OP&F’s continued efforts for members on HELPS Act exclusion

Section 402(l) of the Internal Revenue Service code, commonly known as HELPS - the Healthcare Enhancement for Local Public Servants Act - allows retired public safety officers to exclude from their gross income, each year, up to $3,000 of their state or local retirement benefit, if the amounts are used to pay premiums for health care or long-term care insurance and if the premiums are paid directly by the retirement system to the insurance provider. This provision was first enacted in 2006 as part of the Pension Protection Act.

When OP&F sponsored a self-insured group health care plan for retirees, this exclusion could be used by retirees. Since 2019, when the group plan ended and OP&F implemented a stipend-based model to assist retirees in purchasing health care, OP&F has recommended members contact their tax advisors on utilization of the exclusion. There is an argument to be made that our Health Reimbursement Arrangement qualifies for this provision. However, it is unclear if that is allowed.

Due to this uncertainty, OP&F and others have pursued federal legislation to make clear which expenses are covered. OP&F has worked closely with Ohio Senator Sherrod Brown on three changes to the HELPS act:

1. Increase the amount of the annual exclusion, possibly doubling the current $3,000 amount.

2. Index the new exclusion amount for inflation in subsequent years.

3. Repeal the direct payment requirement.

The exclusion amount was set at the modest annual amount of $3,000 in 2006 and has never been increased to account for rising health care and long-term care insurance costs. OP&F believes increasing the amount now, 15 years later, is reasonable. Indexing the annual exclusion amount for inflation in subsequent years will protect the retirees going forward.

All three of these changes are supported by the International Association of Fire Fighters, the Fraternal Order of Police, and the National Association of Police Organizations. OP&F will update members if the changes we propose are enacted.

Please remember, OP&F cannot advise members on HELPS, as each member has different circumstances to evaluate.

Posted 10/22/2021