The IRS, after seven years of consideration, has clarified the exemptions to rules that establish whether direct payments from retirement plans to a carrier are taxable.
Retirement advisors will want to take note of the final ruling, particularly those with "public safety officers" as clients – including law enforcement, firefighters, EMTs, chaplains to law enforcement departments and corrections officers.
Distributions from qualified retirement plans used to pay premiums on health, accident and long-term care insurance polices are generally taxable. But the final regulations provide for an exception of up to $3,000 annually for retired public safety officers, and his or her spouse and dependents, when premium payments are made to insurance companies directly from qualified retirement accounts.
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