SECURE 2.0 surprise: The ROTH catch-up contribution and ROTH employer match proposal
Congress proposes building on the Secure Act of 2019, with a list of changes to U.S. tax-qualified retirement plans, including catch-up contributions.
This brief is the first in a series of articles exploring actuarial considerations related to public long-term care (LTC) programs using a social insurance framework. We will use the recently proposed federal program—the Well-Being Insurance for Seniors to be at Home (WISH) Act—as a reference point to help highlight considerations. These types of public LTC programs are complex in nature with many different questions to answer when constructing program features and benefits. Plan-specific parameters, geographic assumptions, and program eligibility requirements are just a few factors that influence the required revenue for public LTC programs.
This article discusses at a high level the features of public LTC programs and actuarial considerations surrounding these features. Upcoming articles in this series will continue our journey as we dive deeper into certain topics. Our next article will focus on sensitivity testing and how changes to assumptions can affect the projected solvency of a program.
Public LTC programs can take on many forms. For the purpose of this article, we will not be looking at a full universe of public program ideas. Instead, we focus on features of the recently proposed public program, the WISH Act,1 as a case study to compare to other insurance programs (such as private LTC insurance).
The proposed WISH Act would create a new federal LTC social insurance plan financed by a 0.6% payroll tax on wages. Revenue would be placed in a new federal LTC Insurance Trust Fund that would pay benefits to individuals for the “catastrophic” period of LTC needs. Benefit highlights include a $3,600 monthly cash benefit indexed to wages, unlimited benefit period, and an elimination period2 of one to five years (depending on lifetime income earned).
In 2016, the American Academy of Actuaries (Academy) published an issue brief describing essential criteria for considering long-term care financing proposals.3 The first criteria in the issue brief considers the important decision of who will be covered and receive benefits under a potential reform. The answers to the following questions will impact the demographics, health status, and wealth and income characteristics of the population covered under a program.
Many of the plan design features of proposed public programs have been borrowed from the private LTC market, so many of the design elements can look very similar to private market plans. When structuring a program’s benefit design, the following questions need to be considered.
Constructing, pricing, and monitoring public LTC programs involves many decision points. This first brief sets the stage for some of the key questions to address. Future briefs in this series will dive deeper into a few topics, such as the sensitivity of pricing to changes in key assumptions and program features. We will also explore how the experiences of covered participants vary, given the structure of the program features. We welcome other ideas to explore more in depth in this series.
1U.S. Congressman Thomas Suozzi. (July 6, 2021). Suozzi introduces legislation to transform American elder care, create federal long-term care insurance program. Press release. Retrieved September 28, 2021, from https://suozzi.house.gov/media/press-releases/suozzi-introduces-legislation-transform-american-elder-care-create-federal-long.
3Long-Term Care Criteria Work Group (November 2016). Essential Criteria for Long-Term Care Financing Reform Proposals. American Academy of Actuaries. Retrieved September 28, 2021, from https://www.actuary.org/sites/default/files/files/publications/Essential_Criteria_for_Long-Term_Care_Financing_Reform_Proposals_112916.pdf.
4Thau, C., Schmitz, A., & Giese, C. (July 1, 2020). 2020 Milliman Long Term Care Insurance Survey. Broker World. Retrieved September 28, 2021, from https://brokerworldmag.com/2020-milliman-long-term-care-insurance-survey/.