Retirees May Deduct Cost of Benefits
In 2006, Congress passed the Pension Protection Act (“PPA”), which contains many provisions that affect members of the New York City Police Pension Fund. Among those provisions is the ability to exclude up to $3,000 from the amount of income distributions reported to the Internal Revenue Service (“IRS”) for payment of premiums for accident or health insurance or long-term care insurance.
- Distributions used to pay premiums for a spouse and
dependent children are also excludable.
- This exclusion can be made if the amount paid for the premium would have
otherwise been included in your income and is deducted directly from your
- What this means for retired NYPD officers is that the cost of
the City’s optional benefit rider may be excluded from the total amount of
your pension reported annually.
- The maximum amount allowed by the PPA to be excluded
is $3,000; however, the amount
excluded may not exceed the actual amount
- To claim this benefit, you must reduce the taxable
benefit on line 16B of the 1040 by the
amount of the exclusion and write
“PSO” on the line for “public safety officer.”
- The exclusion will not be reported on 1099 forms
issued by the City, so any retiree who
claims the benefit has a
responsibility to report it to the IRS.
- Accordingly, pensioners who retired on ADR (accidental
disability retirement) are not
eligible for this exclusion
because at this time their pension is not taxed.
This information is provided as a courtesy to PPF members and is based on the Fund’s current understanding of the law, but does not constitute tax advice and should not replace the advice of a qualified tax professional.
should save their Quarterly Statement (for those with electronic deposit) or their monthly pension check stub, in order to document their premium deductions for any health insurance or long term care insurance, as required proof for the IRS, if asked. No other documentation will be provided by the Pension Fund. Please contact Marie Elena Brusco @ (212) 693-6058 questions regarding this matter.
*Acknowledgement to NCPERS for their effort and
research on the 2006 PPA bill.