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Since Jan. 1, 1990, there has been both an “old” and “new” disability plan in the 1977 Fund. Those members initially hired before Jan. 1, 1990, are included in the old plan (Pre-1990 Plan) unless they elected to be covered by the new disability plan adopted in 1990. Those hired after Dec. 31, 1989, and those hired on or before that date who elected coverage under the new plan (the 1990 Plan) are covered under the new disability plan.
Throughout this section of the handbook, you will see references to the term “base salary.” All benefits within the 1977 Fund are calculated according to this amount. The base salary is defined by state law as the salary of a first-class police officer or firefighter plus all longevity increases (if provided by the employer) for service of twenty (20) years or less as certified to the 1977 Fund by each department. Upon retirement, benefits are based on the base salary effective for your department in the year your service ends. This first-class salary varies from employer to employer and is certified annually to the 1977 Fund.
Steps to Apply for Pre-1990 Disability Plan Benefits:
The time spent receiving disability benefits is considered active service until you have twenty (20) years of service. During this period, you may be subject to an annual medical review. If you are found to be no longer disabled, and suitable and available work is offered to you by your department, your disability benefit will cease regardless of whether you accept the offer of employment. Recovered members who return to 1977 Fund-covered service, will not be treated as new applicants, and will not be subject to the 1977 Fund membership application process required for new 1977 Fund members.
If you were to return to 1977 Fund-covered service after recovering from a covered impairment and you become disabled within two years of your return to active duty for the same condition or conditions (without an intervening circumstance) that caused the covered impairment for which you were previously paid disability benefits, you are eligible to receive benefits equal to the amount of the disability benefit you were receiving when you returned to work, plus any cost of living adjustments that 1977 Fund retired members received during your period of re-employment.
If you were to return to 1977 Fund-covered service after recovering from a covered impairment, your employer should notify INPRS. Any disability benefits paid to you after returning to work must be repaid to INPRS.
Pre-1990 Disability Statute – Line-of-Duty Injuries on or after July 1, 2000
If a member of the Pre-1990 Disability Plan suffers a duty-related injury, a duty- related disease or a disability presumed incurred in the line of duty under IC 5-10-13 or IC 5-10-15 on or after July 1, 2000, part of the disability benefits may be non- taxable. The part of the benefit that is taxable if your benefit is determined to be in the line-of-duty is the part of the benefit that is based on service over twenty (20) years. The local board must make a determination on whether the disability was incurred in the line-of-duty. This determination must be reviewed and approved by the 1977 Fund and the INPRS Medical Authority.
Pre-1990 Disability Statute – Line-of-Duty Injuries on or before July 1, 2000
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 Jan. 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). Go here for complete information.
Pre-1990 Disability Statute – Injuries that are not in the Line-of-Duty
Disability benefits in the 1990 Plan that are not related to an injury suffered while on duty are fully taxable until age fifty-two (52), when the disability benefit converts to a retirement benefit. At that point, members begin to recover any tax basis from the monthly retirement benefits.
If you are a part of the 1990 Plan and are found to have a covered impairment, the 1990 Plan will pay monthly disability benefits based on the class of your impairment, degree of impairment, and first-class salary for your department in the year in which the local board makes the disability determination. If you are in the 1990 Plan, in order for you to qualify for disability benefits under the 1990 Plan, your local board will conduct a hearing to determine whether you have a covered impairment.
Steps to Apply for 1990 Disability Plan Benefits
Your class of impairment determines your base monthly benefit and the degree of your impairment determines your additional monthly benefit.
A covered impairment is an impairment that permanently or temporarily makes you unable to perform your duties and the appointing authority certifies that there is no suitable and available work in your department for which you are or may be capable of becoming qualified, considering reasonable accommodations to the extent required by the Americans with Disabilities Act (ADA). Certain covered impairments are excluded from consideration if the impairment was a pre-existing “Class 3 excludable condition” at the time you were hired. You are not eligible for Class 3 benefits for impairments that relate to the excludable condition.
If the local board determines that you have a covered impairment, the board will also determine the “class” of your impairment, both of which, are reviewed by the INPRS Medical Authority. The class of impairment determines your base monthly benefit. The degree of impairment determined by the INPRS Medical Authority determines your additional monthly benefit.
The following describes the three different classes of impairments and the amount of base benefit for each class:
Class 1 Impairment
A Class 1 impairment is the direct result of one or more of the following:
You will receive a monthly base benefit equal to forty-five percent (45%) of the base salary, plus an additional amount based on your degree of impairment as determined by the INPRS Medical Authority.
Class 2 Impairment
A Class 2 impairment is defined as a duty-related disease, which means a disease arising out of your employment. This disease can be determined if it is apparent to the rational mind, upon consideration of all the circumstances, that:
You are entitled to receive twenty-two percent (22%) of the base salary plus 0.5 percent (0.5%) of that salary for each year of service, up to a maximum of thirty (30) years of service. In addition, you will be paid an amount based on your degree of impairment, as determined by the INPRS Medical Authority.
Benefit periods are limited for certain Class 2 disability benefits. Benefits for a Class 2 impairment are payable for a period equal to your years of service, if your total disability benefit is less than thirty percent (30%) of base salary and you have fewer than four (4) years of service.
Class 3 Impairment
A Class 3 impairment is a covered impairment that is not a Class 1 or Class 2 impairment. Benefit periods are limited for certain Class 3 disability benefits. Benefits for a Class 3 impairment are payable for a period equal to your years of service, if your total disability benefit is less than thirty percent (30%) of base salary and you have fewer than four (4) years of service.
You will receive a monthly benefit equal to the product of your years of service, not to exceed thirty (30) years, multiplied by one percent (1%) of the base salary. In addition, you will be paid an amount based on your degree of impairment, as determined by the INPRS Medical Authority.
A member's disability benefit is equal to the member's base monthly benefit, which is based on the member's class of impairment, plus an additional monthly benefit amount, which is determined by the INPRS Medical Authority based on the member's degree of impairment using a linear interpolation calculation.
A member of the 1977 Fund who was hired after Dec. 31, 1989, (or elected coverage under IC 36-8-8-12.4) who receives a disability benefit based on a Class 1 impairment is entitled to receive the disability benefit for the remainder of the disabled member's life. At age fifty-two (52), a member receiving a disability benefit based on a Class 1 or Class 2 impairment may be entitled to a monthly supplemental benefit.
|Type of Impairment||Benefit Period||Occurrence||Benefit Formula|
|Class 1||Life||Injured on duty; or injured off-duty while responding to an offense (police officer) or an emergency (firefighter)||45 percent x base salary + additional monthly benefit based on degree of impairment|
|Class 2||Period equaling total years of service or until age 52||Proven duty-related disease||22 percent x base salary + 0.5 percent x years of service up to 30 + additional monthly benefit based on degree of impairment|
|Class 3||Period equaling total years of service or until age 52||All other not Class 1 or 2||1 percent x base salary x years of service up to 30 + additional monthly benefit based on degree of impairment|
If a member is hired with a pre-existing excludable medical condition, the member will not be eligible for a Class 3 disability benefit when the impairment is related in any manner to the excludable condition. This condition would also prevent the member from receiving any Class 3 disability benefit for a period of four years after the date of hire or rehire, unless the Class 3 impairment is attributed to an accidental injury.
Class 1 Benefits – Class 1 disability benefits are not subject to federal income taxes.
Class 2 Benefits – The taxable part of the Class 2 disability benefit is the part of the benefit that is based on service. The non-taxable part of a Class 2 impairment benefit is that part of the benefit that is based on the twenty-two percent (22%) of base salary and the additional benefit of ten percent (10%) – forty-five percent (45%), that is based on degree of impairment.
Class 3 Benefits – Class 3 disability benefits are fully taxable until the disability benefit converts to a retirement benefit at age fifty-two (52). At that point, members begin to recover their tax basis from the monthly retirement benefits.
Supplemental Benefit – If a member is receiving a Class 1 or Class 2 disability benefit at age fifty-two (52) and the member is eligible for a supplemental benefit, that benefit is taxable. The benefit also includes cost of living increases.
You may elect the amount of federal and state tax you want withheld from your disability benefits. These forms are available from INPRS.
These tax rules are complex, so if you need additional information, you should obtain IRS Publication 575; or, if you need further assistance, you should contact your local IRS office or tax consultant.
If a member retires because of a disability less than twelve (12) months after the date the member enters the DROP, the benefits for the member are calculated under the provisions of the applicable fund as if the member never entered the DROP. If the member retires because of a disability at least twelve (12) months after the date the member enters the DROP, the benefits for the member are calculated as if the DROP retirement date is the date the member retires because of a disability.
A completed 1977 Fund application for disability benefits, signed by you and the Chief of your department includes the following:
Appeals of the 1977 Fund initial determination will be heard by an Administrative Law Judge in compliance with the Indiana Administrative Orders and Procedures Act IC 4-21.5.
You must have standing as a party or a right to intervention to request administrative review. The steps of administrative review are http://www.in.gov/inprs/adminreview.htm.
The appeal process will allow for additional evidence to be presented by all parties. The Administrative Law Judge will submit findings to INPRS. INPRS will review the findings of the Administrative Law Judge and issue a final determination.
All parties will be advised of the final determination.
Every attempt has been made to verify that the information in this handbook is correct and up-to-date. Published content does not constitute legal advice. If a conflict arises between information contained in this publication and the law, the applicable law shall apply.