Pension Protection Act.
How the Change in Pension Protection Act (PPA) will effect LTC!
In 2006, the Pension Protection Act (PPA) was signed into law. Along with sweeping changes to laws controlling pensions and retirement plans, the PPA also amended laws surrounding long-term care insurance.
Answers to Frequently Asked Questions
How does the Pension Protection Act treat long-term care riders on life insurance and annuity contracts?
The PPA separates the benefits of the life insurance contract or the annuity contract from the benefits provided by the LTC rider. The LTC rider is treated as a separate contract, independent from the underlying life insurance or annuity contract, for purposes of determining whether it is "qualified long-term care insurance"and the taxation of the benefits provided under the rider.
Can an LTC rider be added to a life insurance contract or to an annuity?
The PPA added specific language stating that the addition of an LTC rider to a life insurance contract or to an annuity will not cause the life insurance contract or the annuity to fail to qualify as valid insurance or annuity contracts.
If an LTC rider is added to an annuity, will the rider charge be considered taxable income?
Prior to the PPA, the rider charge would be treated as a charge against the cash value in the contract, which would be included in the annuity owner's income. As of January 1st, 2010, LTC rider charges against the cash value of an annuity contract will not be included in income but will reduce the basis in the annuity.
Can I do a tax-free Section 1035 exchange of a long-term care contract for a new long-term care contract?
The PPA added paragraph (a)(4) to IRS Code 1035, stating that as of January 1st, 2010, a LTC contract can be exchanged tax-free for another LTC contract.
Can I do a tax-free Section 1035exchange of a life insurance policy or an annuity for a long-term care contract?
The PPA has amended IRC 1035 (b), so that as of January 1st, 2010, tax-free exchanges of annuity or life insurance contracts for a long-term care contract are allowed.
Can I do a tax-free Section 1035 exchange of a life insurance contract for a life insurance contract with an LTC rider?
The PPA has amended IRC 1035(b) so that as of January 1st, 2010, it will be possible to do a tax-free exchange of a life insurance contract for a life insurance contract with an LTC rider.
Can I do a tax-free Section 1035 exchange of an annuity contract for an annuity contract with an LTC rider?
The PPA has amended IRC 1035(b) so that as of January 1st, 2010, it will be possible to do a tax-free exchange of an annuity contract for an annuity contract with an LTC rider.