Line-of-duty disability and death benefits received specified income-tax exclusions

Plain-English summary

A state governmental retirement plan asked about special benefits for public safety officers who are permanently disabled, catastrophically injured, or killed in the line of duty. The disability statutes restrict benefits to service-connected injuries, exclude intentional misconduct and intoxication, and do not compute the benefits by age, service, or employee contributions. The IRS ruled that the statutes are in the nature of workers’ compensation acts. The permanent-disability lump sum, catastrophic-injury lump sum, and ongoing catastrophic benefit are excluded under IRC § 104(a)(1) to the extent their value exceeds any immediately payable retirement benefit, and a qualifying continuation paid to a surviving spouse is also excluded. The separate line-of-duty death benefit paid to a spouse or dependent child is excluded under IRC § 101(h)(1), provided the plan also determines that the officer was not acting with gross negligence. These conclusions depend on the statutory eligibility and causation requirements described in the ruling.

Ruling snapshot

• Question: Are the plan’s line-of-duty disability, survivor, and death benefits excluded from recipients’ gross income?
• Outcome: Approved
• Key authorities: IRC §§ 101(h), 104(a)(1), 401(a); Treas. Reg. § 1.104-1(b); Rev. Rul. 80-14; Rev. Rul. 80-44; Rev. Rul. 80-84; Rev. Rul. 85-104

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 202512001 Third Party Communication: None
Release Date: 3/21/2025 Date of Communication: Not Applicable
Index Number: 101.08-00, 104.02-00
Person To Contact:
------------------- --------------------, ID No. -----------------
------------------------ Telephone Number:
------------------------------------------------------------ --------------------
-------- Refer Reply To:
------------------ CC:EEE:EB:HW
----------------------------- PLR-107905-24
Date:
December 09, 2024

Legend

Taxpayer = --------------------------------------------------------------

Plan = -------------------------------------------------------

Dear ------------:

This responds to your letter, dated January 24, 2024, supplemented by a letter dated
December 6, 2024, requesting the following rulings:

(1) That -------------------------------------------and -------------- are statutes in the nature of
    a workmen's compensation act and that the lump sum payment of ------------ for a
    non-catastrophic line of duty disability benefit paid pursuant to -------------------------
    and the lump sum payment of ------------ for a catastrophic line of duty disability
    benefit paid pursuant to -------------------------of the -------- statutes are excludable
    from the gross income of the recipient under section 104(a)(1) of the Code, and
    that the ----------- annual benefit paid for a catastrophic line of duty disability
    benefit, as actuarially adjusted every four years, paid pursuant to ---------------------
    --------- of the -------- statutes is excludable from the gross income of the recipient
    under section 104(a)(1) of the Code.
(2) That ------------------------- of the -------- statutes that provides for a lump sum
    payment on account of the death of a public safety officer killed in the line of duty
    and paid to the spouse or child of the public safety officer pursuant to ---------------
    ---------------attributable to such officer's service as a public safety officer is
    excludable from the gross income of the recipient under section 101(h) of the
    Code.

PLR-107905-24 2

                                           FACTS

Taxpayer is the administrator of the Plan established under the laws of the State of ------
-------. The statutes constituting the Plan and governing the payment of retirement and
disability benefits by Taxpayer are set forth in --------------------------------------------.
Taxpayer is the administrator of the tax qualified, defined benefit Plan to which both the
members and the participating employers contribute. The Plan is a governmental plan
administered and operated by the State of -------- through Taxpayer. Participation in the
Plan is mandatory for eligible state and school district employees and is available to
other public employers and their employees on a contractual basis.

-------------------------of the -------- ------- provides for a one-time payment of ------------ to a
public safety officer who is determined by the retirement board to be permanently
disabled as a result of bodily injury or disease sustained in the line of duty. Under --------
-------------------------, the retirement board must determine that the permanent disability
occurred in the line of duty, the permanent disability was not caused by intentional
misconduct of the public safety officer or by the public safety officer’s intentional
infliction of injury, and the public safety officer was not voluntarily intoxicated at the time
of the event causing the disability. ---------------------------------provides that the benefit
payable under this section is “separate from and independent of any benefits payable to
the public safety officer under this chapter.”

------------------------ of the ----------------provides for a one-time payment of ------------- to a
public safety officer who is determined by the retirement board to be catastrophically
injured. -------------------------also provides for an ongoing annual benefit payment of not
less than -----------, adjusted every four years pursuant to an actuarial study to determine
the change in average public safety officer benefits over the previous four years. In
addition, -------------------------provides that in the event a public safety officer who is
receiving benefits under this section dies and leaves a surviving spouse to whom the
member was married at the time of the catastrophic injury, the surviving spouse will
receive the ongoing annual benefit payment (to which the public safety officer would
have been entitled) for the duration of the spouse’s life--------------------------------------------
---------------- defines a “catastrophic injury” as a “sudden, violent, life-threatening, duty-
related injury sustained by an active member within the scope of the public safety
officer’s duties and within the department policy that is due to an externally caused
event such as a motor vehicle collision, gunshot wound, aggravated battery, structural
collapse, significant fall, or other external event or events that is not self-inflicted or the
result of intoxication, provided, however, that no psychological injury, disorder, or
condition shall be considered a catastrophic injury under this definition.” Further, the
injury must be of such severity that it causes the loss of ability to maintain certifications
required by the state of --------, the member's department, or both. -----------------------------
provides that the “benefits provided for in this section shall not be in addition to other
benefits under this chapter.”

--------------------------------------------------provides for a death benefit payment of -------------
in the event a public safety officer dies as the direct and proximate result of a personal
PLR-107905-24 3

injury sustained in the line of duty. The death benefit is payable to an officer’s surviving
spouse or, in the event there is no surviving spouse, divided among the officer’s
dependent children. The benefit is only paid after the retirement board determines that
the death occurred in the line of duty -------------------------------------------------------------------

----------------------------, the death was not caused by the intentional misconduct of the
officer or by such officer’s intentional infliction of injury, and the officer was not
voluntarily intoxicated at the time of death. In addition, benefit payments will not be paid
to a person whose actions were a substantial contributing factor to the death of the
officer.

                                                   LAW

Section 61(a) of the Code provides that, except as otherwise provided by law, gross
income means all income from whatever source derived, including compensation for
services.

Section 72(a) of the Code provides that, except as otherwise provided, gross income
includes any amount received as an annuity (whether for a period certain or during one
or more lives) under an annuity, endowment, or life-insurance contract.

Section 101(h)(1) of the Code provides that gross income shall not include any amount
paid as a survivor annuity on account of the death of a public safety officer (as such
term is defined in Section 1204 of the Omnibus Crime Control and Safe Streets Act of
1968 as in effect immediately before the enactment of the National Defense
Authorization Act for Fiscal Year 2013) killed in the line of duty—(A) if such annuity is
provided under a governmental plan which meets the requirements of section 401(a), to
the spouse (or former spouse) of the public safety officer or to a child of such officer;
and (B) to the extent such annuity is attributable to such officer’s service as a public
safety officer.

Section 101(h)(2) of the Code provides that section 101(h)(1) of the Code shall not
apply with respect to the death of any public safety officer if, as determined in
accordance with the provisions of the Omnibus Crime Control and Safe Streets Act of
1968—(A) the death was caused by the intentional misconduct of the officer or by such
officer’s intention to bring about such officer’s death; (B) the officer was voluntarily
intoxicated (as defined in section 1204 of such Act) at the time of death; (C) the officer
was performing such officer’s duties in a grossly negligent manner at the time of death;
or (D) the payment is to an individual whose actions were a substantial contributing
factor to the death of the officer.

Section 104(a)(1) of the Code provides that gross income does not include amounts
received under workmen’s compensation acts as compensation for personal injuries or
sickness.
PLR-107905-24 4

Treas. Reg. § 1.104–1(b) provides that section 104(a)(1) of the Code excludes from
gross income amounts received by an employee under a workmen’s compensation act
or under a statute in the nature of a workmen’s compensation act that provides
compensation to the employee for personal injury or sickness incurred in the course of
employment. Treas. Reg. § 1.104–1(b) also provides this exclusion to compensation
paid under a workmen’s compensation act to the survivor or survivors of a deceased
employee. Treas. Reg. § 1.104–1(b) states that this exclusion does not apply to the
amount received either to the extent that it is determined by reference to the employee’s
age or length of service, or the employee’s prior contributions, even though the
employee’s retirement is occasioned by an occupational injury or sickness, or to the
extent that it is in excess of the amount provided in the applicable workmen’s
compensation act or acts.

Rev. Rul. 80–14, 1980–1 C.B. 33, concluded that a statute that provides disability
benefits to a class restricted to employees with service-incurred disabilities is a statute
in the nature of a workmen's compensation act and the benefits are excludable from
gross income under section 104(a)(1) of the Code.

In Rev. Rul. 80–44, 1980–1 C.B. 34, a statute in the nature of a workmen’s
compensation act provided for an allowance of the greater of (A) 60 percent of the
individual’s average final compensation, or (B) the amount to which the individual would
be entitled under the normal, years of service, retirement plan. The ruling concluded
that the benefits under the statute were excludable under section 104(a)(1) of the Code
to the extent that they did not exceed 60 percent of the final average compensation. Any
excess over 60 percent of final average compensation was attributable to length of
service, and therefore, not excludable from gross income. Rev. Rul. 80–44 also holds
that benefits of the surviving spouse which are a continuation of the employee’s benefits
are excludable under section 104(a)(1) of the Code in the same percentage as the
employee’s benefits were excludable.

Rev. Rul. 80–84, 1980–1 C.B. 35, concluded that benefits paid to employees’ survivors
may qualify as paid under a statute in the nature of a workmen’s compensation act
where those benefits are a mere continuation of employees’ section 104(a)(1) benefits.
The ruling also stated that a statute authorizing benefits for employees’ survivors may
qualify as a statute in the nature of a workmen’s compensation act if it requires as a
prerequisite to payment a determination that the cause of the employee’s death was
service-related. The ruling concluded that survivor benefits are excludable from gross
income under section 104(a)(1) if the recipient can establish that the benefits are
received under the service-connected death provisions.

Rev. Rul. 85–104, 1985–2 C.B. 52, considered a statute under which the participants,
who were disabled due to work-related injury or sickness, receive the greater of a fixed
percentage of base salary or an amount computed on the basis of years of service. The
ruling concluded that an amount up to the percentage of base salary specified by the
statute would be excludable from the participant’s gross income under section 104(a)(1)
of the Code, but that any excess, computed on the basis of length of service, would not
PLR-107905-24 5

be excludable under section 104(a)(1). The ruling also concluded that if the benefits are
computed by a formula that does not refer to the employee’s age, length of service, or
prior contributions and are provided to a class that is restricted to employees with
service-incurred injuries, then the benefits are payment for those injuries, and the
statute under which the benefits are paid qualifies as a statute in the nature of a
workmen’s compensation act.

                            ANALYSIS AND CONCLUSION

------------------------------------------------- provides for a one-time payment of ------------ to a
public safety officer who is determined by the retirement board to be permanently
disabled as a result of bodily injury or disease sustained in the line of duty. Under --------
-------------------------, the retirement board must determine that the permanent disability
occurred in the line of duty and was not caused by intentional misconduct, intentional
infliction of injury, or voluntary intoxication.

The payment under ------------------------ is not determined on the basis of age, length of
service, or prior employee contributions, and the lump sum payment is provided to a
class that is restricted to employees with service-connected injuries who are determined
to be permanently disabled. Therefore, -------------------------is a statute in the nature of a
workmen’s compensation act and the lump sum payment is excluded from the
recipient’s gross income under section 104(a)(1) to the extent that the lump sum
payment paid by Taxpayer to the recipient exceeds the value of any retirement benefit
immediately payable to the public safety officer under the Plan.

------------------------------------------------- provides for a one-time payment of ------------ to a
public safety officer who is determined by the retirement board to be catastrophically
injured. In addition, ------------------------- provides for an ongoing annual benefit payment
of not less than ----------- (adjusted pursuant to an actuarial study) which is payable to a
surviving spouse for the life of the surviving spouse in the event that the public safety
officer dies. Under -------------------------, the retirement board must determine that the
catastrophic injury was sustained by an active member within the scope of the public
safety officer’s duties and within the department policy that is due to certain externally
caused events and meets other statutory requirements.

The lump sum payment under -------------------------is not determined on the basis of age,
length of service, or prior employee contributions, and the lump sum payment is
provided to a class that is restricted to employees with service-connected injuries that
are determined by the Taxpayer to be permanently disabled. In addition, the ongoing
annual benefit is not determined on the basis of age, length of service, or prior
employee contributions, and the ongoing annual benefit is provided to a class that is
restricted to employees with service-connected injuries who are determined to be
catastrophically injured. Further, -----------------------------provides that the “benefits
provided for in this section shall not be in addition to other benefits under this chapter.”
Therefore, -------------------------is a statute in the nature of a workmen’s compensation
act and the one-time lump sum payment and ongoing annual benefit are excluded from
PLR-107905-24 6

the recipient’s gross income under section 104(a)(1) to the extent that the value of the
lump sum payment and ongoing annual benefit paid by Taxpayer to the recipient
exceeds the value of any retirement benefit immediately payable to the public safety
officer under the Plan. In addition, in the event a public safety officer who is receiving
benefits under ------------------------ dies, the payments to a surviving spouse under --------
-------------------------are excluded from the gross income of the surviving spouse.

------------------------------------------------- provides for a death benefit payment of ------------
in the event a public safety officer dies as the direct and proximate result of a personal
injury sustained in the line of duty. The death benefit is payable to an officer’s surviving
spouse or, in the event there is no surviving spouse, divided among the officer’s
dependent children.

The death benefit provided under ------------------------------------------------- is limited to
public safety officers as defined in Section 1204 of the of the Omnibus Crime Control
and Safe Streets Act of 1968 as in effect immediately before the enactment of the
National Defense Authorization Act for Fiscal Year 2013. Section 1204 of the Omnibus
Crime Control and Safe Streets Act of 1968 defines a public safety officer as “an
individual serving a public agency in an official capacity, with or without compensation,
as a law enforcement officer, as a firefighter, or as a chaplain.” ---------------------------------
---------------- defines public safety officer as an active member of Plan who is either
designated as police officer, firefighter, or paid firefighter under the ----------------. Plan is
a governmental plan which meets the requirements of section 401(a) of the Code and
the death benefit is only payable to surviving spouse of the public safety officer or to
dependent children of such officer.

The death benefit is limited to spouses and children of public safety officers who are
killed in the line of duty. The benefit is paid only after the retirement board determines
that the death occurred in the line of duty -------------------------------------------------------------

----------------------------, the death was not caused by the intentional misconduct of the
officer or by such officer’s intentional infliction of injury, and the officer was not
voluntarily intoxicated at the time of death. Benefit payments will not be paid to a person
whose actions were a substantial contributing factor to the death of the officer.

The death benefit payable to the spouse or dependent child of a public safety officer
under --------------------------------------------------that provides for the payment of a lump sum
on account of the death of a public safety officer killed in the line of duty and attributable
to such officer's service as a public safety officer is excludable from the gross income of
the spouse or dependent child under section 101(h)(1) of the Code, provided that
Taxpayer determines the officer was not performing such officer’s duties in a grossly
negligent manner at the time of death consistent with section 101(h)(2)(C).

The rulings contained in this letter are based upon information and representations
submitted by Taxpayer and accompanied by a penalties of perjury statement executed
by an appropriate party, as specified in Rev. Proc. 2024-1, 2024-1 I.R.B. 1, section
PLR-107905-24 7

7.01(16)(b). This office has not verified any of the material submitted in support of the
request for a ruling, and such material is subject to verification upon examination. The
Associate Office will revoke or modify a letter ruling and apply the revocation
retroactively if there has been a misstatement or omission of controlling facts; the facts
at the time of the transaction are materially different from the controlling facts on which
the ruling was based; or, in the case of a transaction involving a continuing action or
series of actions, the controlling facts change during the course of the transaction. See
section 11.05 of Rev. Proc. 2024-1.

Except as expressly provided herein, no opinion is expressed or implied concerning the
tax consequences of any aspect of any transaction or item discussed or referenced in
this letter.

No opinion is expressed concerning the Federal tax consequences under any other
provision of the Code other than those specifically stated herein.

This ruling is directed only to the party requesting it. Sections 6110(k)(3) of the Code
provides that it may not be used or cited as precedent.

In accordance with the Power of Attorney on file with this office, a copy of this letter is
being sent to your authorized representative.

                                       Sincerely,



                                       Denise Trujillo
                                       Chief, Health & Welfare Branch
                                       Office of Associate Chief Counsel
                                       (Employee Benefits, Exempt Organizations,
                                       and Employment Taxes)

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