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A Guide to Retirement Community Contracts

Plus how to compare community amenities and health care plans


(Editor’s note: This content is sponsored by Acts Retirement-Life Communities.)

There are many options to consider when planning for retirement. What can really be confusing is making sense of the different types of communities available, not to mention the types of contracts each community offers. There’s one thing you can be certain about: Today’s retirement communities are vastly different from those your parents or grandparents considered 20 or more years ago — and that’s a good thing.

Today’s retirees can find vibrant communities where the focus is on embracing the type of lifestyle they’d like to live. Whether it’s an emphasis on nightly social events, group cycling events, exploring their spiritual side or learning a new skill, this new generation of retirement communities is designed for living life to its fullest.

With so many lifestyle and care options come plenty of contract options, too. Here’s a guide to understanding the types of retirement community contracts and the amenities and health care plans each type offers. We’ll start by defining some industry jargon you need to know: the CCRC.

What’s a Continuing Care Retirement Community (CCRC)?

While it’s exciting to focus on luxury amenities, fun activities and events, it’s important to understand how these communities work financially and contractually. How does payment work, what kinds of care is offered and what are the kinds of contracts available?

If you find all this bewildering, there’s a reason. Never before have there been as many options for retiring seniors to choose from. Unlike 20 years ago, there are now (at least) three kinds of retirement communities:

  1. Independent living communities with private residences for those who are active and want to live in a community of people in similar situations
  2. Assisted living communities for people who need support services
  3. Skilled nursing care communities for people who need 24-hour care

It’s possible to find all three types on one campus. These types of full-service retirement communities are called continuing care retirement communities (CCRCs). The benefit is having all three types of lifestyle accommodations available to them in one place. If they ever need it, residents have access to exactly the right level of care without having to uproot and move to another community. They’ll be able to transition, for example, from independent living to assisted living and still enjoy the same on-campus services and amenities like recreational centers, beauty salons, shopping, educational classes, group events and trips.

What’s a Life Care Community?

A life care community is a type of CCRC. When you visit a CCRC to take a tour or talk to staff and residents, you’ll only know it’s a life care community unless you ask. That’s because “life care” refers to the type of contract available when you join the CCRC.

What Types of CCRC Contracts Are There?

What’s the difference between CCRCs and life care communities? It comes down to the type of contract that a community offers. If a CCRC does not offer the premium level type of contract (Type A), then it is not a life care community.

There are three types of CCRC contracts:

  1. Extensive (Type A)
  2. Modified (Type B)
  3. Fee-for-Service (Type C)

Type A contracts offer unlimited housing, assistance, amenities and services for life. It’s lifetime access to all three levels of care without a price increase based solely on needing higher levels of care. This type of contract is generally considered protection against price increases (other than adjustments for inflation and normal operating costs). Residents who sign Type A contracts will generally pay the same monthly fee for independent living as they would for assisted living and even skilled nursing care where 24-hour care is provided.

Residents who choose Type A contracts are locking in lifetime health care coverage, housing, services and amenities at today’s prices. They’re likely to see significant savings in the long run because the rate is predetermined, and rates for a higher level of care may be provided at a dramatic discount below market rates. Consider it a solid insurance policy.

Type B contracts also offer access to all three levels of care but without the built-in price protections of Type A contracts. Residents who choose Type B will get a discounted rate for independent living (the lowest level of care). They will also get a discount for assisted living or skilled nursing care, but only for a limited period of time.

Just like a Type A contract, the monthly fee cannot change because of a need for increased levels of care. Unlike a Type A contract, the price-lock feature is good for the benefit period only. When the contracted number of days for the benefit has been exhausted, the resident must pay current market prices for the higher levels of care.

Every community is different, and the services offered under Type B contracts (or any type of contract, for that matter) can vary. It is important to have the contract you are considering be looked over by an attorney who is knowledgeable about communities and how they’re set up.

Type C contracts are also called fee-for-service contracts or rental contracts. The benefit of a rental contract is that residents pay a lower monthly fee. The lower fee includes only the most basic benefits, such as basic (independent) housing, some residential amenities, scheduled transportation and social activities.

Enriched housing (assisted living) and skilled nursing services are not included and must be paid for a la carte or “fee-for-service.” There is no long-term benefit of Type C contracts, which is why they’re often called rental contracts.

Peace of Mind When Making Your Decision

One thing that current and soon-to-be retirees agree on is that peace of mind is a top priority during retirement — by a margin of 7-to-1, in fact, according to one 2013 Merrill Lynch and Age Wave retirement study). Knowing that you won’t have to move elsewhere if and when you need more care during retirement is a relief. Knowing that it won’t cost you more in monthly fees is an even bigger relief, which is why more CCRCs are beginning to offer life care contracts.

As older adults and their families become more aware of life care communities (those that offer Type A contracts), they’re inquiring about them while searching for the right community. Knowing the difference between the various types of contracts, be sure to ask about them whenever you speak to a community representative.

For more information about the differences between retirement community contracts, amenities and health care plans, read these articles by Acts Retirement-Life Communities:

By Acts Retirement-Life Communities

Acts Retirement-Life Communities is the largest not-for-profit owner, operator and developer of continuing care retirement communities in the United States. Headquartered in suburban Philadelphia, Acts has a family of 23 retirement communities that serve approximately 8,500 residents and employ 6,200 in Pennsylvania, Delaware, Maryland, North and South Carolina, Georgia, Alabama and Florida. For more information about Acts visit actsretirement.org.

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