Last Updated: December 2009
If you are a member of SERS Plan 2 or Plan 3 and you become disabled, you may be entitled to disability benefits. This publication describes disability retirement benefits and how to apply for them. The Department of Retirement Systems (DRS) recommends that you contact a retirement services analyst if you plan to apply for disability retirement.
To qualify for a disability retirement, you must clearly establish that you are totally incapacitated for continued employment by a school district or educational service district (SERS) and are leaving that employment as a result of your disability.
You must file an application with DRS to be considered for disability retirement benefits. DRS will use the information in your application to determine your eligibility.
You may apply for disability retirement even if you are eligible to receive a service retirement. Your benefit amount will be the same with either retirement type, but the tax treatment may be different. Consult a tax advisor for more information.
You do no need a minimum amount of service credit to be eligible for a disability retirement.
You must take the following steps to apply for disability retirement:
Step 1. Request an application packet and estimate of benefits by contacting DRS. Please be prepared to give us the following information:
Step 2. Read through all of your application packet materials. There are three separate parts to the application that must be completed by different individuals and then returned to DRS.
DRS will not begin the application review process until all three parts have been received. In most cases, the determination process takes four to six weeks. The process may take longer if DRS finds that your application requires supporting documentation. We will contact you if we need more information. Examples of supporting documentation include:
You may submit any of the preceding information with your application to help expedite the determination process.
If you choose, you may apply for disability retirement and receive a determination of eligibility from DRS before separating from employment. If you have already separated you may still apply for disability retirement as long as you were disabled at the time of your separation.
You may petition for a review within 120 days of receiving the denial. If your petition is denied, you will be informed of appeal procedures. You will 60 days to appeal the decision.
DRS will mail you an approval letter with additional information. You must separate from employment in order to begin receiving your benefit.
If you continue to work and have not separated employment within 90 days of your approval date, DRS will rescind its approval. You must reapply and submit current medical evidence to be considered for a benefit.
Your retirement date is the first of the month following your date of separation. For example, if your application is approved May 4, and you separate from service on May 15, your retirement date is June 1 and you will receive your first benefit on the last working day of June.
2 % x service credit years x average final compensation = monthly benefit (then reduced if retiring before age 65)
1 % x service credit years x average final compensation = monthly benefit (then reduced if retiring before age 65)
Average final compensation (AFC) is the monthly average of your 60 consecutive highest-paid service credit months. AFC does not include payments for any type of severance pay, such as lump sum payments for deferred sick leave, vacation or annual leave.
Note: For Plan 3 members, you can access your defined contribution funds any time after you separate from system covered employment.
If you retire before age 65, your disability benefit is reduced to reflect the fact that you will receive it over a longer period of time. The reduction depends on your service credit, the date you retire, your age and the early retirement factor used.
If you retire with less than 30 service credit years, your benefit will be actuarially reduced based on your average life expectancy.
If you retire with 30 years or more of service credit, your benefit reduction is set at three percent for each year that you are under age 65.
If you retire on or after July 1, 2008 (PERS) or September 1, 2008 (SERS) and have 30 years or more of service credit, you can choose either the three percent reduction or the 2008 early retirement factor,* which provides a smaller benefit reduction but imposes stricter return to work rules.
For more information, see the DRS publication, Thinking About Retiring Early?
*These factors became available 7/1/2008 for PERS and 9/1/2008 for SERS and were established by legislation which ended gain sharing. If a court of law decides the repeal of gain sharing is invalid, the factors and return to work rules in place before the passage of the law will apply.
If your monthly benefit is $50 or less, you may choose to receive a lump sum payment instead of the monthly benefit. If you choose a monthly benefit you will not be eligible to withdraw your contributions.
If your monthly benefit is less than the minimum payment, you may choose to receive a lump sum payment instead of the monthly benefit. The minimum monthly payment amount is indexed and changes each year. For the current minimum monthly payment amount, please contact DRS.
If you qualify, DRS will provide you with the lump sum payment option at the time you receive an estimate. If you choose a lump sum disability payment, you will be considered retired and ineligible for any further benefits from PERS or SERS. Your decision is permanent and cannot be changed later.
You have the option to apply for up to 24 months of service credit while on leave for a disability. To qualify:
For more information on how to apply for temporary disability service credit, contact DRS.
On July 1 of every year following your first full year of retirement, your monthly benefit will be adjusted by the percentage change in the Consumer Price Index to a maximum of three percent per year.
If you are receiving a monthly disability benefit, DRS may require you to undergo comprehensive medical examinations at the expense of DRS. You are responsible for ensuring that your doctor reports any and all changes in your disabling condition to DRS.
If medical examinations show that you have recovered from the disability for which DRS granted a disability retirement, you may no longer be eligible to receive a retirement benefit.
Your disability retirement benefit may also be affected if you return to work. In some cases, depending on the position and the extent to which you work, your retirement benefit may be suspended. If you decide to return to work, call DRS to determine how your benefit will be affected.
If you take your disability in a lump sum and return to work and return to PERS or SERS membership, you must pay back the lump sum you received, minus the monthly amount for which you were eligible, plus interest.
If you receive an overpayment of your disability benefit or refund, DRS will require that the overpayment be repaid. If you receive an underpayment, DRS will correct the error and pay you in full.
If your medical coverage is provided by the state Health Care Authority (HCA), please contact them for information concerning continuation of coverage.
If you're retiring as a public safety officer, you may be able to excluded up to $3,000 of your qualified heath, accident and long-term care insurance premiums from your gross taxable income each year, as long as the premiums are deducted from your retirement benefit.
You may also be eligible for disability-related benefits from the Department of Labor and Industries (workers' compensation benefits), Department of Social and Health Services, the Social Security Administration, your employer, or disability insurers. Please contact these organizations directly for more information.
The benefits you receive from the Department of Labor and Industries, the Social Security Administration or other disability insurers do not affect your benefit amount with DRS. However, the benefit from DRS may affect other benefits. Please contact these organizations directly for more information.
Disability benefits are taxed as ordinary income until minimum retirement age. You may be able to receive tax credits for the elderly or disabled as explained in the Internal Revenue Service (IRS) Publication 524.
You must complete a W-4P form to indicate how you want income tax withheld from your retirement benefit. If you do not, DRS will follow IRS rules requiring withholding as if you were married and claiming three exemptions. This is regardless of the number of exemptions you qualify to claim on your income tax return.
Your retirement benefit may be subject to assignment or attachment to satisfy court and administrative orders for spousal maintenance and child support, or orders authorized by federal law.
DRS is authorized to divide pensions between members and ex-spouses based upon court-ordered property division. If the divorce decree complies with the applicable law, DRS will send the property division payment directly to the ex-spouse. For more information, read How Can a Property Division Affect My Retirement Account? and Can Legal Action Affect My Retirement Account?