Washington, D.C. – U.S. Senator Pat Toomey (R-Pa.) is pushing a new measure to increase the affordability of long-term care insurance. Senator Toomey’s Long-Term Care Affordability Act would allow individuals to pay up to $2,500 each year for long-term care insurance with their 401k, 403b, and IRAs without a tax penalty.
 
“For too many Americans approaching retirement, the onset of a chronic illness that requires nursing home or in-home care could cause financial ruin,” said Senator Toomey. “Paying for long-term care insurance with retirement savings can enhance financial security in retirement. The Senate should pass this bill.”
 
Retirement accounts give a tax benefit to workers who set aside money now for use during retirement. Early withdrawals from these accounts are generally treated as income and taxed accordingly. However, there are exceptions. For example, 401k holders may be able to use their retirement account to own life insurance without a tax penalty. Senator Toomey’s measure would treat insurance for long-term care similarly.
 
According to the U.S. Census Bureau, 50 percent of individuals living past the age of 65 will need some long-term care, and more than half of American households contribute to retirement accounts. All of them would be eligible to pay for long-term care with retirement savings under this legislation.
 
In November 2019, Senator Toomey convened the Senate Finance Committee Subcommittee on Health Care to address barriers to diagnosis, treatment, and care for Alzheimer’s patients. During that hearing, Senator Toomey outlined the need for this new legislation. You can watch here.
 
Following that hearing, Senator Toomey and Senator Debbie Stabenow, chairman and ranking member of the subcommittee, sought input from health care providers, researchers, patients, advocacy groups, states, and others to inform the development of this legislation.
 
“We are grateful to Senator Toomey for his leadership to address the challenges and issues facing the estimated 280,000 Pennsylvanians living with Alzheimer's and their caregivers, and the millions more impacted nationwide. The introduction of the Long-Term Care Affordability Act is an important step to help individuals and families better plan for possible future long-term care needs.” - Clayton Jacobs, executive director of the Alzheimer's Association Greater Pennsylvania chapter
 
“Alzheimer's is one of the most expensive diseases in the nation, and for far too many Americans paying for the costs associated with caring for a loved one is a challenge. This bill would make long-term care insurance more accessible by creating the ability to use retirement plan funds to obtain the insurance. We are thankful for Senator Toomey's commitment to improving the lives of all those affected by Alzheimer's and other dementia.” - Kristina Fransel, executive director Alzheimer's Association Delaware Valley Chapter
 
Organizations that have endorsed this legislation include:
  • Alzheimer’s Association
  • America’s Health Insurance Plans (AHIP)
  • American Health Care Association (AHCA)
  • American Seniors Housing Association
  • Argentum
  • Edward Jones

You can read a one-pager on the legislation here, and the text of the bill is available here.