Public Workers Beware - New Ruling Extinguishes Workers' Compensation Benefits

More bad news for workers. The latest Appellate Division decision reduces pension benefits for all public workers including state workers, police officers, firefighters and teachers who are totally disabled. They will lose the ability to collect workers' compensation benefits when they also receive an Ordinary Disability Pension, the New Jersey Appellate Division has ruled.

Decided November 8, 2004, the case of Rosales vs. State of New Jersey, A-2110-02T, reversed the trial judge's finding that workers' compensation benefits may only be offset against Accidental Disability Pensions. Prior to this decision, a public worker who was totally disabled from a non-traumatic event could collect an Ordinary Disability Pension and benefits from the workers' compensation system at the same time. This decision flies in the face of the Legislature's clear intent as the applicable Statute permits public employees to receive their Ordinary Disability Pension without reduction by the amount of any post retirement compensation. Further, the Division of Pensions has consistently interpreted and applied the various statutory provisions to mean that there is no reduction of benefits for recipients of Ordinary Disability Pensions. The Division of Pensions in all of its publications, employee advisory releases and on its web site have told all public employees and employers that Ordinary Disability Pensions are not subject to a reduction for receipt of Workers' Compensation periodic benefits.

The impact of the decision is enormous as there is a huge difference between the various types of pensions that are available to public workers and and we will now need to fight harder to obtain the best benefit for our public employee clients.

The three basic types of pension benefits are: 1) Retirement based on years of service over 55 multiplied by the pertinent wage (not applicable here); 2) Accidental Disability Pension set at 72.67% of the pertinent wage; and 3.) Ordinary Disability Pension set at 43.6 % of the pertinent wage. There are also significant tax advantages to the Accidental Disability Pension as it has been classified as a Workers' Compensation benefit and, as such, is fully tax exempt from state and federal income tax. The Ordinary Disability Pension is subject to state and federal income tax and the Time Service Pension is fully taxable. The Police and Fireman's Pension Retirement Act (PFRS) and the State Police Retirement System (SPRS) standard for an Ordinary Disability Pension requires 4 years of employment for eligibility and the SPRS requires 5 years. Each of these provisions contain a disability test that the member be permanently mentally or physically incapable of performing usual duty or any other available duty to which the employer is willing to assign the officer. The Public Employees Retirement System (PERS)and The Teachers Pension and Annuity Fund (TPAF) statutory test for award of an Ordinary Disability Pension provides that a member,under 60 years of age, who has 10 or more years of credit for New Jersey service and that the member is physically or mentally incapacitated for the performance of duty and should be retired. No longer will a public employee be content to receive just an Ordinary Disability Pension. Because the benefits of an Accidental Disability Pension far outweigh the Ordinary disability pension, it is much more difficult to obtain. Procedurally, an employee who sustained an injury or occupational disease and who had to cease public employment would file for an Accidental Disability Pension and Workers' Compensation.

Very often the disability did not meet the "traumatic event" requirements of Accidental Disability and an award an Ordinary Disability Pension was given. Strategically, the employee would often not appeal the denial of the Accidental Disability Pension as they would be able to receive additional workers' compensation benefits and now this must change and more pension rulings will have to be contested. It is my opinion that disabled workers should obtain the help of an attorney before filling out their disability papers so that have a chance to maximize their recovery.