Human resources vice presidents and benefits managers constantly search for the best incentive programs to attract and retain key executives. Top executives are always looking for way to receive compensation on a tax-favored basis. The simple solution is corporate-pay long-term care insurance.

C-Corporations are the best targets. Corporations can target key employees and reward them with this coverage based on merit. Long-term care Insurance is often overlooked, but an attractive alternative for highly compensated executives.

Agents’ best allies in the sales process are the advisors: CPAs, attorneys and HR professionals. The concept is simple: The agent is helping the executive “create an asset” for a future need. They have other asserts designated for specific purposes during their retirement years.

Problem number one for most retirees is outliving their asset’s ability to sustain their quality of life during life expectancy. Long-term care expenses can expose them to unnecessary risk of decimating their savings, investments and retirement plans. The reality is that people are living longer.

The solution is protection provided by corporate-pay long-term care insurance. The corporation pays the premium, which is tax deductible. The executive does not have to report “economic benefit” on the premium. The LTC daily benefit accrues on a compound basis until needed in the future.

The C-Corp writes off the premium in a 35% tax bracket. The executive doesn’t have to report the premium in a 40% tax bracket and the LTC asset may be worth more than $1 million tax-free in the future.

The best strategy is to purchase a policy on a modified premium-paying basis like a 10-pay. This approach allows a 55-year-old executive to have a portable LTC policy paid for during his working years by his employer. This also assures they will have “no premium increases” in their retirement years when they least have the ability to pay for them. LTC coverage is a guaranteed renewable contract which means premiums may be increased over time. Modified payment plans limit this risk.

The most important feature to include in these policies is Cost of Living Adjustment (COLA) riders. COLA riders can be a fixed interest factor or CPI based; they can be simple or compound. A compound interest factor for a 55 year old could grow the daily benefit from $200 per day when purchased to $700 per day at 80 years old. On a five-year benefit period, this would mean a total tax free benefit of $1.26 million, a tax-equivalent yield to an executive in a 40% tax bracket of $1.6 million.

This is a substantial asset the agent has created for them.

They can postulate over how much they would have to invest, and at what rate of return, over what period of time to create the asset equivalent to the LTC benefit. This solution is simpler: Transfer the risk to the insurer, the corporation pays the premium, and the executive wins at retirement and beyond.

Peace of mind is accomplished. Retirement plans and investments provide financial security, and long-term care insurance completes the puzzle.

Kevin Conley is president of Freedom Broker Services, a regional brokerage in Vienna, Va., and part of  John Hancock Financial Network . He can be reached at 703-287-7130 or by email.