479 / Can long-term care insurance be provided under a cafeteria plan or through the use of a health savings account or flexible spending arrangement?

Qualified long-term care insurance (QLTCI) premiums cannot be reimbursed through a flexible spending arrangement (FSA). Similarly, QLTCI policies cannot be purchased with pre-tax dollars through an employer-provided cafeteria plan (Section 125(f)(2)).

On the other hand, health savings accounts (HSAs) present an excellent opportunity to pay for QLTCI premiums on a tax-advantaged basis. Subject to limitations, contributions to an HSA are not subject to federal income tax. Earnings and distributions from an HSA are tax-free if used to pay for qualified medical expenses.

Since qualified long-term care premiums are deemed a qualified medical expense, they comprise an allowable withdrawal from an HSA. However, the tax-free amount is limited to “qualified LTCI premiums,” which are defined as the lesser of actual premiums paid or the “age-based” limits from the table below.

Age-Based LTCI Premiums (IRC Section 213(d)(10)(A))
Age at End of Tax Year	2025 Premium Limit
40 or Less	$480
41 – 50	$900
51 – 60	$1,800
61 – 70	$4,810
71 and Older	$6,010

If one’s premiums were greater than the limits in the table, the balance would have to be paid with non-HSA funds; otherwise, amounts withdrawn from an HSA for ineligible expenses are subject to income tax and a 20 percent penalty (those who are disabled, deceased or over age 65 are exempt from the penalty).

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Planning Point: An HSA may be set-up through a cafeteria plan.

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