The Pension Protection Act of 2006 allows certain retired and disabled public safety officers to reduce taxable income by up to $3,000 annually to pay qualified insurance premiums.
Until recently, the only way to qualify for the exclusion was to have premiums withheld from a retirement plan (such as an MSRS pension plan ) and paid directly to the insurance provider. With the signing of the SECURE Act 2.0 by President Biden, eligible retired public safety officers are no longer required to set up direct payment of insurance premiums through retirement plan providers. However, upon request, MSRS will continue to withhold premiums for eligible retired and disabled public safety officers who are under age 65 and who elect to receive health and dental insurance coverage through SEGIP.
Premiums for a spouse and dependent children are eligible for the tax exclusion; however, survivors do not maintain eligibility for this provision after the death of an eligible public safety officer or judge.
For more information about this program, contact MSRS at 651-296-2761 or 1-800-657-5757.
FAQs
A public safety officer is defined by section 1204(9)(A) of the Omnibus Crime Control and Safe Streets Act of 1968 (42 U.S.C. 3796b(9)(A)). Generally, public safety officer refers to anyone covered by the MSRS State Patrol, Correctional and Judges Retirement Plans, as well as probation and parole officers, regardless of the plan that covers their service.
Employees must have retired at full retirement age or are collecting a disability benefit. Full retirement age for the State Patrol and Correctional Plan is 55 years or older; Judges Plan is age 65, if first appointed or elected as a judge before July 1, 2013, or age 66, if first appointed or elected as a judge after June 30, 2013. Employees who retire prior to full retirement age are not eligible for the tax exclusion.
Public safety officers who make payments directly to their health, dental and long-term care providers are responsible for tracking their payments and reporting the exclusion (up to $3,000) on their income tax form.
Alternatively, retired and disabled public safety officers who continue their insurance coverage through SEGIP and who are under age 65 may sign up to have their insurance premiums automatically deducted from their MSRS premium benefit and paid directly to MMB. MSRS will track these payments and send a letter the following January to program participants to report the amount withheld (up to $3,000). Participants report this amount on their income tax return.
The program allows you to reduce taxable income by up to $3,000 annually. The lifetime value of this benefit may be substantial. For example, a retiree who participates in the program for 25 years could reduce their federal taxable income by up to $75,000 over this period.
We recommend that you consult your tax preparer or financial advisor to determine if participation in this program is right for you.
You may enroll in this optional program at any time, provided you are an eligible retired and disabled public safety officers who is under age 65 and who elects to receive health and dental insurance coverage through SEGIP. Complete the Authorization for Insurance Premium Withholding form. Sign and date page 2 of the form.
Timeline: Forms received by MSRS by the 15th of the month will be processed on the 1st business day of the next month. Forms received after the 15th will be processed the 1st business day two months after received.
For new retirees, premium withholding will begin after your first pension payment is made.
If you participate in the Health Care Savings Plan (HCSP) or another similar program that allows reimbursement of insurance premiums, you cannot receive tax-preferred treatment of the same expenses from both programs.
You may use your HCSP for reimbursement of other eligible health care expenses including co-pays, deductibles and insurance premiums not deducted from your pension benefit. You may also request reimbursement of your insurance premiums that exceed the $3,000 tax exclusion maximum.
You will still qualify for the $3,000 tax exclusion, but premiums can no longer be withheld from your MSRS pension benefit. MSRS will send confirmation that the deduction has been discontinued. At that time, you should contact your insurance provider to make arrangements to pay the premium directly.
Each January you will receive a letter from MSRS that reports the total premium amount withheld from your pension benefit. This amount is not reported on your Form 1099-R tax statement.