Chapter 6: Benefit Options Beyond Workers’ Compensation
Employees who receive a workers’ compensation disability award remain eligible for a broad range of other benefits. Selecting the benefit option that best meets employee needs is complex, and they should be advised to seek independent legal and accounting advice before making a decision. Following is an overview of the major benefit options.
I. Disability Retirement
An employee who can demonstrate physical or mental incapacity to perform normal duties and has the required length of service credit in the NJ pension system can apply for a disability retirement benefit. Two types are available:
A. Accidental Disability Retirement Benefit
To be eligible, the worker must demonstrate that the disability is work related, and was injured as a result of an “identifiable, undesigned and unexpected mishap caused by external circumstances.” Eligibility is contingent on the injured worker satisfying the remaining requirements including that the injury occurred during the performance of regular or assigned duties, and was not the result of negligence or preexisting conditions alone or in combination with the work, and that the disability is permanent and total. The benefit is currently 72.7% of base salary at the time of the traumatic event for participants in the Public Employees’ Retirement System (PERS) and the Teachers’ Pension and Annuity Fund (TPAF). If the employee is a participant in the Police and Firemen’s Retirement System (PFRS), the benefit is 70% of compensation on which pension contributions were made at the time of retirement or the date of the traumatic event whichever provides the higher benefit.The accidental disability retirement benefit net of that portion generated by the employee contribution to the retirement plan is reduced dollar for dollar for all periodic workers’ compensation benefits the worker receives. The accidental disability retirement benefit is exempt from federal tax and NJ State income tax until age 65. The benefit is not reduced if the employee receives private insurance benefits. New Jersey service credit in the pension system is not required to be eligible for the accidental disability retirement benefit.
B. Ordinary Disability Retirement Benefit
If the worker does not meet the standards required for the accidental disability retirement benefit, but is otherwise qualified as totally and permanently disabled, an ordinary disability benefit may be approved.For PERS and TPAF participants, the benefit is currently equal to 43.6% of the final average salary of the worker based on the worker’s salary history. For PFRS participants the benefit is equal to 40% of the worker’s final compensation or 1.5 % of final compensation for each year of service credit, whichever is higher. This benefit is subject to federal tax but is not subject to NJ income tax until age 65. The benefit is not reduced by Social Security, regular workers’’ compensation or private insurance benefits, but any workers’’ compensation award the worker receives may be reduced. If the pension is based solely on the work-related condition, the entire pension can be used to offset the workers’ compensation award. If the ordinary pension is for both work and non-work related conditions, there is an apportionment to determine what part of the pension overlaps with the workers’ compensation claim. If there is no relationship between the ordinary pension condition and those of the workers’ compensation award, there is no offset.For PERS and TPAF participants, a minimum of ten years of New Jersey service credit in the pension system is required to be eligible for ordinary disability retirement. In addition the pension account must be active, and the employee must be considered totally and permanently disabled, that is, incapable of performing normal or assigned job duties with no possibility of significant improvement. For PFRS participants, the same stipulations apply, except that only four years of service credit in the New Jersey pension system is required. Both accidental and ordinary disability benefits are considered retirement benefits. The person receiving either benefit is free to accept active employment from another employer, but the benefit will be reduced to the extent that salary and benefit combined exceed the worker’s salary at the time the benefit was approved.
II. Regular Retirement
An employee who has satisfied the requirements for a regular pension can apply for this benefit, which varies based on age and years of service. Retired status does not prohibit an individual from accepting a job from another employer. And retirement benefits are not offset or reduced in any way because the employee has received a workers’’ compensation disability award.An employee who chooses to retire makes it possible for the employer to seek another applicant for the position, thus reducing the cost and lost work time associated with work place injury.
III. Social Security Disability
An employee who can demonstrate permanent total disability due to a work related injury is also eligible to apply for a benefit provided by the Social Security Administration (SSA). The approval process requires three to five months to complete according to SSA. The process includes review by the New Jersey Disability Determination Services, a division of the Department of Labor and Workforce Development.Requirements are strict: the employee must have a medical condition that is expected to last at least one year or result in death and must demonstrate an inability to be successfully employed in any job for which the individual might be qualified based on age, medical condition, education and work experience.Workers’ compensation and other public disability benefits may reduce the Social Security benefit, particularly if the combination of these benefits exceeds 80% of the employee’s average current earnings, which are calculated by Social Security on the basis of a formula.
IV. Additional Options Available to the Employee and the Employer The Americans with Disabilities Act
An employee who has experienced a work related injury and achieved MMI can seek to be qualified as disabled under the provisions of this act. The qualifications for disability are different than those related to workers’’ compensation, in that the employee must demonstrate impairment that substantially limits one or more major life activities, a record of such impairment, or being regarded as having such impairment.In effect, an employee may have received workers’’ compensation benefits, but can be deemed eligible under ADA. If an employee is deemed eligible, the employer is required to make reasonable accommodations within certain prescribed limits. At the same time, employees seeing ADA eligibility must demonstrate ability to perform the essential functions of the job being sought without creating a danger to themselves or others. In addition, the employer has the right to require that an employee submit to a fitness for duty examination.The provisions of the Act and its requirements are complex; skilled professional support is required to understand and apply them to any particular situation.
V. The Family Medical Leave Act (FMLA)
Under the provisions of this act, employers with more than 50 employees are required to provide 12 weeks of job protected leave in a twelve month period to any employee that can demonstrate a serious health condition, and has been employed for more than 1,250 hours in the past twelve months.The benefits include continuation of the employee’s medical benefits and a guarantee – with some stipulations – that the employee will be returned to the same or an equivalent position at the same rate of pay and benefits. Employers have the right to treat the time an employee is out of work while receiving temporary disability benefits under workers’’ compensation as FMLA time if they have included a provision in their policy manual to that effect.
Because of the complexity of these programs, counsel and technical advice from financial professional and attorneys who specialize in workers’’ compensation and employee benefits should be secured by both employers and employees.
Thanks to Robert McGuire, Compensation Manager, Bergen Risk Managers,
John J. Feczko, Esq., John R. Tort, Jr., Esq., and Rosemary Freeman, Pension Supervisor, County of Bergen for their assistance in preparing the information included in this pamphlet. Please note that this information is not a substitute for expert advice regarding risk management and legal opinion. Individuals considering application for any of the benefits mentioned in this document are urged to seek professional assistance.