Section 845 of '06 Pension Protection Act

[Guest RJMOB]

Client (Policemen/Firemen's DB Plan) has asked us to implement this PPA '06 section effective 1/1/07 for plan retirees who currently have insurance premiums deducted from their pension payments. The insurance deductions are totalled for each insurance carrier and checks to each carrier are paid directly from the plan.

Question: Should each retiree's Insurance Premium amount be set up as a separate payment and reported on the 1099-R with Taxable Amount = $0?

OR

Should we leave the retirees' existing payments as is; report Taxable equal to Gross and simply check Box 2a - Taxable Amount Not Determined ?

[Guest RJMOB]

And the answer is found in .............IRS Publication 575, Pension and Annuity Income.

Page 2 contains the following language:

an eligible retired public safety office can elect to exlcude from income distributions up to $3,000 made directly from an eligible retirement plan to the provider of accident, health or long-term care insurance."

The phrase "can elect to exclude" leads me to believe that again, the IRS is silently telling payors that, the IRS isn't going to issue a new Distribution Code for this tax benefit or change the 1099-R design (at least any time soon) and, therefore, like the IRA qualified charity distribution, it is the recipient's responsibility to find and claim whatever tax benefits are out there.

So, the answer appears to be: Leave the retirees' existing payments as is; report Taxable equal to Gross and simply check Box 2b - Taxable Amount Not Determined.