Public safety officers' tax savings on health insurance premiums

Updated April 2017
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If you retired as a public safety officer from a designated Washington state retirement system, the federal Pension Protection Act of 2006 (PPA) might benefit you. It allows you to exclude up to $3,000 of your qualified health, accident and long-term care insurance premiums from your gross taxable income each year as long as the premiums are also deducted from your retirement benefit.

Do I qualify for this tax saving option?

Answer the three questions below. If the answer to each is yes, then you likely qualify. Please read the rest of this brochure. Then, if you choose to participate, fill in and send to us the form in this brochure.

Are you a retired Washington state public safety officer?

If you are a retiree of the Washington State Patrol Retirement System (WSPRS), Law Enforcement Officers’ and Fire Fighters’ Retirement System (LEOFF), or Public Safety Employees’ Retirement System (PSERS), you can answer yes.

If you belong to a different retirement system, you might be able to answer yes if you meet the federal definition of a public safety officer:

You retired from a public agency for which you served as a:

  • Fire fighter or law enforcement officer (including police, corrections, probation and parole officers as well as judges and prosecuting officers) involved in crime, juvenile delinquency control, or reduction or enforcement of criminal laws
  • Police or fire department chaplain
  • Ambulance crew or rescue squad member

Did you retire at the normal retirement age or with a disability?

“Normal retirement age” is the age when you’re entitled to receive a full benefit. If you retired early, you don’t qualify unless you received a disability retirement.

Do your health insurance premiums qualify?

If your health insurance premiums meet all the following criteria, you can answer yes:

  • They cover health, accident or long-term care insurance.
  • They cover you, your spouse or your dependents.
  • They are automatically deducted from your monthly retirement benefit and sent to your insurance provider.

I’m not sure whether I’m eligible. Can I talk with someone about it?

It is up to you to find out whether you qualify. Federal regulations govern eligibility. DRS team members aren’t allowed to offer tax advice. If you’re not sure whether you’re eligible, we encourage you to contact the Internal Revenue Service (IRS) or your tax advisor.

I worked but didn’t retire as a public safety officer. Am I eligible?

No. You must have retired as a public safety officer to be eligible.

Do age restrictions apply?

Yes. To be eligible for this tax savings, you must have retired as a public safety officer through a disability or at your retirement plan’s normal retirement age. “Normal retirement age” is the age you’re entitled to receive a full retirement benefit. If you retired early, you won’t later become eligible when you reach normal retirement age.

I don’t pay federal taxes from my benefit. Can I still take the savings?

No. Since federal taxes aren’t being withheld from your monthly benefit, you can’t access this tax savings.

How does this provision help me?

If you qualify, you can exclude up to $3,000 in health insurance premiums from your gross taxable income each year. That means you might pay less in taxes because your gross taxable income will be lower when you report it to the IRS in your annual tax return.

How do I find out how much I paid in qualified premiums?

Every January, DRS will send you a letter providing the total amount of your qualified health insurance premiums for the previous calendar year.

If I’m a dual member, can I save even more on taxes?

No. If you retired from more than one retirement system, known as dual membership, you can still only exclude up to $3,000.

Would this change the federal withholding tax on my benefit?

No. Your monthly federal withholding tax would not change. If you had too much tax withheld during the year, you would receive a refund from the IRS when you file your tax return.

You can also change the amount of your withholding on your monthly benefit. To do so, complete IRS form W-4P and return it to DRS.

Do my insurance premiums qualify for this tax savings?

For your health insurance premiums, including self-insured plans, to qualify, they must meet all of the following criteria:

  • They cover health, accident or long-term care insurance.
  • They provide coverage for you, your spouse and/or your dependents.
  • They are automatically deducted from your monthly benefit and DRS sends them directly to your insurance provider.

Does when I decide to participate affect that year’s savings?

No. If you were having your health insurance premiums deducted from your monthly benefit and the total premiums were at least $3,000, then you are eligible for the full tax savings as long as we receive your form before the end of the calendar year.

Can I pay my premiums myself and still receive this tax savings?

No. DRS must deduct your health insurance premiums from the gross taxable amount of your benefit payments and send the premiums directly to your insurance provider.

Does returning the form cause my premiums to be deducted from my monthly benefit?

No. By filling out and returning your form, you tell DRS you want to participate in this tax saving program. You must still arrange to have your health insurance premiums deducted from your retirement benefit.

If you are a retiree insured through the Public Employees Benefits Board (PEBB), contact the Health Care Authority (HCA) at 800-200-1004.

All others, contact your insurance providers to let them know you would like this service. They can choose whether to allow your premiums to be deducted from your monthly benefit. To do so, they need to contact DRS.

Must I send in this form annually?

No. Once you’ve signed up, the provision remains in effect until you cancel it in writing.

Can both my spouse and I use the tax saving provision?

Yes, if you and your spouse both retired as public safety officers, you and your spouse can both use the tax saving provision. That means your family can exclude up to $6,000, but no more than $3,000 apiece.

My LEOFF Plan 1 employer pays my health care premiums. Can I use this provision for my family instead?

Yes. The provision doesn’t apply to you since you don’t pay premiums for your health care benefits, but it could apply to your spouse or dependents if you’re paying premiums on health care benefits for them and those premiums are deducted from your monthly retirement benefit.

Can the tax saving provision be applied to my family’s premiums?

Yes. The tax saving provision applies as long as you are the recipient of the retirement benefit from which the premium payments are made.

After my death, can my spouse still use the tax saving provision?

No. The tax saving provision only applies to a retirement benefit paid to someone who is an eligible retired public safety officer. The tax saving provision doesn’t extend to your spouse or dependents after your death.

Where can I find the form that tells DRS I want to participate?

You can find it right here.