The Pension Protection Act of 2006 (PPA) permits eligible retired public safety officers to exclude up to $3,000 of distributions from their LACERA retirement plan for direct payment of healthcare premiums. These before-tax distributions are used by LACERA for direct payment of qualified accident, health, and/or long-term care insurance premiums for the public safety officer, spouse, and/or dependents.
Eligibility for the PSO Healthcare Tax Benefit
A public safety officer (PSO), 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, firefighter, chaplain, or member of a rescue squad or ambulance crew.
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 healthcare plans
- Have attained the normal retirement age at retirement, or
- Have retired by reason of disability
How to Sign Up
Review the PSO Healthcare Tax Benefit packet for more details about eligibility, FAQs, and required forms.
If after reviewing all the information provided, you can attest to your eligibility to receive this tax benefit, you will need to fill out the Affidavit Form included in the packet and return it to LACERA. You can download and print the packet, order one on the Forms and Publications page, or call LACERA at 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.
How to Claim the Exclusion
In accordance with IRS guidelines, LACERA does not report the amount of these excluded funds on your 1099-R. To receive this tax benefit, eligible PSOs must report the excluded funds to the IRS on their 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 healthcare premiums and enter “PSO” next to the line.
LACERA continues to monitor IRS guidelines on this subject and will update you if new information becomes available.
Long-Term Care Payment Authorization Required
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 agreements.
See "How to Sign Up" above to get started. 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.