WASHINGTON, DC — The Senate Finance Committee yesterday advanced U.S. Senator Sherrod Brown’s (D-OH) legislation to allow retired first responders to withdraw from their retirement without being penalized. The senator’s legislation would improve and reform the Healthcare Enhancement for Local Public Safety Act (HELPS), by changing state and local direct payment requirements from mandatory to optional, and creating an alternative to the current method, allowing the retirement system to make the distribution to the retired public safety officer. The retiree can then make the premium payment to the provider and remain eligible for the tax exclusion. The legislation now moves on to the full Senate for a vote.
“Ohio firefighters and other first responders wear their bodies out protecting our families and communities, and they shouldn’t be penalized for withdrawing from the retirement that they’ve earned,” said Brown. “This is a simple solution that allows first responders to keep their own money and alleviates pressure on state and local governments, and today we are one step closer to getting it passed into law.”
U.S. Senators John Thune (R-SD), Mark Warner (D-VA), and Chuck Grassley (R-IA) joined Brown in introducing this legislation in May.
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 Brown’s 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 senator’s 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, the International Association of Fire Fighters, National Association of State Retirement Administrators, National Conference on Public Employee Retirement Systems, and Ohio Police and Fire Pension Fund.
