When Congress passes laws that grant a benefit to some but not all, there’s rejoicing among those who receive the benefit and grumbling among those who don’t. Well, Congress has done it again.
In 2006 it passed the Pension Protection Act, which allows a limited premium conversion tax advantage for retired public safety officers, but not for anyone else. Until recently, OPM was of the opinion that this provision didn’t apply to public safety officer annuitants who were covered by CSRS or FERS. That all changed on June 20, 2007, when OPM issued Benefits Administration Letter 07-201. Here’s what they had to say:
The Office of Personnel management (OPM) has determined that the Civil Service Retirement System (CSRS) and Federal Employees Retirement System (FERS) are eligible retirement plans under section 845 of the PPA. Retired public safety officers are deemed to have a premium conversion election for this purpose. As a result, retired public safety officers whose CSRS or FERS annuity payments include a direct premium payment to a health insurance carrier or long term care insurance carrier may self-identify eligibility for, and self-report, the tax exclusion to the Internal Revenue Service. IRS Publication 721Tax Guide to U.S. Civil Service Retirement Benefits at http://www.irs.gov/pub/irs-pdf/p721.pdf contains additional information on this tax advantage.
Note the words “self-identify” and “self-report.” Whereas the identification and reporting of employee premium conversion activities are handled by agencies, if you are a retired public safety officer who wants to take advantage of this form of tax relief, you’ll have to establish your eligibility with the IRS and report any excluded income up to a maximum of $3,000 annually.
If you are retired and aren’t sure whether you qualify as a public safety officer, that term has the same meaning as will be found in section 1204(9)(A) of the Omnibus Crime Control and Safe Streets Act of 1968 (42 U.S.C. 3796b(8)). You can check it out by going to http://www.oip/usdoj.gov/BJA/grant/psob/death_benefits_statute.pdf and reading page five.
