Sens. Chuck Grassley (R-Iowa), Sherrod Brown (D-Ohio), John Thune (R-S.D.) and Mark Warner (D-Va.) have introduced legislation that seeks to make it easier for retired first responders to take advantage of a benefit designed to help them cover health expenses.
Under the current system, health insurance payments are required to go directly from the pension plan to the health insurer for first responders to obtain the existing tax benefit. Their new bipartisan proposal would improve and reform the Healthcare Enhancement for Local Public Safety (HELPS) Act by no longer requiring the payment to be made directly to the health insurer. Instead, distribution could be made directly to the retiree. Allowing payments to be made directly to the retiree will enable first responders to exclude from tax up to $3,000 of a retirement distribution if they use it to pay for health care premiums.
“First responders play a vital role in our communities, addressing a variety of high-stress emergency situations throughout their careers. All first responders ought to be able to take advantage of a tax benefit that is intended to help them access health coverage in retirement,” Grassley said.
“Ohio firefighters and other first responders wear their bodies out protecting our families and communities, and they shouldn’t have to worry about being penalized for withdrawing from retirement that they’ve earned,” Brown said. “This is a simple solution that allows first responders to keep their own money and alleviate pressure on state and local governments.”
“We owe a great debt of gratitude to our retired police officers, firefighters, and other first responders who dedicated their lives to protecting our communities and keeping our friends, families, and neighbors across South Dakota safe,” said Thune. “Currently, it is extremely difficult for retired first responders to utilize an existing benefit that helps cover certain health care expenses, which is why I introduced this legislation that would ensure these retirees can make tax-free withdrawals from their pension and direct those amounts to qualifying insurance premiums.”
“Virginia’s first responders put themselves at risk every day to protect our communities – the least we can do is ensure that they are taken care of in retirement,” said Warner. “I’m proud to introduce the bipartisan Police and Fire Health Care Protection Act of 2022, which will make it easier for tens of thousands of retired officers – like Mr. Wally Bunker, a stalwart advocate and retired police officer from Culpepper – to claim the benefits that they have earned.”
In order to implement the direct payment requirement under current law, state and local retirement systems are now responsible for directly paying often numerous health and long-term care providers and keeping track of changes to premium amounts and payment deadlines for thousands and sometimes tens of thousands of retirees. This already challenging task is made even more difficult because providers will often communicate only with the retiree policyholder and not with the retirement system. Information does not flow seamlessly, and inadvertent errors are made. In addition, due to the complexity, some retirement systems have made the decision to not implement HELPS, thereby resulting in retired public safety officers covered by these pension plans being ineligible for the tax benefit.
Under the senators’ bill, plans that are able to implement HELPS through the current direct payment method, possibly because they have only one or two providers to pay and a small number of retirees, may continue to do so. However, for the many retirement systems that are experiencing administrative problems with the current requirement or have refused to implement HELPS because of the burdens, the senators’ legislation will allow them to make distributions to their retirees without rendering the retiree ineligible for the tax exclusion.
In cases where the distribution is made to the retiree, the legislation would require the retiree to include with their tax return an attestation that the amount sought to be excluded from the pension distribution does not exceed the amount paid by the employee for qualified health insurance premiums for the taxable year. The tax exclusion is capped under current law at $3,000 per year.
The bill has been endorsed by the Fraternal Order of Police, National Association of Police Organizations and the International Association of Fire Fighters.
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