Taxability of Accidental Disability...

I received my accidental disability pension including all backpay in a very timely fashion. Good job on that one Division of Pensions and Benefits! I also went to an accountant to ammend the last 3 years' tax returns. He needed paperwork/clarification on how the pension is coded for tax purposes in order to keep the IRS from needing further paperwork when I file.

I checked every fact sheet available over the internet and except for a general statement about the State of NJ filing it as untaxable, no where could I find out why. The State PBA pension consultant was the first to provide me the information I needed. Further calls to the Division of Pensions and Benefits, including having to get nasty at one point, finally yielded the same results. It seemed like some big secret as to why this pension is not taxable. How hard would it be to put this on a fact sheet available to everyone who receives accidental disability?

So here it is folks...

"The Taxpayer received service incurred disability pension from the State of New Jersey Police and Fireman's Pension System. This pension is excludable from Gross Income under Section 104 (a)(1) of the IRC and Section 1.104-1(b) of the IRS Regs. which excludes from Gross Income the amounts received by an employee under a Workmen's Compensation Act or under a Statute in the nature of a W.C. Act that provides benefits in the nature of, in lieu of, or supplemental to W.C. to the employee for personal injury or sickness incurred in the course of employment."

The legal ruling of Caplin & Drysdale Attorneys (a law firm which specializes in federal taxation) filed January 11, 2001 caused the State of New Jersey to change their policy and to consider certain accidental disability pensions to be excludable from Gross Income.

The Division will, upon request, send ammended 1099R forms to the taxpayer and the IRS.

What's going on at the Division of Pensions and Benefits???

Since the Supreme Court decision in my case...the first major change in case law in the last 20+ years...I have received calls from two of my former fellow corrections officers, who are disabled and attempting to receive accidental disability, saying that the Division of Pensions and Benefits has put all accidental disability cases on hold pending clarification on this new standard.

How much clearer could the Supreme Court make the standard? Besides the givens for accidental disability...
"the worker is totally and permanently disabled as a direct result of a
traumatic event occurring during and as a direct result of the performance
of his regular or assigned duties and that such disability was not the result
of the member's willful negligence and that such member is mentally or
physically incapacitated for the performance of his usual duty and of any
other available duty in the department which his employer is willing to
assign to him.

The Supreme Court further clarified traumatic event as an occurence which was...
"(a) identifiable as to time and place;
(b) unexpected and undesigned; and
(c) not caused by a pre-existing condition alone or in combination
with work effort"

How much clearer could it be Division? Unless you have a pre-existing condition or were hurt by repetitive activity, you pretty much get accidental disability even those people who were traditionally excluded due to slips and falls are now included by this Court as deserving of accidental disability. This decision was sent down to clear up the confusion and keep unsuspecting, injured people from having to go bankrupt waiting months and years for court decisions and paying exhorbitant amounts in attornies fees.

Kind of makes you wonder what sort of shanagans the Board is trying to play or what sort of arguments they are trying to grasp out of thin air to keep deserving people from getting what they deserve. I can asure you that I will continue to be the watch dog on this issue.