Under the new rules that took effect January 2010, Pension Protection Act compliant annuities, like Annuity Care, will pave the way for a tremendous opportunity for advisors and consumers alike. PPA compliant annuities are a special class of annuity carrying LTC benefits pursuant to the guidelines set forth in the Health Insurance Portability and Accountability Act of 1997. For consumers who purchase PPA compliant annuities like Annuity Care, the LTC benefits they derive from their annuity will now be considered Tax Free! Additionally, any premiums associated with the LTC riders inside PPA compliant annuities will no longer be treated as a taxable distribution. But the good news doesn’t stop there.

For financial advisors, the opportunity to discuss PPA compliant annuities with prospects and clients who already own non-qualified annuities is tremendous. That’s because a 1035 transfer can now transcend an annuity with taxable gain into one that is completely tax-free when used to pay LTC expenses. Consider Joe Smith who started an annuity with you a decade ago by depositing $75,000. Its current value is $150,000, carrying $75,000 of taxable gain. Joe is concerned about LTC costs but doesn’t like the idea of paying for something they may never use. Here comes the amazing part! Are you ready? With a simple 1035 exchange into a PPA compliant annuity, Joe can draw down all $150,000 in LTC benefits TAX-FREE! Now consider the impact of not making the transfer. If Joe needs to withdraw funds from the existing annuity for LTC, that $75,000 of gain comes out first and is subject to income taxes. In a 28% bracket, that’s $21,000 of taxes the Joe lost out on. Not so in the PPA compliant annuity. In fact, cost basis is taken first from PPA compliant annuities. But the good news doesn’t stop there.

Let’s continue on with Joe Smith and show you an innpovative feature of Annuity Care. When you sold Joe his annuity, you listed him as sole owner and annuitant. His wife, Linda, is the beneficiary. Joe likes your suggestion of creating an LTC emergency fund simply by transferring his annuity over to Annuity Care. But Joe is concerned about his wife’s LTC need and doesn’t have additional assets to fund an Annuity Care policy for Linda. This is usually where the sale falls apart. With Annuity Care, it’s easy to list Linda as a “designated user” under Joe’s policy, making it possible for either one – or both – to access the LTC benefits.