FAQS - PPA PUBLIC SAFETY OFFICER TAX BENEFIT
- Who qualifies for the $3,000 healthcare tax benefit under the Pension Protection Act of 2006?
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 healthcare premiums. (12-14-06)
- How is Public Safety Officer defined under the PPA?
The PPA defines Public Safety Officer as “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.”*
Under this federal definition, duties of a law enforcement officer may include control or reduction of crime, prosecution or adjudication, and/or correction and detention. Supervision of these duties may also fall within the federal PSO definition. (1-22-07)
*As defined in the Omnibus Crime Control and Safe Streets Act of 1968 (42 U.S.C. 3796b(9)(A).
- If I meet the definition of Public Safety Officer, are there other requirements to qualify for the $3,000 healthcare tax benefit?
In addition to meeting the PPA definition, the individual must have separated from service as a PSO and retired on disability or attained the normal retirement age. (Normal retirement age is 55 for safety plans A and B, 57 for general plans A, B, C, and D, and 65 for general plan E.) (12-21-06)
- I'm an eligible Public Safety Officer. Can I pay my healthcare premiums myself and still receive the $3,000 tax benefit
granted under the Pension Protection Act of 2006?
No. The law requires LACERA to exclude the funds from the distribution of the Public Safety Officer's retirement plan and pay the premiums directly to the insurance provider. (12-14-06)
- I’m a general member, and believe I qualify as
a PSO. Can I participate in this tax benefit?
The definition of PSO includes Safety members who are sworn employees in law enforcement (Sheriff and District Attorney Investigators), firefighting, forestry, and lifeguard classifications. The definition of PSO also appears to include certain General Member classifications such as all probation officers, along with district attorneys and court commissioners who handle criminal matters. Public defenders and court officials assigned to civil matters and other general members do not qualify.
Retired LACERA members who can attest they meet the federal definition of Public Safety Officer and the other eligibility requirements may call 800-786-6464 to request an additional information packet and an election form from LACERA. Updates on this topic will be posted on lacera.com as new information becomes available. (6-04-08)
- Who has the final word in determining Public Safety Officer status as it relates to the Pension Protection Act of 2006?
It is the responsibility of each individual to substantiate his or her PSO eligibility. The individual's responsibility also applies in the event of an IRS audit. PSO determinations will ultimately be made by the IRS. (1-22-07)
- What are the advantages of excluding up to $3,000 from
my LACERA retirement plan distributions?
This is an IRS tax benefit. If you are an eligible PSO, you are permitted to claim up to $3,000 of excluded funds from the taxable distribution of your LACERA retirement allowance. (7-25-07)
- Both my spouse and I are eligible retired Public Safety
Officers. Can we exclude up to $3,000 from each of our
LACERA retirement funds?
Yes, under the Pension Protection Act of 2006 each of you would be eligible to exclude up to $3,000 from your respective LACERA retirement funds for a total annual family limit of $6,000. (12-14-06)
- If my spouse or dependent, who is not an eligible Public Safety Officer, survives me, will the $3,000 exclusion and tax benefit granted by the Pension Protection Act of 2006 continue to apply as a survivor benefit?
No. A survivor benefit does not apply. (1-18-07)
- Which insurance companies are currently eligible for LACERA direct payments?
At this time, LACERA can make direct premium payments (on a monthly basis) on the following LACERA-administered healthcare plans:
- Anthem I, II, III
- Anthem Prudent Buyer Plan
- Kaiser Permanente/Kaiser Permanente Senior Advantage for CA Residents
- Kaiser-Colorado, Georgia, Hawaii, Oregon
- PacifiCare/United Healthcare Medicare Advantage
- SCAN Health Plan
- Local 1014 Firefighters
- CIGNA Network Model Plan
- CIGNA HealthCare for Seniors Plan-Phoenix, AZ
- CIGNA Indemnity Dental/Vision
- CIGNA Dental HMO/Vision (2-7-08)
- Which long-term care plans are eligible for LACERA direct payments?
If you meet all the other eligibility requirements, and you have long-term care insurance through any carrier, the premiums are eligible for LACERA direct payments on a monthly basis. However, your tax benefit on long-term care plans not sponsored by LACERA does not automatically apply for the entire year; rather, it begins with the first direct payment by LACERA. (1-10-08)
- Will LACERA make direct payments to my healthcare plans on an annual or semi-annual basis?
LACERA will only make direct healthcare premium payments on a monthly basis. (1-18-07)
- I'm a retired Public Safety Officer with 25 years of County service, and my healthcare plans are fully subsidized by LACERA. Does the $3,000 tax benefit granted under the Pension Protection Act of 2006 apply to me?
No. Since you have no premiums to pay, this tax benefit does not apply to you. (12-14-06)
- I'm a Public Safety Officer retired on a service-connected disability. My retirement allowance is non-taxable. Does the $3,000 IRS tax benefit apply to me?
No. Since your retirement allowance (or retirement plan distributions) is already non-taxable, the tax benefit granted under the Pension Protection Act of 2006 does not apply to you. (12-14-06)
- Will I be required to renew this IRS tax benefit each year?
No. Opting for this IRS tax benefit is an "evergreen election." This means once you complete the Election Form, your election of this benefit remains in effect unless and until you cancel it in writing. You do not have to renew it each year. If you cancel your qualified plan(s), you also lose the benefit. (12-14-06)
- Is there an open enrollment period for the IRS tax benefit granted under the Pension Protection Act of 2006?
This is an IRS tax year election, which means eligible PSOs can elect this benefit anytime. In most cases, it is also an IRS tax year benefit; those who elect it anytime during the year receive the tax benefit for the entire year. Conversely, if you cancel it anytime during the year, you lose the tax benefit for the entire year.
EXCEPTION: The tax benefit for long-term care premiums from carriers other than MetLife and Transamerica begins with the first direct payment by LACERA. (9-24-07)
- I'm an eligible Public Safety Officer, can I exclude the maximum $3,000 of distributions from my LACERA retirement?
Under the Pension Protection Act of 2006, you may exclude the lesser of $3,000 or the amount of the premiums on your qualified healthcare plans. (12-14-06)
- I worked as a PSO for many years, but I retired in a different
capacity. Am I eligible for this tax benefit?
No. Pursuant to section 845(4)(B) of the PPA, to be eligible for this tax benefit, an individual must have separated from County service as a PSO. (9-24-07)
- How do I arrange for direct payment of the monthly premiums on
my long-term care insurance?
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. (7-25-07)
- Is the Firefighters Local 1014 Plan eligible for LACERA direct
Yes. The IRS has interpreted Section 845 of the PPA to include self-insured plans such as the Firefighters Local 1014 Plan. (7-25-07)
- I am a probation officer. Do I meet the PSO definition?
The definition of PSO appears to include all probation officers. Probation officers who meet the other requirements may be eligible for this tax benefit. (3-13-07)
- The portion of my LACERA service-connected disability that exceeds
50 percent of my final compensation is taxable. Can I participate
in this IRS tax benefit?
If you meet all the other eligibility requirements, you are eligible for this IRS tax benefit. However, your tax benefit cannot exceed the amount of the taxable portion of your allowance. (3-6-07)
- My healthcare plans are fully subsidized by LACERA. Will the $3,000 tax benefit apply if I sign up for long-term care insurance?
Yes. If you meet all the other eligibility requirements, you are eligible for this IRS tax benefit. However, your tax benefit cannot exceed the amount of the taxable portion of your allowance. (4-30-07)
- Is the $3,000 PSO exclusion for payment of healthcare
premiums reported to the IRS on Form 1009-R or Form 1040?
To receive this tax benefit, the eligible retired PSO must report the excluded funds on IRS Form 1040 when filing his or her annual income tax return. LACERA continues to monitor IRS guidelines on this subject and will update you as new information becomes available. (1-22-08)
- Am I eligible for the $3,000 retiree healthcare tax benefit
on my CalPERS-sponsored long-term care plan?
Yes. Begin by notifying CalPERS that you want to receive the benefit. CalPERS will then contact LACERA. If you don't already have a PSO Election Form on file with LACERA, you must submit one. The form is available online on the Brochures & Forms page of lacera.com. (2-4-08)