T.C. Memo. 2008-101
UNITED STATES TAX COURT
GEORGE AND HAZELANN TATEOSIAN, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 13019-05. Filed April 16, 2008.
Thomas E. Brever, for petitioners.
Lisa R. Woods, for respondent.
MEMORANDUM OPINION
KROUPA, Judge: Respondent determined a $10,085 deficiency
in petitioners’ Federal income tax and a $2,017 accuracy-related
penalty for 2003. Two issues are presented for our decision.
The first is whether certain payments that petitioner received
from the Public Employees Retirement Association of Minnesota
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(PERA) are disability payments and excludable from gross income
or pension payments and includable. We hold that they are
includable in income. The second issue is whether petitioners
are liable for the accuracy-related penalty under section
6662(a).1 We hold that they are not.
Background
This case was submitted fully stipulated pursuant to Rule
122. The stipulation of facts and the accompanying exhibits are
incorporated by this reference. Petitioners resided in St. Paul,
Minnesota at the time their petition was filed.
George Tateosian (petitioner) was born on October 28, 1927,
and became a member of the Saint Paul Police Department in 1955.
By reason of an injury sustained in the line of duty, he was
permanently disabled on June 18, 1959, after fewer than 5 years
of service. The St. Paul Police Relief Association (SPPRA)
awarded petitioner an on-duty-disability pension on August 1,
1960. Initially, petitioner’s disability payment was determined
without regard to his age or length of service. Petitioner began
receiving disability benefits in the sum of 40 units per month
under this regimen in 1960. A “unit” was defined as “one-
hundredth of the current maximum monthly pay of a police officer
1
All section references are to the Internal Revenue Code in
effect for the year at issue, and all Rule references are to the
Tax Court Rules of Practice and Procedure, unless otherwise
indicated.
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in the police service of the city.” Petitioner’s units were not
recalculated, but they were increased for cost-of-living
adjustments.
Petitioner initially received his payments from his local
relief association, SPPRA. At some point, SPPRA began treating
petitioner’s payments as taxable. SPPRA then consolidated with
PERA in 1994. At the time of the consolidation, petitioner
signed a form electing PERA to provide his future payments under
the Public Employees Police and Fire Fund Benefit Plan (PEPFF
Benefit Plan), as set forth by Minn. Stat. Ann. ch. 353 (West
2004).
Petitioner received $37,271 from PERA in 2003. PERA issued
petitioner a Form 1099-R, Distributions From Pensions, Annuities,
Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts,
etc., indicating that petitioner received $37,271 in taxable
income for 2003. Petitioners did not report this amount on their
tax return for 2003.
Discussion2
The question we consider is whether the payments received
are includable in petitioners’ income for 2003. Petitioner
contends that the disputed distributions are excludable from
gross income as disability payments in the same manner as
2
There has been no question raised in this case concerning
which party bears the burden of proof or the burden of going
forward with the evidence.
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worker’s compensation. Respondent argues that the payments are
includable in petitioner’s income because they had been converted
to pension payments.
Gross income includes all income from whatever source
derived unless excludable by a specific provision of the Internal
Revenue Code. See sec. 61(a). Amounts received as compensation
for personal injuries under worker’s compensation acts and
statutes in the nature of a worker’s compensation act are
excluded from gross income. See sec. 104(a)(1); sec. 1.104-1(b),
Income Tax Regs. Courts have strictly construed this exclusion
so as to conform with the general rule that income is taxable
unless specifically excluded. McDowell v. Commissioner, T.C.
Memo. 1997-500; see also Kane v. United States, 43 F.3d 1446,
1449 (Fed. Cir. 1994).
A statute is in the nature of a worker’s compensation act
only if it provides disability payments solely for service-
related personal injury or sickness. Take v. Commissioner, 82
T.C. 630, 634 (1984), affd. 804 F.2d 553 (9th Cir. 1986). A
retirement pension that is determined by reference to the
employee’s age or length of service, even though the employee’s
retirement is occasioned by injury, is includable in income.
Wiedmaier v. Commissioner, T.C. Memo. 1984-540, affd. 774 F.2d
109 (6th Cir. 1985); Sec. 1.104-1(b), Income Tax Regs.
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This Court has previously considered the nature of payments
under certain State disability and/or pension programs. Levesque
v. Commissioner, T.C. Memo. 1999-57; Picard v. Commissioner, T.C.
Memo. 1997-320, revd. 165 F.3d 744 (9th Cir. 1999); Mabry v.
Commissioner, T.C. Memo. 1985-328; Wiedmaier v. Commissioner,
supra. Mabry and Wiedmaier involved payments to disability
retirees that were initially excludable but became includable in
income when the disabled taxpayers would have qualified for a
service retirement if they had continued in active work status.
This Court held in both instances that payments under those
circumstances did not meet the requirements for exclusion under
section 104(a)(1) because benefits were formally transformed into
service retirement when the disabled employee reached a certain
age and/or completed a certain number of years of service.3 It
3
In one instance, the taxpayer’s pension plan labeled his
benefits a “reduced disability allowance”. Wiedmaier v.
Commissioner, T.C. Memo. 1984-540, affd. 774 F.2d 109 (6th Cir.
1985). The Court nevertheless held that the reduced disability
allowance was taxable. Id. Petitioner’s disability/retirement
fund treated his payments during 2003 as taxable and nothing in
the record indicates that the fund labeled them “disability”
payments.
In another case, the Court of Appeals for the Ninth Circuit
considered whether certain payments were taxable. Picard v.
Commissioner, 165 F.3d 744 (9th Cir. 1999), revg. T.C. Memo.
1997-320. The Court of Appeals distinguished the holdings in
Mabry v. Commissioner, T.C. Memo. 1985-328, and Wiedmaier v.
Commissioner, supra, in reversing this Court. That situation
involved an Oakland police officer who sustained injuries while
on duty. Picard v. Commissioner, supra at 744. The disability
retirement plan provided that the amount the taxpayer received
would be reduced on the date on which he would have completed 25
(continued...)
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was explained in Mabry that to be excludable, payments may be
based only on disability and that when other factors, including
age and length of service, are taken into account, the payments
will not fall within section 104(a)(1).
Determination of Petitioner’s Benefits
We look to State law in our consideration of whether the
payments received are disability or retirement payments.
Accordingly, we must examine the bylaws of petitioner’s local
relief association and the applicable Minnesota statutes to
determine whether petitioner must include the payment in income.
The SPPRA bylaws define a “Duty Disability Pensioner” as a
member who has been permanently disabled so as to render
necessary his retirement from active police service because of an
injury received while on duty. A duty disability pensioner
receives 40 units per month if the retirement occurs during the
first 20 years of service.4 Under this regimen, petitioner began
3
(...continued)
years of service, which was when he would have qualified for
retirement if he had never become disabled. Id. The Court of
Appeals held that the payments were disability benefits and
excludable, reasoning that at the time the police officer’s
pension was reduced, he was not transferred from a disability
pension to a general pension. Id. at 746-747. The Court of
Appeals also distinguished Picard from Mabry and Wiedmaier
because the taxpayer’s benefits were determined by the date of
hire rather than reference to age or length of service.
4
The provision states, in part, as follows:
If the date of such retirement [for physical
(continued...)
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receiving disability benefits in the sum of 40 units per month in
1960.
The same bylaws define a service pensioner as a member who
retires after having attained a minimum age of 50 and having at
least 20 years of service in the police department. Notably,
service pensioners also receive a basic pension of 40 units per
month under the SPPRA bylaws. The bylaws do not provide for the
conversion of disability benefits into retirement benefits.
Legislative Changes Affecting SPPRA
In 1982 Minnesota enacted statutes that affected many
recipients of disability pensions. Minn. Stat. Ann. secs.
423A.11, 423A.15 (West 2001). Minn. Stat. Ann. sec. 423A.11
affects individuals receiving a disability benefit from a local
relief association on March 24, 1982. Minn. Stat. Ann. sec.
423A.15.5 This provision terminated the disability benefit of a
member of a local police relief association when that member’s
years of service credited for active duty coupled with his/her
years of receipt of a disability benefit equaled the number of
4
(...continued)
or mental disability because of injury
received or suffered while on duty] is
subsequent to January 1, 1949, he/she shall
receive the sum of 40 units per month if the
retirement is necessary during the first 20
years of his/her service * * *.
5
The texts of Minn. Stat. Ann. secs. 423A.11 and 423A.15
(West 2001) are reproduced in the appendix to this opinion.
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years of service that would entitle him/her to a service pension
of the disability benefit. See Minn. Stat. Ann. sec. 423A.11,
subd. 1(b). This provision applies if the member does not have
enough active-duty credit to entitle him/her to a service pension
in an amount equal to the disability benefit when he/she attains
the minimum age for retirement provided by the relief
association’s bylaws. See id. The disabled member is deemed a
service pensioner after the disability benefit terminates and is
entitled to receive a service pension in an amount equal to the
disability benefit. Minn. Stat. Ann. sec. 423A.11, subd. 2. The
disability benefit that was transformed into a service pension is
then subject to any annual automatic adjustments applicable to
any other service pension payable by the relief association. Id.
Relief association members who meet the age and service
requirements for termination of their disability benefits become
ineligible for a disability benefit. Minn. Stat. Ann. sec.
423A.11, subd. 3.
Petitioner was receiving disability payments from SPPRA, a
local relief association, on March 24, 1982; therefore, Minn.
Stat. Ann. secs. 423A.11 and 423A.15 applied to him. Minn. Stat.
Ann. secs. 423A.11, subd. 1(b), 423A.15. By March 24, 1982, the
length of time that petitioner worked combined with the length of
time that he received disability benefits was long enough to
entitle him to a service pension in the amount of 40 units under
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Minn. Stat. Ann. sec. 423A.11. He also had reached 50 years of
age, the minimum age for receipt of retirement as provided by the
SPPRA bylaws. Accordingly and consistent with the provisions of
Minn. Stat. Ann. secs. 423A.11 and 423A.15, petitioner’s
disability benefits terminated on March 24, 1982. Moreover, the
same statute that terminated his disability benefit specifically
deemed him to be a service pensioner. See Minn. Stat. Ann. sec.
423A.11, subd. 2.
Because Minn. Stat. Ann. sec. 423A.11 “terminated”
petitioner’s disability benefits and deemed him a service
pensioner, his payments could no longer be characterized as
compensation for personal injuries under a statute in the nature
of a worker’s compensation act. See sec. 104(a)(1); sec. 1.104-
1(b), Income Tax Regs. Petitioner’s benefits became taxable when
they were legally and formally transformed into a service
retirement upon petitioner’s attaining a certain age and/or
completing a certain number of years of service. See Mabry v.
Commissioner, T.C. Memo. 1985-328; Wiedmaier v. Commissioner,
T.C. Memo. 1984-540.
These circumstances offer more persuasive support for
treating petitioner’s payments as retirement payments than the
circumstances presented in Picard, Mabry, or Wiedmaier. Minn.
Stat. Ann. sec. 423A.11 explicitly terminates the disability
benefit and deems the payments a retirement pension. Moreover,
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petitioner’s benefits were determined by reference to his age and
length of service, as distinguished from those at issue in
Picard. See Picard v. Commissioner, 165 F.3d at 746.
Minn. Stat. Ann. sec. 423A.11 changed petitioner’s payment
from a disability benefit into a retirement benefit, which was
determined with respect to his age and length of service.
Because petitioner elected PERA coverage under Minn. Stat. ch.
353 in 1994, we now address the effect, if any, of that
election.6
In an attempt to overcome the effects of Minn. Stat. Ann.
sec. 423A.11, petitioner makes three arguments with respect to
his PERA election. Petitioner first argues that his benefits are
not within the statutory scheme of Minn. Stat. Ann. sec. 423A.11
because his benefits are under the statutory scheme of PERA.
Petitioner’s argument is not factually or legally supported by
the record. Petitioner elected PERA coverage in 1994 after his
annuity payments had already been deemed to be retirement
payments under Minn. Stat. Ann. sec. 423A.11 in 1982. See Minn.
6
Petitioner’s election was consistent with the terms of
Minn. Stat. Ann. sec. 353A.08 and Minn. Stat. Ann. sec. 353.659
(West 2004), which were enacted in 1987 to allow for a benefit
recipient to elect to have his plan administered by the Public
Employees Police and Fire Fund Benefit Plan (PEPFF Benefit Plan)
under PERA or to continue coverage with his local relief
association. Petitioner chose to have his plan administered by
PEPFF and PERA in 1994 because that is when his local relief
association consolidated with PERA.
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Stat. Ann. sec. 353.659.7 Accordingly, as of 1994 when he
elected PERA coverage under Minn. Stat. Ann. ch. 353,
petitioner’s payments were retirement payments, and neither party
has presented any evidence or law that the characterization
changed after 1982.
Petitioner next argues that his payments were normal
disability benefits as described by Minn. Stat. Ann. sec.
353.656, subd. 6a.8 To that end, petitioner relies upon the
language of Minn. Stat. Ann. sec. 353.656, subd. 6a, which
provides that a member receiving a disability benefit “may
continue to receive a normal disability benefit” if he/she is
living at age 65.9
To thoroughly address this argument, we look to the complete
text of Minn. Stat. Ann. sec. 353.656. Two provisions within
Minn. Stat. Ann. sec. 353.656 provide for members receiving
disability payments to make an election to continue to receive
disability payments in lieu of other forms of payment.
Minn. Stat. Ann. sec. 353.656 subd. 1a provides that a
disabled member of the PEPFF may elect to receive a normal
7
The text of Minn. Stat. Ann. sec. 353.659 is reproduced in
the appendix to this opinion.
8
The text of Minn. Stat. Ann. sec. 353.656 (West 2004) is
reproduced in the appendix to this opinion.
9
Petitioner has not suggested that there exists, nor have we
found, any statutory directive automatically converting his post-
1994 payments from retirement into disability payments.
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disability benefit. Minn. Stat. Ann. sec. 353.656, subd. 6a,
allows a member who receives a disability benefit to elect to
continue to receive a normal disability benefit if he or she is
living at age 65. Petitioner provided no evidence that he made
such an election.
Minn. Stat. Ann. sec. 353.656, subd. 6a, allows a member who
receives a disability benefit to elect to continue to receive
that benefit at age 65. Petitioner presented no evidence of an
election under this subdivision, either. Also, Minn. Stat. Ann.
sec. 353.656, subd. 6a, would not have applied to him because he
was not receiving a disability benefit at the time this statute
became applicable to PERA members. He was already receiving a
retirement benefit. Moreover, PERA treated petitioner’s benefits
as taxable, and presumably PERA would not have done so had he
made an election to receive normal disability benefits.
Petitioner’s third argument is that Minn. Stat. Ann. sec.
423A.11 is being retroactively applied to him because he began
receiving payments earlier than 1982. The only tax year in this
case is 2003. Petitioner’s retroactivity argument thus misses
the mark.
We are sympathetic to petitioner, a police officer disabled
in the line of duty. Under the facts and circumstances of this
case, however, petitioner’s payments remained retirement payments
once he elected PERA, and they are treated as retirement payments
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under PERA and Minn. Stat. Ann. ch. 353. Accordingly, we must
hold that the payments are subject to tax.
Whether Petitioner Is Liable for the Accuracy-Related Penalty
Respondent determined that petitioners are liable for the
accuracy-related penalty under section 6662(a) with respect to
the underpayment attributable to petitioners’ omission of the
payments from PERA from their income. Petitioners contend that
they should not be liable for this penalty. We agree with
petitioners.
Respondent has the burden of production and must come
forward with sufficient evidence that it is appropriate to impose
the penalty. See sec. 7491(c); Higbee v. Commissioner, 116 T.C.
438, 446-447 (2001). Section 6662(a) imposes an accuracy-related
penalty on any portion of an underpayment of tax required to be
shown on a return if that portion is attributable to negligence
or disregard of rules or regulations or any substantial
understatement of income tax. See sec. 6662(a) and (b)(1) and
(2); sec. 1.6662-2(a)(1) and (2), Income Tax Regs.
Negligence is the lack of due care or failure to do what a
reasonable and ordinarily prudent person would do under the same
circumstances. Neely v. Commissioner, 85 T.C. 934 (1985).
Disregard is characterized as any careless, reckless, or
intentional disregard. See sec. 6662(c); sec. 1.6662-3(b)(2),
Income Tax Regs. Negligence is strongly indicated where a
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taxpayer fails to include on an income tax return an amount of
income shown on an information return. See sec. 1.6662-3(b)(1),
Income Tax Regs.
There is a substantial understatement of income tax if the
amount of the understatement exceeds the greater of either 10
percent of the tax required to be shown on the return, or $5,000.
Sec. 6662(d)(1)(A); sec. 1.6662-4(b)(1), Income Tax Regs.
Petitioners failed to include as income the amount shown on
the information return sent by PERA. Therefore, respondent has
met his burden of production with respect to this penalty. The
accuracy-related penalty does not apply, however, to any portion
of an underpayment for which there was reasonable cause and where
the taxpayer acted in good faith with respect to that portion.
See sec. 6664(c)(1); sec. 1.6664-4(a), Income Tax Regs. The
determination of whether the taxpayer acted with reasonable cause
and in good faith is made on a case-by-case basis, taking into
account all pertinent facts and circumstances. Sec. 6664(c)(1);
sec. 1.6664-4(b), Income Tax Regs. Circumstances that may
indicate reasonable cause and good faith include an honest
misunderstanding of fact or law that is reasonable in light of
all the facts and circumstances, including the experience,
knowledge and education of the taxpayer. Sec. 1.6664-4(b)(1),
Income Tax Regs. We have chosen not to impose penalties in
instances where an area of law is novel or the statute is
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unclear. See, e.g. Williams v. Commissioner, 123 T.C. 144, 153
(2004); Hitchens v. Commissioner, 103 T.C. 711, 719-720 (1994);
Facq v. Commissioner, T.C. Memo. 2006-111.
Petitioner, a disabled policeman, received a disability
annuity for many years. Minnesota law then changed so that
petitioner’s annuity would, at a time defined in the statute,
become a retirement annuity. Further confusing this situation,
petitioner’s annuity changed from one payment plan to another and
came under the provisions of a different Minnesota statute that
used the term “disabled” in a manner that led petitioner to
believe that his annuity continued as one subject to the
disability provisions. Considering petitioner’s education,
background, and the complexity of the statutory scheme in this
case, we hold that petitioner acted with reasonable cause and in
good faith based on his understanding of Minnesota law. His
misunderstanding was reasonable in light of the facts and
circumstances here. Petitioners have established that they had
reasonable cause and acted in good faith when they failed to
include the $37,271 in pension payments on their return.
Accordingly, we hold that petitioners are not liable for the
accuracy-related penalty.
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To reflect the foregoing,
Decision will be entered
for respondent with respect to
the deficiency and for
petitioners with respect to
the penalty under section
6662(a).
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APPENDIX
Provisions of Chapter 423A
423A.11. Recomputation of a disability benefit as a service
pension
Subdivision 1. Termination of disability benefit. The
disability benefit of any disabled member of a local police or
salaried firefighters relief association, whichever is
applicable, shall terminate when the disabled member attains:
(a) the minimum age for the receipt of a service pension
specified in the articles of incorporation or the bylaws of the
relief association, if the disabled member has credit for at
least the number of years of service for active duty which would
entitle the disabled member to a service pension in an amount
equal to the amount of the disability benefit; or
(b) the age attained by the disabled member when the total
number of years of service credited for active duty and of years
of receipt of a disability benefit equals the number of years of
service credit which would entitle the disabled member to a
service pension in an amount equal to the amount of the
disability benefit, if the disabled member has credit for less
than the number of years of service for active duty which would
entitle the disabled member to a service pension in an amount
equal to the amount of the disability benefit when the disabled
member attains the minimum age for the receipt of a service
pension specified in the articles of incorporation or the bylaws
of the relief association.
Subd. 2. Amount of disability benefit recomputed as a service
pension. After the disability benefit terminates, the disabled
member shall be deemed to be a service pensioner and shall be
entitled to receive a service pension in an amount equal to the
disability benefit without any benefit offset required pursuant
to any applicable provision of law, articles of incorporation or
bylaws which was payable by the relief association immediately
prior to the date when the disability benefit terminated pursuant
to this section or the service pension otherwise payable based on
the service credit for active duty of the person, whichever
amount is greater. The disability benefit recomputed as a service
pension shall be subject to any annual automatic post retirement
adjustments or escalation applicable to any other service pension
payable by the relief association.
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Subd. 3. Limitation on disability benefit coverage. No relief
association member who has attained the age and acquired the
service credit for termination of a disability benefit specified
in subdivision 1 shall be eligible for a disability benefit after
that date. If a relief association member who is ineligible for a
disability benefit solely pursuant to the limitation set forth in
this subdivision becomes permanently unable to perform the duties
of a police officer or a firefighter, whichever is applicable, by
virtue of a medically determinable illness or injury, the member
shall be eligible to a service pension in an amount equal to the
amount of the disability benefit which would have been paid had
the person been entitled to a disability benefit, or the amount
of the service pension otherwise payable based on the service
credit for active duty of the person, whichever is greater.
423A.15. Effect of provisions for existing disability benefit
recipients
The provisions of section 423A.06 shall apply to any member of
any applicable local relief association in active service on or
after March 24, 1982. The provisions of section 423A.11 shall
apply to any person receiving a disability benefit from a local
relief association on or after March 24, 1982. The provisions of
section 423A.12 shall apply to any person who returns to active
employment as a police officer or firefighter, whichever is
applicable, after receipt of a permanent disability benefit. The
provisions of section 423A.14 shall apply to any person who first
commences receipt of a disability benefit after March 24, 1982.
Provisions of Chapter 353 (PERA)
353.656. Disability benefits
Subdivision 1. In line of duty; computation of benefits. A
member of the police and fire plan who becomes disabled and
physically unfit to perform duties as a police officer,
firefighter, or paramedic as defined under section 353.64,
subdivision 10, as a direct result of an injury, sickness, or
other disability incurred in or arising out of any act of duty,
which has or is expected to render the member physically or
mentally unable to perform the duties as a police officer,
firefighter, or paramedic as defined under section 353.64,
subdivision 10, for a period of at least one year, shall receive
disability benefits during the period of such disability. The
benefits must be in an amount equal to 60 percent of the "average
salary" as defined in section 353.651, subdivision 2, plus an
additional percent specified in section 356.315, subdivision 6,
of that average salary for each year of service in excess of 20
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years. If the disability under this subdivision occurs before the
member has at least five years of allowable service credit in the
police and fire plan, the disability benefit must be computed on
the "average salary" from which deductions were made for
contribution to the police and fire fund.
Subd. 1a. Optional annuity election. A disabled member of the
police and fire fund may elect to receive the normal disability
benefit or an optional annuity as provided in section 353.30,
subdivision 3. The election of an optional annuity may be made
prior to commencement of payment of the disability benefit or as
specified under subdivision 6a. The optional annuity shall begin
to accrue on the same date as provided for the disability benefit.
(1) If the person who is not the spouse of the member is named
as beneficiary of the joint and survivor optional annuity, the
person is eligible to receive the annuity only if the spouse, on
the disability application form prescribed by the executive
director, permanently waives the surviving spouse benefits under
section 353.657, subdivisions 2 and 2a. If the spouse of the
member refuses to permanently waive the surviving spouse
coverage, the selection of a person other than the spouse of the
member as a joint annuitant is invalid.
(2) If the spouse of the member permanently waives survivor
coverage, the dependent child or children, if any, continue to be
eligible for survivor benefits, including the minimum benefit
under section 353.657, subdivision 3. The designated optional
annuity beneficiary may draw the monthly benefit; however, the
amount payable to the dependent child or children and joint
annuitant must not exceed the 70 percent maximum family benefit
under section 353.657, subdivision 3. If the maximum is exceeded,
the benefit of the joint annuitant must be reduced to the amount
necessary so that the total family benefit does not exceed the 70
percent maximum family benefit amount.
(3) If the spouse is named as the beneficiary of the joint and
survivor optional annuity, the spouse may draw the monthly
benefit; however, the amount payable to the dependent child or
children and the joint annuitant must not exceed the 70 percent
maximum family benefit under section 353.657, subdivision 3. If
the maximum is exceeded, each dependent child will receive ten
percent of the member's specified average monthly salary, and the
benefit to the joint annuitant must be reduced to the amount
necessary so that the total family benefit does not exceed the 70
percent maximum family benefit amount. The joint and survivor
optional annuity must be restored to the surviving spouse, plus
applicable postretirement adjustments under section 356.41, as
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the dependent child or children become no longer dependent under
section 353.01, subdivision 15.
Subd. 2. Benefits paid under workers' compensation law. If a
member, as described in subdivision 1, is injured under
circumstances which entitle the member to receive benefits under
the workers' compensation law, the member shall receive the same
benefits as provided in subdivision 1, with disability benefits
paid reimbursed and future benefits reduced by all periodic or
lump sum amounts paid to the member under the workers'
compensation law, after deduction of amount of attorney fees,
authorized under applicable workers' compensation laws, paid by a
disabilitant if the total of the single life annuity actuarial
equivalent disability benefit and the workers' compensation
benefit exceeds: (1) the salary the disabled member received as
of the date of the disability or (2) the salary currently payable
for the same employment position or an employment position
substantially similar to the one the person held as of the date
of the disability, whichever is greater. The disability benefit
must be reduced to that amount which, when added to the workers'
compensation benefits, does not exceed the greater of the
salaries described in clauses (1) and (2).
Subd. 2a. Reduction restored; overpayment. A disabled member
who is eligible to receive a disability benefit under subdivision
2 as of June 30, 1987, and whose disability benefit amount had
been reduced prior to July 1, 1987, as a result of the receipt of
workers' compensation benefits, must have the disability benefit
payment amount restored, as of July 1, 1987, calculated in
accordance with subdivision 2. However, a disabled member is not
entitled to receive retroactive repayment of any disability
benefit amounts lost before July 1, 1987, as a result of the
reduction required before that date because of the receipt of
workers' compensation benefits.
Any disability benefit overpayments made before July 1, 1987,
and occurring because of the failure to reduce the disability
benefit payment to the extent required because of the receipt of
workers' compensation benefits, may be collected by the
association through the reduction of disability benefit or
annuity payment made on or after July 1, 1987, until the
overpayment is fully recovered.
Subd. 3. Nonduty disability benefit. Any member of the police
and fire plan who becomes disabled after not less than one year
of allowable service because of sickness or injury occurring
while not on duty as a police officer, firefighter, or paramedic
as defined under section 353.64, subdivision 10, and by reason of
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that sickness or injury the member has been or is expected to be
unable to perform the duties as a police officer, firefighter, or
paramedic as defined under section 353.64, subdivision 10, for a
period of at least one year, is entitled to receive a disability
benefit. The benefit must be paid in the same manner as if the
benefit were paid under section 353.651. If a disability under
this subdivision occurs after one but in less than 15 years of
allowable service, the disability benefit must be the same as
though the member had at least 15 years service. For a member who
is employed as a full-time firefighter by the department of
military affairs of the state of Minnesota, allowable service as
a full-time state military affairs department firefighter
credited by the Minnesota state retirement system may be used in
meeting the minimum allowable service requirement of this
subdivision.
Subd. 4. Limitation on disability benefit payments. (a) No
member is entitled to receive a disability benefit payment when
there remains to the member's credit unused annual leave or sick
leave or under any other circumstances when, during the period of
disability, there has been no impairment of the person's salary
as a police officer or a firefighter, whichever applies.
(b) If a disabled member resumes a gainful occupation with
earnings less than the disabilitant reemployment earnings limit,
the amount of the disability benefit must be reduced as provided
in this paragraph. The disabilitant reemployment earnings limit
is the greater of:
(1) the salary earned at the date of disability; or
(2) 125 percent of the salary currently paid by the employing
governmental subdivision for similar positions.
The disability benefit must be reduced by one dollar for each
three dollars by which the total amount of the current disability
benefit, any workers' compensation benefits, and actual earnings
exceed the greater disabilitant reemployment earnings limit. In
no event may the disability benefit as adjusted under this
subdivision exceed the disability benefit originally allowed.
Subd. 5. Proof of disability. A disability benefit payment
must not be made except upon adequate proof furnished to the
association of the existence of such disability, and during the
time when disability benefits are being paid, the association has
the right, at reasonable times, to require the disabled member to
submit proof of the continuance of the disability claimed. A
person applying for or receiving a disability benefit shall
provide or authorize release of medical evidence, including all
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medical records and information from any source, relating to an
application for disability benefits.
Subd. 5a. Cessation of disability benefit. The association
shall cease the payment of an in-line-of-duty or nonduty
disability benefit the first of the month following the
reinstatement of a member to full time or less than full-time
service in a position covered by the police and fire fund.
Subd. 6. Repealed by Laws, 1993, c. 307, art. 4, § 54.
Subd. 6a. Disability survivor benefits. If a member who is
receiving a disability benefit under subdivision 1 or 3:
(a) dies before attaining age 65 or within five years of the
effective date of the disability, whichever is later, the
surviving spouse shall receive a survivor benefit under section
353.657, subdivision 2 or 2a, unless the surviving spouse elected
to receive a refund under section 353.32, subdivision 1. The
joint and survivor optional annuity under subdivision 2a is based
on the minimum disability benefit under subdivision 1 or 3, or
the deceased member's allowable service, whichever is greater.
(b) is living at age 65 or five years after the effective date
of the disability, whichever is later, the member may continue to
receive a normal disability benefit, or the member may elect a
joint and survivor optional annuity under section 353.30. The
optional annuity is based on the minimum disability benefit under
subdivision 1 or 3, or the member's allowable service, whichever
is greater. The election of this joint and survivor annuity must
occur within 90 days of age 65 or the five-year anniversary of
the effective date of the disability benefit, whichever is later.
The optional annuity takes effect the first of the month
following the month in which the person attains age 65 or reaches
the five-year anniversary of the effective date of the disability
benefit, whichever is later.
(c) if there is a dependent child or children under paragraph
(a) or (b), the association shall grant a dependent child benefit
under section 353.657, subdivision 3.
353.659. Local relief association consolidation account benefits
For any person who has prior service covered by a local police
or firefighters relief association which has consolidated with
the public employees retirement association and who has elected
the type of benefit coverage provided by the public employees
police and fire fund benefit plan under section 353A.08 following
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the consolidation, any retirement benefits payable are governed
by the applicable provisions of this chapter. For any person who
has prior service covered by a local police or firefighters
relief association which has consolidated with the public
employees retirement association and who has not elected the type
of benefit coverage provided by the public employees police and
fire fund benefit plan under section 353A.08 following the
consolidation, any retirement benefits payable are governed by
the provisions of sections 353B.01 to 353B.13 which apply to the
relief association.