Public Safety Officers premium tax exclusion

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nyone
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Public Safety Officers premium tax exclusion

Post by nyone »

DH is trying to set up health insurance (Washington State ACA) through Molina Healthcare, who says they can only accept premiums from a bank account or credit card (not directly from his pension), so he would not be able to use this tax savings if he went with Molina. The 2006 federal Pension Protection Act allows for $3000 tax exclusion if premiums are automatically deducted directly from his monthly pension. Has anyone encountered this problem with health insurance companies? Or are we asking the wrong questions to Molina?
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FiveK
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Re: Public Safety Officers premium tax exclusion

Post by FiveK »

Does the pension provider send the pension from a bank account and would the pension provider be willing to send the premium amount to Molina from that same account?
jerryk68
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Re: Public Safety Officers premium tax exclusion

Post by jerryk68 »

This exclusion is for retired police officers, firefighters and others that are considered retired public safety officers (PSO Tax Exclusion). One of the requirements, and there are many, is that the health insurance premium must come directly from the pension. I would check with your local union, association or pension provider which probably dealt with this in the past.
jebmke
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Re: Public Safety Officers premium tax exclusion

Post by jebmke »

jerryk68 wrote: Thu May 26, 2022 3:15 pm This exclusion is for retired police officers, firefighters and others that are considered retired public safety officers (PSO Tax Exclusion). One of the requirements, and there are many, is that the health insurance premium must come directly from the pension. I would check with your local union, association or pension provider which probably dealt with this in the past.
I have had clients who believe they can double dip with this exclusion - that is, exclude it from income and also deduct it on Schedule A. More than once I have had to whip out the IRS publication that discusses this specifically.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
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nyone
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Re: Public Safety Officers premium tax exclusion

Post by nyone »

The insurance provider requires a routing number to set up payment. When discussed with the pension provider, they say the do not have a routing number. I did an internet search on this problem and did not find anything. Since this is a federal tax exclusion available to many retirees, I was surprised that this didn’t show up in my Google search. This didn’t seem to be a problem with other health insurance companies, just Molina so far, so we’ll need to change his selection if we want this tax benefit.
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retiredjg
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Re: Public Safety Officers premium tax exclusion

Post by retiredjg »

This probably does not come up often because most federal retirees have kept their FEHB coverage and do not need or choose to use the ACA. In fact, I'm not sure why any PSO would be retiring without being eligible to keep FEHB.

So his situation may be a bit unicorn-ish.
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FiveK
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Re: Public Safety Officers premium tax exclusion

Post by FiveK »

retiredjg wrote: Thu May 26, 2022 6:06 pm This probably does not come up often because most federal retirees have kept their FEHB coverage and do not need or choose to use the ACA. In fact, I'm not sure why any PSO would be retiring without being eligible to keep FEHB.

So his situation may be a bit unicorn-ish.
Perhaps it wasn't a federal safety office position? E.g., state, county, city, etc.? Federal tax deduction applies even if it wasn't a federal position.
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retiredjg
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Re: Public Safety Officers premium tax exclusion

Post by retiredjg »

FiveK wrote: Thu May 26, 2022 6:15 pm
retiredjg wrote: Thu May 26, 2022 6:06 pm This probably does not come up often because most federal retirees have kept their FEHB coverage and do not need or choose to use the ACA. In fact, I'm not sure why any PSO would be retiring without being eligible to keep FEHB.

So his situation may be a bit unicorn-ish.
Perhaps it wasn't a federal safety office position? E.g., state, county, city, etc.? Federal tax deduction applies even if it wasn't a federal position.
You're right. I was thinking too narrowly. It does apply to other officers as well.

In my experience, others are able to keep their employer insurance, but that is probably not across the board. Lots and lots of agencies out there and probably some do not let their officers keep gov't insurance after retirement.
Topic Author
nyone
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Re: Public Safety Officers premium tax exclusion

Post by nyone »

He was a county employee and had to elect PEBB right away. We didn’t hear good reviews about the plan and since I was going to work longer, he elected to go on my health insurance then switch to ACA when I retired.
jerryk68
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Re: Public Safety Officers premium tax exclusion

Post by jerryk68 »

nyone wrote: Thu May 26, 2022 6:59 pm He was a county employee and had to elect PEBB right away. We didn’t hear good reviews about the plan and since I was going to work longer, he elected to go on my health insurance then switch to ACA when I retired.
Just make sure that if he drops his insurance eligibility when he retires to go on your insurance that he can go back and purchase the insurance when you retire. Some retirement plans have provisions that once you drop the plan you can't get it back. Keep in mind, there are some strange rules when retiring. In my case in order to be eligible to purchase insurance in retirement you had to have had it for 5 years prior to retirement.

Also have him research the PSO exclusion requirements that the IRS has. It's easy for the IRS to verify some of the qualification steps because you have to write PSO on your 1040 tax form next to the annuity that you received and your 1099 will reflect a deduction for health insurance.
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