The Indiana General Assembly passed House Enrolled Act (HEA) 1048 during the 2011 legislative session. The law states that a member hired into the 1977 Police Officers’ and Firefighters’ Pension and Disability Fund (1977 Fund) on or before January 1, 1990 and/or was injured in the line of duty on or before July 1, 2000, can receive favorable tax treatment, on a prospective basis only, pending a favorable ruling from the Internal Revenue Service (IRS). According to Indiana Law IC 36-8-8-13.4, the impairment qualifications of a member must be:
- The direct result of:
- a personal injury that occurred while the member was on duty;
- a personal injury that occurred while the member was off duty and responding to an offense or a reported offense, in the case of a police officer, or an emergency or reported emergency for which the member was trained, in the case of a firefighter; or
- an occupational disease (as defined in IC 22-3-7-10);
- a duty-related disease, which is considered to arise out of the member’s employment if it is apparent to the rational mind, upon consideration of all of the circumstances, that:
- there is a connection between the conditions under which the member’s duties are performed and the disease;
- the disease can be seen to have followed as a natural incident of the member’s duties as a result of the exposure occasioned by the nature of the member’s duties; and
- the disease can be traced to the member’s employment as the proximate cause; or
- a disability presumed incurred in the line of duty under IC 5-10-13 or IC 5-10-15.
Recently, INPRS received approval from the IRS that any 1977 Fund members meeting the above criteria may be eligible to begin receiving favorable tax treatment. Members who feel they qualify should follow the steps below.
- If the fund member or survivor of a fund member elects to file an application with the local board, it must be filed no later than two years after the date of notification. The application must be filed with the local board that made the determination of a covered impairment that resulted in a disability benefit.
- The fund member, or survivor of a fund member, who files an application must present the local board with supporting evidence that the member's covered impairment is duty-related.
- This provision allowing a fund member or survivor of a fund member to be considered for favorable tax treatment will expire on July 1, 2021.
- The local board will determine if a hearing is required after the application request has been made by the fund member or survivor of a fund member. If required, the local board must follow IC 36-8-8-12.7, and a hearing must be held no later than 90 days after submission of the initial request.
- The local board may establish reasonable procedures with respect to the application process, and a medical physician may provide opinions relevant to making its determination.
- The local board must make its recommendation in writing and include its fact findings. Copies must be provided to the fund member, or survivor of the fund member, and INPRS, no later than 30 days after the filing of the application. This process also applies to cases where a hearing is required.
- Once the member and safety board have received the determinations, the following documents are sent to INPRS:
- Letter of the member’s review request to the local board,
- Local board minutes,
- Local board determination,
- Medical records from all treating physicians presented at the hearing,
- Recommendation of determination from the local board if the disability was duty-related or non duty-related.
Once INPRS has received the documents listed above, they will be sent to the INPRS medical authority for review. Upon receipt of the INPRS medical authority determination, copies will be forwarded to the local board and the member.
If a member, or survivor of a member, is approved as having a line-of-duty disability and qualifies for favorable tax treatment, it is on a prospective basis only. No prior returns can be amended for this provision. Tax questions should be discussed with a Certified Public Accountant (CPA) or tax advisor.
If you have any other questions, contact the Customer Service Center at (888) 526‐1687 Monday through Friday from 8 a.m. to 8 p.m. Eastern time, excluding holidays.