No Tax Break Foreseen on LTC Premiums

Meanwhile, the Office of Personnel Management has sent guidance to agencies regarding payroll withholding for employees who sign up for the Federal Long Term Care Insurance Program, addressing various administrative issues and also informing them that premiums cannot be deducted on a pre-tax basis. “We do not foresee the passage of any legislation in the near future that would change the tax treatment of long term care insurance premiums,” OPM said. The guidance also notes that when an employee goes on leave without pay-which commonly is used by those taking parental leave, going on active military service or for other reasons-for more than three pay periods, payroll withholding will be automatically canceled and the enrollee will have to pay premiums directly to the carrier. Payroll withholding can be reinstated when an employee returns to pay status, OPM added. Payroll withholding isn’t available for those who signed up during the early enrollment period that ran March 25-May 15; it will become available during the regular open season starting July 1. Those who signed up during early enrollment can switch to payroll withholding at that time.