Healthcare Enhancement for Local Public Safety (HELPS) Retirees Implementation
In the Pension Protection Act of 2006, NCPERS successfully lobbied Congress to approve the Healthcare Enhancement for Local Public Safety Retirees Act (HELPS). This act allowed a yearly pretax distribution of up to $3,000 from a governmental DB, 403(b), or 457(b) plan to retired public safety officers for use toward health care or long-term care insurance, provided the premium payments were made directly by the governmental retirement system to the provider of the insurance. HELPS took effect on January 1, 2007. It is found at IRC Section 402(l).
Prior to HELPS, retirees paid for their health or long-term care premiums entirely with after-tax dollars. Since 2007, eligible public safety retirees have been able to use pretax dollars from their qualified pension plans to pay for some of their health premiums. For retirees who are in the 25 percent federal marginal tax rate bracket, this could be a tax savings of up to $750 per year.
Over the years, however, NCPERS learned that the direct payment requirement was an administrative burden for many retirement systems and even caused some systems to not implement HELPS, thereby rendering their public safety retirees ineligible for the tax exclusion. In the 117th Congress, H.R. 7203 was introduced by Rep. Steve Chabot (R-OH) and Rep. Abigail Spanberger (D-VA) to repeal the direct payment requirement. Also, Senators Sherrod Brown (D-OH) and John Thune (R-SD) introduced S. 4312, which would have made the direct payment requirement optional instead of mandatory. We are pleased to report that the SECURE Act 2.0 included the Brown-Thune legislation.
In addition, there is growing recognition that the $3,000 annual cap under HELPS, which has not changed since its inception 17 years ago, needs to be increased. H.R. 7203 would have doubled the annual cap. There is also discussion of indexing the cap each year for inflation.
Finally, in the 117th Congress, S. 4267 was introduced by Sen. Michael Bennet (D-CO), who serves on the Senate Finance Committee. This bill would index for inflation the annual cap under HELPS as well as create a new and separate tax credit for retired public safety officers for their health care premiums of up to $4,800 per year. Building on our success on the HELPS direct payment requirement issue, NCPERS will advocate for these new proposals to enhance HELPS and create a new tax credit.