NEW IRS GUIDELINES: EXCLUDED FUNDS ARE TO BE REPORTED BY MEMBERS ON FORM 1040
As we have communicated to you, the Pension Protection Act of 2006 (PPA) permits eligible retired public safety officers (PSO) to exclude up to $3,000 of distributions from their LACERA retirement plan for direct payment of health care premiums.

The IRS recently issued new guidelines on how these funds are to be reported. In accordance with the most recent IRS information, LACERA will not report the amount of these excluded funds on your 1099R. To receive this tax benefit, the eligible PSO must report the excluded funds to the IRS on his or her annual income tax return. To claim the exclusion on IRS Form 1040, reduce the taxable amount you enter on line 16b by the amount of your excluded health care premiums and enter “PSO” next to the line.

LACERA continues to monitor IRS guidelines on this subject and will update you as new information becomes available. (7-27-07)

PPA: RETIRED "PUBLIC SAFETY OFFICERS" $3,000 HEALTH CARE TAX BENEFIT
The Pension Protection Act of 2006 (PPA), signed into law by President Bush on August 17, permits eligible retired Public Safety Officers (PSO) to exclude up to $3,000 of distributions from their LACERA retirement plan for direct payment of health care premiums. These excluded distributions shall be used by LACERA for direct payment of qualified accident or health and/or long-term care insurance premiums for the public safety officer, his or her spouse, and/or dependents. This Internal Revenue Service (IRS) tax benefit became effective January 1, 2007.

"Public Safety Officer," as defined by the PPA* is "an individual serving a public agency in an official capacity, with or without compensation, as a law enforcement officer, as a firefighter, as a chaplain, or as a member of a rescue squad or ambulance crew."
*Omnibus Crime Control Act of 1968, 42 U.S.C 3796b(9)(A)

In addition to meeting the PPA definition of PSO, an individual must:

• Have separated from County service as a PSO
• Have a taxable LACERA retirement allowance
• Currently pay premiums on LACERA-administered health care plans
• Have attained the normal retirement age at retirement, or
• Have retired by reason of disability

Please review the PPA: PSO FAQs for supplemental details on eligibility requirements and other related information.

Pursuant to the Health Insurance Portability and Accountability Act of 1996 (HIPAA), eligible PSOs who wish to have LACERA make direct payments to their long-term care (LTC) plans must contact the carriers directly to authorize the necessary payment agreement.

After LACERA receives and reviews your Affidavit Attesting to PSO Status and Election Form, you will receive a Member Enrollment Request for you to complete and submit to your carrier. You will also receive a New Carrier Enrollment Kit containing documents for you to forward to your carrier. Your carrier must complete and submit those documents to LACERA; we cannot initiate direct payments on your behalf until we receive the proper documents from your LTC carrier.

If after reviewing all the information provided, you can attest to your eligibility to receive this tax benefit, fill out the Election Form and return it to LACERA. You may also access it from the Brochures & Forms page, or by calling LACERA at 1-800-786-6464.

In the event of an IRS audit, it will be the responsibility of each member to substantiate his or her PSO eligibility. For questions regarding legal or tax matters, consult with a professional advisor; LACERA does not offer legal or tax advice.

Click here to read the entire Pension Protection Act of 2006 (PPA).