LEGISLATIVE VICTORIES FOR NAPO! CLINTON SIGNS THE TAXPAYER RELIEF ACT OF 1997 ENACTING SEVERAL PROVISIONS CRITICAL TO LAW ENFORCEMENT

WASHINGTON, DC-On August 5, 1997, President Clinton signed the Taxpayer Relief Act of 1997, enacting numerous provisions that would benefit law enforcement.  NAPO was instrumental in having several of our top legislative priorities included in the bill!  Our successful efforts have major consequences for law enforcement nationwide.

SURVIVOR BENEFITS FOR PUBLIC SAFETY OFFICERS KILLED IN THE LINE OF DUTY

At last, the families of law enforcement officers and fire fighters who were killed in the line of duty will not have to pay federal taxes on their survivor’s benefits.  In the past, federal tax law allowed officers who retired on a disability to collect their disability pension payments tax free.  However, the survivors of officers killed in the line of duty had to pay federal taxes on their survivor’s benefits.

NAPO thanks Representatives Jim Ramstad (R-MN), Karen Thurman (D-FL) and Eleanor Holmes Norton (D-DC) and their staffs for all of their help in correcting this disparate tax treatment.  It is finally recognized that whether an officer retires on disability or is killed in the line of duty, that officer’s family loses a wage earner, and in many instances - the family’s sole wage earner.

NAPO, through a coalition with the International Association of Fire Fighters (IAFF) and the International Brotherhood of Police Officers (IBPO) fought hard and succeeded in having the legislative language amended to include fire fighters.

TREATMENT OF CERTAIN DISABILITY BENEFITS RECEIVED BY FORMER POLICE OFFICERS OR FIRE FIGHTERS

At long last, justice in benefits for both fire fighters and our fellow officers in Connecticut!  As many of you already know, in 1971, the state of Connecticut passed a Workers Compensation Program for police officers and fire fighters who developed hypertension or heart disease during the course of their employment.  Because the heart
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and hypertension problem was considered a disability, most recipients were not paying federal income taxes on the funds they received due to the disability.

However, because of a technicality in Connecticut law, the Internal Revenue Service deemed that these benefits are in fact taxable.  The Connecticut Act did not require evidence of a direct relationship between a person’s capacity as a police officer or fire fighter and the development of the disease.  Nor did it allow an opportunity for the state to rebut or challenge claims made under the Act.  Non-rebuttable disability was considered differently than Worker’s Compensation and did not receive the same protection from federal taxes.  It was taxable under federal law.

Thanks to the help of Congresswoman Barbara Kennelly (D-CT) and Senator Chris Dodd (D-CT), this situation has finally been corrected.  According to Congresswoman Kennelly’s office, they are now working with  the IRS to set up procedures so that people affected by this law will be able to deal with the IRS smoothly during this transition.

A special congratulations to the Connecticut Coalition of Police and Correctional Officers who fought hard to correct this problem!

PERMANENT MORATORIUM ON APPLICATION OF CERTAIN NONDISCRIMINATION RULES TO STATE AND LOCAL GOVERNMENTS

NAPO is proud to report that there is now a permanent moratorium, ending nearly two decades of uncertainty surrounding how, and if, nondiscrimination tax rules would be applied to pension plans maintained by state and local governments!

Beginning with the Employee Retirement Income Security Act of 1974 and again with the Tax Reform Act of 1986, Congress has continued to set requirements for qualified retirement plans to meet strict nondiscrimination standards.  The original intent of the legislation was to ensure that such plans did not provide disproportionate benefits to business owners, officers, or highly compensated individuals.

Compliance with the nondiscrimination rules would require that jurisdictions lump all employees into one large group for testing purposes, diminishing current tax exempt status and radically redesigning the plans.  Severe costs would be imposed to gather and assess the vast amounts of data necessary to apply the private sector tax rules.

The U.S. Department of Treasury had consistently delayed enforcement of these rules for almost 20 years, but the rules themselves had not been made permanently inapplicable to public sector plans until President Clinton signed Taxpayer Relief Act of 1997.

NAPO extends our heartfelt thanks to Senator Orrin G. Hatch (R-UT), Senator Kent Conrad (D-ND), Representative Rob Portman (R-OH) and Representative Benjamin Cardin (D-MD) whose efforts were instrumental in making permanent the moratorium.

REMOVAL OF THE DOLLAR LIMITATION ON PAYMENT OF BENEFITS

Those officers who participate in a defined benefit pension system will no longer be limited on the dollar amount they receive from their pension system (effective for  those who retire on or after Jan. 1, 1997).

NAPO thanks Representative Benjamin Gilman (R-NY), and Senator Alfonse D’Amato (R-NY) whose efforts were instrumental in amending the Internal Revenue Code of 1986 to remove the dollar limitation on payment of benefits from a defined benefit plan that is maintained by a State or local government for the benefit of employees of the police department or fire department.

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