The Healthcare Enhancement for Local Public Safety Retirees Act (“HELPS Act”) was enacted in Section 845 of the Pension Protection Act of 2006 (“PPA ‘06″). The HELPS Act added section 402(l) to the Internal Revenue Code (“Code”). Section 402(l) permits certain taxpayers to exclude from their gross income distributions up to $3,000 annually from an eligible governmental plan used to pay qualified health insurance premiums of an eligible retired public safety officer and his or her spouse and dependents. 

All retired Los Angeles firefighters and police officers who retired on or after achieving eligibility for normal retirement or who retired on a disability retirement meet the definition. 

Deferred vested members who left prior to being eligible to retire are not eligible until they have retired from LAFPP. 

If you worked as a police officer or firefighter, but retired from the City in a different employment category, you are not eligible for the exclusion.

The retiree can use the exclusion for his or her own premium or for family premiums which also cover a member’s spouse and/or dependent(s). A dependent has to be someone for whom you can take a deduction on your tax return. 

Your individual tax advisor or accountant should be consulted if you have any questions about whether someone qualifies as a dependent.

No. A domestic partner is not a spouse. A spouse must be a person to whom you are legally married. 

A domestic partner may be claimed as a dependent if he or she otherwise qualifies as a dependent for tax purposes. Again, you should consult with your individual tax advisor if you have any questions about this.

Yes, each of you may exclude the amount of your individual premiums up to $3,000 per year.

Yes, for premiums paid on or before December 29, 2022, LAFPP must have paid the premium to the provider of the accident or health plan or long-term care insurance coverage. Money paid by the retiree did not count prior to December 30, 2022. As such, Health Insurance Premium Reimbursement (HIPR) participants do not qualify for this tax benefit for any premiums they paid prior to December 30, 2022.

However, the Secure 2.0 Act removed this requirement for premiums paid on or after December 30, 2022. HIPR participants may qualify to apply any premiums they paid in excess of the reimbursement received from LAFPP to the tax exclusion as of this date.

No. The total that can be claimed by a retiree for qualified health insurance premiums is the actual amount of the premium(s), up to $3,000 from all sources.

No, the benefit is specific to the retired public safety officer.

No. The coverage is limited to the plans maintained by the City or the employee organizations.

It is an exclusion from income. In order to claim the exclusion, you report the amount of total distributions received from LAFPP (from Box 2a of Form 1099-R) on line 5a of your Form 1040, 1040-SR or 1040-NR. Then, you report the taxable amount (reducing for the exclusion) on line 5b of the Form 1040, 1040-SR or 1040-NR and write “PSO” next to the appropriate line on which you report the taxable income. Again, you should consult with your tax advisor if you have any questions about how to properly report the tax exclusion on your federal income tax form.

No. The exclusion is specific to accident or health insurance or long-term care insurance premiums.

No. The amount of premiums you paid that were not covered by your health subsidy or reimbursement can be eligible for the tax exclusion. 

As with all matters involving federal tax law, the rules under Code Section 402(l) are subject to change by further acts of Congress. LAFPP recognizes that the amount of the exclusion ($3,000) has not been increased by Congress for many years. There have been proposals to increase the amount of the exclusion and/or to allow the exclusion to apply to premiums paid by the retiree. LAFPP will update the information provided in this resource if Congress changes the rules for the HELPS Act exclusion.