monthly contribution amount for the selfonly premium of the employer’s lowest cost coverage that provides minimum value is affordable if it is equal to or lower than 9.78% of the employee’s computed monthly wages. For hourly employees, monthly wages are equal to 130 hours multiplied by their rate of pay. For salaried employees, monthly wages are equal to their monthly salary. This document is designed to highlight various employee benefit matters of general interest to our readers. It is not intended to interpret laws or regulations, or to address specific client situations. You should not act or rely on any information contained herein without seeking the advice of an attorney or tax professional. ©2019 My Benefit Advisor. All Rights Reserved. CA Insurance License #0G33244
3. Federal Poverty Level (FPL) safe harbor. Coverage is affordable if it does not exceed 9.78% of the FPL. For a 2020 calendar year plan, coverage is affordable under the FPL safe harbor if the employee monthly cost for self-only coverage in the lowest cost plan that provides minimum value is not more than $101.79 (48 contiguous states), $127.14 (Alaska), or $117.19 (Hawaii). Employer Action Employers budgeting and preparing for the 2020 plan year should review these affordability safe harbors when analyzing employee contribution amounts for the coming year.
Submitted by SCCCC Member:
My Benefit Advisor, LLC