Public safety officer retirement exclusion

California conforms to IRC §402(l), as added by PPA ’06 (P.L. 109-280), which allows retired public safety officers to elect to exclude up to $3,000 in distributions from an eligible retirement plan if the amounts are used for qualified health insurance premiums.

The federal changes that PPA ’06 made to IRC §§402, 403, and 457 automatically apply under California law, without regard to taxable year, to the same extent as applicable for federal income tax purposes. Some tax software may not automatically exclude the distributions if elected for federal purposes. This is because separate state and federal elections are allowed.

However, California does not conform to the PPA’06 change to IRC §72(t) that allows public safety employees to take distributions from a pension plan after attaining age 50 without a penalty, if separated from service.

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