National F.O.P. scores a major legislative victory...

Pension Reform Bill Eliminates DROP Tax Penalty Provision and Includes HELPS Retirees Act

The F.O.P. scored a major legislative victory when the Senate passed H.R. 4, the "Pension Protection Act of 2006," by a 93-5 vote. This came after the House approved the bill 279-130. The bill eliminates the Deferred Retirement Option Plans (DROP) tax penalty provision, and includes the "Healthcare Enhancement for Local Public Safety (HELPS) Retirees Act," both of which the F.O.P. had been lobbying for quite some time now.

"The bill is a major victory for our officers, many of whom are hurt by the DROP provision and have trouble affording decent health insurance," National President Chuck Canterbury stated. "Many of our officers are forced to retire earlier than the rest of the general population and are unfairly penalized because of this. This bill will help end this and save many of our officers a great deal of money."

The DROP provision, which is included in section 828 of H.R. 4, would eliminate the ten percent (10%) early withdrawal penalty from a government defined benefit plan for public safety officers participating in Deferred Retirement Option Plans (DROP). Under current law, a law enforcement officer who leaves active service before the age of 55 and opts to receive a lump-sum payment under DROP before the age of 59 ½ is subject to an early withdrawal penalty of ten percent (10%).

The HELPS provision, which is included in Section 845 of H.R. 4, would provide a modest tax benefit to help retired public safety officers afford health insurance by allowing the use, on a pretax basis, of up to $3,000 annually from their pension funds (including defined benefit plans and defined contribution plans) to pay for premiums on health care and long-term care insurance.

The Fraternal Order of Police is the largest law enforcement labor organization in the United States, with more than 324,000 members.