The proposed Police and Fire Health Care Protection Act of 2022 would allow cops and other retired first responders to withdraw from their retirement for insurance payments without being penalized.

Senators Sherrod Brown (D-OH), John Thune (R-SD), Mark Warner (D-VA), and Chuck Grassley (R-IA) introduced the legislation. It 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.

 “Firefighters and other first responders wear their bodies out protecting our families and communities, and they shouldn’t have to worry about being penalized for withdrawing from retirement that they’ve earned,” says Brown. “This is a simple solution that allows first responders to keep their own money and alleviate pressure on state and local governments.”

 Thune explains, “Currently, it is extremely difficult for retired first responders to utilize an existing benefit that helps cover certain health care expenses, which is why I introduced this legislation that would ensure these retirees can make tax-free withdrawals from their pension and direct those amounts to qualifying insurance premiums.”

“First responders play a vital role in our communities, addressing a variety of high-stress emergency situations throughout their careers. All first responders ought to be able to take advantage of a tax benefit that is intended to help them access health coverage in retirement,” says Grassley.

 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.

“In 2006, Congress enacted the HELPS Retirees Act, which provided a modest tax benefit to help retired public safety officers afford health insurance by allowing the use, on a pre-tax basis, of up to $3,000 annually from their pension funds health care and long-term care insurance,” said Patrick Yoes, national president, Fraternal Order of Police. “However, too many public safety officers were ineligible or lost their eligibility for this benefit because of the law’s ‘direct pay’ requirement. This means that the public pension system must pay the health or long-term care insurance company directly in order to exclude these payments from the employee’s gross income.  Officers whose pensions are or came to be administered by third parties could not take advantage of this tax break. We are very grateful to Senators Brown and Thune for introducing legislation which repeals this direct pay requirement and provides a modest increase to the benefit.”