The recently passed Pension Protection Act of 2006 was quite sweeping, but one provision has not gotten a lot of attention despite the fact that it has given Police, Firefighters, and other Eligible Safety Officers a great planning benefit.
Retired Eligible Public Safety Officers can not direct their 403(b) or 457 provider to pay tax-free distributions to their health or long term care insurance policy up to $3,000 annually starting next year. This is a great benefit and one that I hope spreads to all governmental employers.
While many Eligible Public Safety Workers have retiree health care provided for life, there are a lot who don't or experience higher costs than anticipated. Many would like to purchase long term care insurance but don't have the cash flow, this new provision just might push them to get that policy.
It appears that EPSW's can now save for health and long term care insurance premiums via their governmental DC retirement plans, congrats!
A word of caution, don't be so quick to rollover your 457 balances to an IRA, even though your broker will urge you to. If you do so you lose the rights just granted. Having said that.....if you do want to rollover money (in order to expand your investment options) check with your 457 plan provider and see if you can do a partial rollover and check to see if they will accept rollovers BACK into the plan from retirees, this way you can leave some money on deposit and roll the rest out to invest as you see fit.
Scott Dauenhauer, CFP, MSFP
