Bill would end long-term care savings program


Published January 20, 2016

Nebraska’s Long-Term Care Savings Plan would be eliminated under a bill heard Jan. 20 by the Revenue Committee.

LB756, introduced on behalf of the Legislative Performance Audit Committee by chairperson Sen. Dan Watermeier, would terminate the plan.

Watermeier said the plan was created in 2006 to encourage Nebraskans to plan for the future by providing a tax credit on contributions to an account used to pay for long-term care needs or long-term care insurance plan premiums.

However, he said, a recent audit determined that the plan had been not effective in incentivizing individuals to plan for long-term care needs or reducing Medicaid costs to the state.

“The Long-Term Care Savings Plan was noble and well-intended,” he said, “but it has not produced the results that its creators hoped for.”

Watermeier said the goal of LB756 would be to eliminate the plan with the smallest possible impact on plan participants.

Under the bill, individuals who wish to use the funds in an existing account for qualified long-term care expenses could continue to make qualified withdrawals until the account is depleted.

Individuals who withdraw the entirety of an account would be required to pay taxes on any previously untaxed amount.

Nebraska State Treasurer Don Stenberg testified in support of the bill, saying limited participation in the plan does not justify administration costs to the state. In addition, he said, there is little incentive for banks to participate in the program because doing so entails additional paperwork.

Stenberg noted that the maximum amount of tax savings that an individual could receive in a single year under the plan is $68, and only if he or she were in the highest state tax bracket.

“There is very little tax incentive for individuals to participate,” he said, adding that investing instead in 401(k) plans and individual retirement accounts can result in substantial tax savings.

Mark Intermill, testifying on behalf of AARP, also supported the bill. He said the state would be better served by developing a program to provide consumers with objective information on marketplace terminology and the risks and benefits of long-term care plans.

“Repealing this provides an opportunity to take a new look at options that are available to encourage Nebraskans to look at future long-term care costs,” Intermill said. “The earnings on these plans have not been very attractive and the tax savings have not been very great.”

Galen Ullstrom, representing Mutual of Omaha, opposed the bill. Options such as increasing the tax deduction should be considered rather than simply eliminating the current plan, he said.

“Seventy percent of people over age 65 will utilize some type of long-term care in their life,” Ullstrom said. “Total repeal of this law before there is serious discussion about [alternatives] would be premature.”

The committee took no immediate action on the bill.


Image of Sen. Dan Watermeier

Sen. Dan Watermeier