Dear SOA Member,
Retired Public Safety Officers are permitted to withdraw up to $3,000 annually from their Deferred Compensation Plan, federally tax free, to pay for qualified health insurance premiums for accident, health, or long-term care for themselves, their spouses or dependents. This DOES include the Retiree Plan through the Suffolk County Superior Officers Association Benefit Fund (“Fund”), but not the legal portion.
The amount distributed must be paid directly from the Deferred Compensation Plan to the insurance provider or the Fund and must not exceed the amount paid by the participant for such qualified health insurance premiums for the tax year. Visit the Deferred Compensation website on our SOA website LINKS page for an application in their forms section. You can contact Michael Koubek at the SOA office or via email at email@example.com for an itemized bill that must be submitted with your application, for assistance in form completion or if you have related questions.
T. Rowe Price, the Administrator of the Deferred Compensation Plan, is obligated to report the premium payments made on your behalf to the IRS via a Form 1099 since it is still technically a dispersal. Therefore, you WILL receive a copy of the 1099. The payment is listed as a taxable distribution from the plan. What makes the payment tax-free is how the tax return is completed, not how the 1099 or dispersal receipt is coded. Be advised to consult your tax adviser for the proper completion of your tax return. Only retired Public Safety Officers are qualified and it is incumbent on the taxpayer to get the credit for it by the proper filing of their tax return
Here is the link for the 2019 IRS guide to reporting the PSO Insurance Premium. Please see page 18 which explains how to report it to the IRS. In simple terms, the accountant must know to deduct it. The IRS does not want to make it easy! http://www.irs.gov/pub/irs-pdf/p721.pdf
Also, review this link “Insurance Premiums for Retired Public Safety Officers” for information. http://www.irs.gov/publications/p575/ar02.html
Each individual state will deal with the taxability of the dispersal differently and your accountant will be following IRS and applicable guidelines of the state you reside in for the completion of those tax return forms as well.
James M. Gruenfelder President