Tax savings for health care costs
Beginning in 2007, retired public safety officers, or those who have separated from service due to disability, get a tax break for health care costs. If you are a retired public safety officer,
such as a policeman, fireman, member of a rescue squad or ambulance crew, a member of a volunteer fire department, or a chaplain of a volunteer fire department, you may be eligible to exclude from income distributions from your governmental retirement plan that are used to pay health insurance premiums.
The exclusion is limited to the lesser of your actual health insurance premiums, or $3,000. The payment of the health insurance premiums must be made directly to the provider of the health insurance plan. The exclusion will not apply if the premiums are paid by you then reimbursed by the pension plan. This exclusion applies to distributions from governmental defined benefit plans or defined contribution plans, governmental 403(b) tax-sheltered annuity plans, and governmental 457(b) eligible deferred compensation plans.