In 2006, the Healthcare Enhancement for Local Public Safety (HELPS) Retirees Act allowed retired public safety officers to withdraw $3,000 tax free from their pension plan to pay health or long-term care insurance premiums. This required the pension plans to pay the $3,000 directly to the insurer.
Shortly before January 3, 2023, the law was changed - removing the requirement that pension fund distributions must go directly to the insurer to be eligible for tax-free status.
While preparing my 2023 taxes on TurboTax, it appears that the program has not recognized this change, and still maintains the requirement that the premiums be paid through the pension plan. Is TurboTax going to update based on the new law, and if not, what is the best work around?
January 27, 2024 1:18 PM last updated January 27, 2024 1:18 PM Connect with an expert
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13 RepliesYou enter the Form 1099-R as you normally would. There are follow-up screens with one of which will ask if you were a Public Safety Officer, answer Yes. Continuing on there will be another screen asking how you paid for health insurance. Enter the amount you paid, not to exceed $3,000.
On your Form 1040, on Line 5a will be the written PSO . On Line 5b will be the taxable amount of your pension income less the amount you entered for health insurance.
January 27, 2024 1:28 PMThanks - it sounds like this may be the best workaround.
Unfortunately, in order to do this, the user has to lie when answering the following TurboTax question, "Did the pension administrator take out money for NAME's pension to pay for health insurance?" Only by answering "Yes, money was taken out to pay for health insurance" can you obtain the proper deduction. This was based on the old law requiring the pension provider to direct the funds to the insurance company. Under the new law, the pension distribution goes to the former employee who then pays for the premiums from their personal account funds. This still qualifies for the deduction. Hopefully TurboTax will rewrite their questions to be consistent with current with federal tax law.
