CONTRA COSTA COUNTY
EMPLOYEES' RETIREMENT ASSOCIATION
  
 

The Pension Protection Act of 2006 (PPA'06) is a Federal law that changed retirement plan provisions for both public and private sector pension plans. The majority of these changes affect private sector retirement plans that are subject to ERISA law. However, there are also some important advantages for Safety members included in this legislation.
Retired Safety Member Health Care Tax Benefit
Beginning January 1, 2007, eligible retired public safety members may elect to exclude, from their Federal taxable income, up to $3,000 of their retirement income (including 457 accounts) if the amount is used to pay health, accident or long-term care insurance premiums, as a deduction from your retirement benefit to your insurance provider.
This exclusion is only available if the Safety member retired either on disability, or "on or after normal retirement age." Normal retirement age is not a concept easily defined by 1937 Act law. To comply with IRS guidelines, CCCERA developed, in conjunction with tax counsel, a resolution defining normal retirement age, which was made part of the Board of Retirement's regulations.
"The Normal Retirement Age for a member who earns retirement service immediately before retirement under a 3% at 50 retirement formula, is 50 years of age."

The premiums can be for the retired member, and for his/her spouse (but not, at this time, for domestic partners, since this is a Federal law), for as long as the member is alive. Premiums must be paid directly to the insurer (not pass through the member's hands). The amounts must be deducted directly from pension benefits.

As of this writing, Safety Tax Exclusion information is in IRS Publication number 575, pages 5 and 6. (Link to IRS HOME page on CCCERA's web site: Links Page. Report your total distributions on Form 1040, line 16a; Form 1040a line 12a; or Form 1040NR, line 17. Enter PSO next to the appropriate line on which you report the taxable amount. Please consult the IRS publication for complete instructions.
ONE MORE TAX ADVANTAGE FOR SAFETY MEMBERS:
Public Safety employees who separate from service and withdraw funds from the system after age 50 will not be subject to an IRS "10% early withdrawal penalty" on pension payments from a defined benefit plan.
 
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