For the taxpayers who are or will receive a distribution from their qualified retirement plan, the IRS has recently made revisions on what portion of this distribution will be taxable. Beginning January 2015, distributions from retirement plans are taxable unless a few available exclusions apply. One exclusion consist of allowing $3,000 annually for distributions paid directly to an insurer to purchase accident or health insurance or qualified long-term-care insurance for an eligible retired public safety officer and his or her spouse or dependents. An additional exclusion applicable to this distribution would be any payments for a similar coverage for retired employees. Lastly, distributions for payments to purchase disability insurance premiums are not taxable, as long as it meets the following requirements. The insurance contract must provide for payment of benefits to be made to the trust, in the unfortunate event of an employee’s inability to continue employment due to a disability. However, the benefits can not exceed a reasonable expectation of what the annual contribution amount would have been to the qualified retirement plan on the employee’s behalf during the period of disability, reduced by any other contributions made on the employee’s behalf for the period of disability within the year. This regulation applies to January 1, 2015, but may also be applied to prior years.
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