Tax-Free Retiree Health Care Distributions for Public Safety Offiers
Provisions in the House- and Senate-passed pension bills
March 2006
Allows public safety officers to make tax-free distributions for retiree health care (up to $5,000 annually) from their governmental 457 retirement plans. The distributions are allowed for those officers who retire or become disabled and can only be used for qualified health care related expenses such as health or long-term care insurance premiums. If officers opted for this arrangement, retirement savings in a 457 plan would be depleted for health care expenses. While this may be an acceptable option for some participants, many may prefer to have a distinct dedicated account for health care expenses such as a VantageCare Retirement Health Savings plan account (RHS).
The outlook for this provision is guarded since the revenue cost to the Treasury is significant.