Disability vs PERS Retirement Ohio: Key Differences

The Public Employees Retirement System (PERS) of Ohio provides financial security to public employees. Disability benefits represent a crucial safety net for those unable to work due to illness or injury. Retirement eligibility under PERS Ohio depends on service credit and age criteria. Understanding the nuances of disability vs pers retirement ohio is paramount for Ohio's public servants. This article examines the key differences between these two distinct benefit pathways.

Image taken from the YouTube channel OhioPERS1 , from the video titled OPERS Your Partner in Retirement .

Disability vs. PERS Retirement Ohio: Understanding the Key Differences

Understanding the nuances between disability retirement and regular PERS (Public Employees Retirement System) retirement in Ohio is crucial for public employees considering either option. Both offer financial security in later life, but the eligibility requirements, benefit calculation methods, and tax implications differ significantly. This explanation will outline these differences, providing a clear comparison to aid informed decision-making.

Eligibility Requirements

The initial hurdle is meeting the eligibility criteria for each type of retirement. These criteria dictate whether you even qualify to apply.

Regular PERS Retirement

• Age and Service Credit: Generally, you become eligible for unreduced retirement benefits under PERS with a certain combination of age and years of service credit. Examples include:
  • Age 60 with 5 years of service
  • Any age with 30 years of service
• Purchased Service Credit: Under certain circumstances, members can purchase service credit to reach retirement eligibility faster.
• Active Employment: Typically, you must be an active PERS member at the time of application.

Disability Retirement

• Service Credit Requirement: A minimum amount of service credit is typically required. This is often less than the years needed for regular retirement.
• Permanent Incapacity: The key requirement is demonstrating a permanent physical or mental incapacity that prevents you from performing your job duties. This requires medical documentation and assessment.
• Suitable Alternative Positions: PERS assesses whether the member could be reasonably accommodated in a similar position or another position within the same agency. Disability retirement is considered only if such an accommodation is not feasible.
• Application Process: The application process is more complex than for regular retirement, requiring extensive medical documentation and often independent medical evaluations.

Benefit Calculation

The formulas used to calculate monthly benefits for disability and regular retirement differ, leading to potentially significant variations in payment amounts.

Regular PERS Retirement Benefit Calculation

• Formula-Based: The benefit is generally calculated using a formula that considers:
  • Average final salary (AFS) – often based on the highest years of earnings.
  • Years of service credit.
  • A percentage multiplier specified by PERS.
• Benefit Options: Members have several options for receiving their benefits, including single lifetime annuity, joint and survivor annuity, and others. These choices impact the amount of the monthly payment.

Disability Retirement Benefit Calculation

• Similar Formula, Different Considerations: While the benefit may use a similar formula as regular retirement (AFS x Service Credit x Multiplier), the variables can be adjusted.
• Minimum Benefit Guarantee: PERS might guarantee a minimum disability benefit amount, even if the calculated formula results in a lower payment. This is especially important for those with limited service credit.
• Impact of Earnings: Receiving income from employment after beginning disability retirement may reduce your disability benefit. PERS monitors income and adjusts benefits accordingly.

Taxation

Tax implications are a critical consideration when choosing between retirement options. Both regular and disability retirement benefits are generally subject to federal and state income taxes, but there can be nuanced differences.

Regular PERS Retirement Taxation

• Taxable Income: Benefits are considered taxable income, similar to wages.
• Tax Withholding Options: Retirees can choose how much federal and state income tax to withhold from their monthly payments.
• Potential Tax Deductions/Credits: Retirees may be eligible for certain tax deductions or credits based on their individual circumstances (e.g., age, medical expenses).

Disability Retirement Taxation

• Taxable Income (with potential exception): Similar to regular retirement, disability retirement benefits are generally taxable.
• Potential for Exclusion: In some circumstances, a portion of disability retirement benefits might be excludable from gross income for federal tax purposes if it meets the requirements for payments received under an accident or health plan. Consult with a tax professional for specific guidance.
• Offset by Social Security Disability: If you also receive Social Security Disability Insurance (SSDI), it could affect your PERS disability benefits. The amounts are often coordinated, which can impact the overall tax picture.

Return to Work

The rules governing returning to work after retiring under PERS and disability retirement are markedly different.

Regular PERS Retirement and Returning to Work

• Re-employment Rules: PERS has specific rules regarding returning to work for a PERS-covered employer after retirement. There may be limitations on the number of hours worked or earnings permitted without impacting your retirement benefit.
• Waiting Periods: Certain waiting periods may apply before you can return to work for a PERS-covered employer.

Disability Retirement and Returning to Work

• Significant Restrictions: Returning to work while receiving disability retirement benefits is subject to stricter limitations.
• Earnings Cap: There are typically strict limits on the amount of earnings you can receive from employment without impacting your disability benefit. Exceeding these limits can result in a reduction or termination of disability benefits.
• Medical Review: PERS may conduct periodic medical reviews to assess whether you remain incapacitated and eligible for disability benefits.
• Reporting Requirements: You are generally required to report any employment income to PERS.

Key Differences Summary Table

Video: Disability vs PERS Retirement Ohio: Key Differences

Play Video