Cost of Health and Survival May Depend on Small Businesses
State governments are bracing for huge cost hikes as a result of inflation and expenses related to the aging population, prompting legislators to take action by planning to implement a tax hike for small business employers and employees.
As new tax hikes are on the drawing board, it is important to note that costs are inflating, and the aging population is facing a medical tsunami of expenses.
Let me ask you an honest question: When was the last time California walked away from a tax hike, leaving your money on their table? This is why we must take their plans seriously!
The responsibility of providing continuous care is increasing, and it’s not limited to the elderly. The health of the baby-boomer generation is gradually declining, as inflation and continuous medical expenses continue to rise. While states can address the current situation, a looming crisis is on the horizon.
Therefore, important concerns about long-term care involve its significant cost and the increasing number of people in need of it.
For instance, in California in 2023, the daily expense for long-term care reaches a hefty $400, adding up to approximately $146,000 per year. Men usually need 2.2 years of care, while women typically require 3.7 years, leading to a significant financial strain.
With the annual inflation rate soaring, these numbers are soon to be viewed in the rear-view mirror. It is crucial to take action immediately to prevent a complete collapse of personal resources and planning for both business and personal matters.
Presently, traditional saving and business reserves frequently prove inadequate, leaving individuals susceptible to significant out-of-pocket expenses.
California is battling with the growing demand for care on a long-term basis. Although the specifics are still unclear, many are hoping the coming care crisis doesn’t reach crucial mass until a remedy is found and deployed at the state level and personally.
Many have yet to come to grips with the long-term care dilemma, but soon they will be confronted with the reality of care without coverage. Long-term care coverage offers a variety of services aimed at helping individuals who need support with substantial out-of-pocket expenses such as daily tasks because of illness, disability, and aging.
These services can involve help with activities such as bathing, dressing, organizing medications, nursing homes, assisted living facilities, and in-home care.
With life expectancy on the rise and the population getting older, the state and savvy individuals are acutely aware of the demand for long-term care. The proposed long-term care tax in California has sparked a lot of discussion and conjecture.
Considering a proposal for an increase in income tax ranging from 0.40 to 0.60% to support a state-funded long-term care program. California finds itself in a squeeze between an aging population and resources needed to meet this growing demand.
Therefore, California is considering the possibility of a long-term care tax. Given the recent actuarial reports and the discussions happening in the legislature, it’s important for Californians to understand the complexities of long-term care planning and the potential impacts of proposed taxation.
= 2019, AB 567 (Calderon, Chapter 746, Statutes of 2019) established the Long-Term Care Insurance Task Force (Task Force) in the California Department of Insurance (CDI) to investigate the possibility of launching a culturally competent statewide insurance program for long-term care services, but details remain unclear.
= 2022, the Long-Term Care Insurance Task Force was directed to issue a feasibility report outlining several options for establishing the program including an actuarial report, along with the final recommendation for the California Department of Insurance.
= 2024 – January 1, CDI shall, in order to ensure an adequate benefit within a solvent program, produce an actuarial report of the recommendations made by the Task Force. Currently, California is edging closer to potentially enacting a long-term care payroll tax shouldered by employers and employees. Both employers and employees may be responsible for sharing the new tax burden.
= 2024 – March, The Task Force recommends including a private insurance opt-out provision, with details on eligibility and implementation currently being finalized. It is advisable for people and small businesses to consider obtaining substantial LTC coverage before any formal state announcements are made.
California’s proposed payroll tax for long-term care resembles what the state of Washington has already enacted, with rates varying from 0.6% for lower benefits to a possible 3% for higher benefits, and an income cap of $400,000.
Despite the Task Force providing recommendations and reports to the legislature, no legislation has been introduced or enacted as of now. Several details regarding the proposed program, like eligibility criteria and minimum benefit requirements, are still uncertain.
Additional conversations and policy measures are necessary to tackle these uncertainties. It is crucial to recognize California and the State of Washington are not the only states pushing for a Statewide Long-term care plan funded for employers and employees.
Several more states are exploring a similar approach using the employer/employee tax payment method for long-term care benefit plans: Alaska, California, Colorado, Hawaii, Illinois, Michigan, Minnesota, Missouri, New York, North Carolina, Oregon, Pennsylvania, Utah.
As states grapple with this impending tsunami of the demand for long-term care due to market conditions, inflation, and a rapidly aging population, some leaders are suggesting the privatization of long-term care coupled with the use of other financial instruments.
It’s essential for individuals and small businesses to grasp the implications and take proactive steps to safeguard their financial well-being.
It is critical to delve into the complexities of long-term care, analyze the suggested tax changes, and provide valuable perspectives on how to navigate these issues. Comprehending long-term care in California and preparing a proactive plan paired with well-informed decision-making in this evolving and unpredictable landscape is essential. With potential changes on the horizon, individuals and small businesses must stay informed, assess their choices, and take steps to safeguard their financial stability.
Seeking advice from experienced professionals and taking proactive steps in advance, along with making well-informed choices, are crucial. Individuals and small businesses must arm themselves with knowledge and foresight.
Utilizing tax-deductible Business Estate Plans, privately insured Long-Term Care Plans, and well-structured lifetime income retirement plans can help avoid many pitfalls.
Many small businesses are utilizing tax-deductible cash-heavy indexed life plans along with S&P Indexed IRA and SEP as dynamic tools to navigate potential expenses and maintain financial stability.
“The time to plan is now, and the fruits of your labor will be seen tomorrow”
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