By way of background, a public employee’s contributions to their health insurance premium are treated as pre-tax. That means when the state or a municipality issues a Form W-2, for their federal income taxes, the form does not include the amount, that they paid toward their health insurance, as part of their gross income. In other words, it’s tax-free.

According to Legislative Chairman Bill Hill, “Attempts in Congress to expand the tax break to public retirees have failed until now. Public safety is a start toward the same benefit for all members.”

Capped at $3,000

Under the PPA, beginning with calendar year 2007, Mass retired public safety officers will be entitled to have their health insurance  premiums treated as pre-tax for federal income tax purposes. The tax break is capped at no more than $3,000 in premium contributions each year.

For example, if during next year (2007), a retired public safety officer receives a $20,000 pension and has $2,500 deducted from his pension check for health insurance, then his 2007 Form 1099R, which he will receive from the retirement board in 2008, will show his gross pension to be $17,500, not $20,000. The $2,500, that the retiree paid for insurance premiums in 2007, will be tax-free.

“A central question is who qualifies as a public safety officer,” comments Hill. “Under the law, a public safety officer is defined as a firefighter, a member of a rescue squad or ambulance crew, a fire or police department chaplain, or a law enforcement officer ‘including, but not limited to police, corrections, probation, parole and judicial officers.’”