WHO CAN APPLY FOR ACCIDENTAL DISABILITY RETIREMENT (ADR)

Any person who pays into the Commonwealth of Massachusetts or a municipal retirement system is potentially eligible for Accidental Disability Retirement (ADR) benefits if he/she becomes permanently disabled from returning to his/her prior job as a result of a work related injury.

Accidental Disability Retirement (ADR) benefits can be applied for in one of two ways; (1) The Employer files an application to “involuntarily” retire the Employee or (2) the Employee voluntarily files an application for ADR. The only difference between the two is who files the application and the time it takes to get through the process. An involuntary retirement will take longer than a voluntary retirement.

ADR BENEFITS AND WORKERS’ COMPENSATION

If a retiree is approved for ADR benefits he/she will receive 72% of the yearly base salary tax-free. A retiree cannot receive both ADR and Workers’ Compensation (WC) for the same period. Therefore, any WC benefits will be deducted from the ADR benefit. In legal terms this is call an offset.

An example of this is as follows:

Jim was notified on December 31, 2021 that his ADR application was approved retroactive to December 31, 2020 at a rate of $5,000.00 a month. Retroactive payment was $60,000.00 (12 x $5000.00).

Jim received WC in the amount of $4000.00 a month from December 31, 2020 to December 31, 2021. $48,000 for the one year period.

Jim’s retroactive ADR benefit would be $12,000.00. This is the difference between his ADR benefit and his WC benefit ($60,000.00 – $48,000.00 = $12,000.00).

The amount of any WC payments will be deducted from the ADR benefit for as long as both are payable for the same period. Therefore, there is no real monetary benefit to receiving WC once an ADR application is approved. Due to the offset described in the above example, the retirement board is the only party that benefits from a retiree’s receipt of WC benefits.

At this point, it makes sense for a retiree to think about settling his/her WC case. The benefit of settling the WC case is that a portion of the lump sum settlement will not be offset by the retirement board and will be extra money to the retiree in addition to the monthly ADR payment.

WORKING ON ADR

Once the WC and ADR cases are finalized a retiree is able to seek any employment outside of his/her old job. He/she will be entitled to receive a full ADR benefit as long as the earnings do not exceed the total of $15,000.00 plus 28% of the prior base salary. The retirement board will be able to provide an exact figure.

As an example: If Jim’s base salary was $50,000.00 a year he would be limited to earning $29,000.00 a year. This is 28% of $50,000 which is $14,000.00 plus $15,000.00.

The ADR benefit will be reduced dollar for dollar for any earnings above the limit. In the example above, if Jim earned $30,000.00 his benefits would be reduced $1000.00 for that year. If he earned $58,000.00 or above, his benefit would be stopped. Anything over $58,000.00 would cause an overpayment and it would need to be repaid before his benefits could be restarted.

In order to track retirees’ earnings, every year the Public Employment Retirement Administration Commission (PERAC) requires an earnings report to be filed. If the form is not timely filed, a retiree may forfeit benefits. Typically, if a retiree is paid on a W-2, PERAC will accept the amount listed on it as the amount of the retiree’s earnings for that year. Be aware that self-employment or employment by a closely held corporation, especially one owned by a spouse, can lead to extraordinary scrutiny by PERAC. There is a presumption in these cases that the reported wages are not accurate and are lower than they should be in order for the retiree to continue to collect his/her full benefit. In these circumstances, it is especially important for a retiree to keep track of the hours he/she works and the tasks being performed. A calculation of how the wages were determined is also critical in proving the reported amount is accurate. Case law suggests that if a retiree is a corporate officer he/she has great responsibility in the operation of the business. In one instance, a retiree, who was listed as a corporate officer was attributed 1/3 of the income from that business because he filed an application for a liquor license.

COLA AND OTHER INFORMATION

In some instances, retirees may be entitled to a yearly COLA – cost of living adjustment. Whether such an increase is paid depends on the retirement system. State retirees are automatically entitled to COLA adjustments. Other municipal retirees are paid a COLA at the discretion of the retirement board.

As evidenced by the above, Public Retirement law is very complicated. Obtaining legal advice about your entitlement to benefits is highly recommended. In addition to hiring an attorney, retirees should avail themselves of a free online resource “Mass Retirees”, at www.massretirees.com.