TSERS Disability Retirement Frequently Asked Questions

Q: What are the eligibility requirements for TSERS disability retirement benefits?

For TSERS disability retirement benefits:

1. You must have five years of maintained TSERS retirement membership service prior to January 1, 1988
2. You must apply to receive TSERS disability retirements at least one day but not more than 120 days prior to your disability retirement date
3. You must be approved by the Medical Board to be totally and permanently disabled for the further performance of your job
4. Your disability must have been continuous, must likely be permanent, and must have been incurred at the time of active employment; and
5. You must either not yet be eligible to receive an unreduced TSERS service retirement benefit, or else you have not reached age 65 if you have five or more years of maintained TSERS membership service prior to July 1, 1982 (see next question).

If you meet the above requirements for TSERS disability retirement, you will be able to choose to receive either TSERS disability retirement benefits or DIPNC benefits (see next question).

Your decision would be based, first, on which type of TSERS disability retirement benefits are available to you. Second, you would need to compare the relative financial benefit of drawing TSERS disability retirement (which has no offsets) versus DIPNC benefits (with mandatory offsets). Potential survivor benefits are also different in the two systems.

If your five or more years of maintained service accrued between July 1, 1982 and January 1, 1988, your TSERS disability retirement benefits will be based, in part, on the amount of service that you would have attained if you had been able to remain in service until you would have otherwise been eligible for an unreduced service retirement benefit.

If you have five or more years of maintained TSERS  membership service prior to July 1, 1982, and meet all the other qualifications, you will be eligible to receive TSERS disability retirement benefits under a different provision which allows the calculation of your benefit to be based, in part, on the amount of service that you would have attained if you had been able to remain in service until age 65.

In either case, you will have the opportunity to elect to receive either monthly TSERS disability retirement benefits or monthly DIPNC benefits. Of course, after you have been approved by our Medical Board for disability benefits, the Retirement Systems Division will provide you with figures, and an explanation of the benefits and conditions applicable to you, to enable you to make your choice.

Under current law, the State Health Plan retiree group individual coverage under the PPO 70/30 plan is provided at no cost to you. The coverage begins on the first day of the month following the month you retire on TSERS disability retirement.

You should talk with your employer, review the guides on the applicable disability forms (see next question), and submit a complete disability application package (see next question) to the Retirement Systems Division.

Upon receipt of a complete disability application package (see above question), the Retirement Systems Division’s Disability staff will review your account to verify that you meet disability benefit eligibility requirements. The staff will schedule your file for Medical Board review, typically within 3 - 4 weeks.

You can provide your medical documentation directly to the Retirement Systems Division, but your employer will need to verify your employment information and provide other information on your Form 7 to the Retirement Systems Division in order for your disability retirement benefits to be processed.

If your file has been approved by the Medical Board and your Form 7E (see next question) has been properly completed and submitted to the Retirement Systems Division by your disability retirement effective date, you should expect your first benefit payment to be mailed from our office on the 25th of the month in which you retire, with all future benefits being directly deposited into your banking account by the 25th of each following month. If your file has not been approved by the Medical Board by your disability retirement effective date, you can expect to begin receiving TSERS disability retirement benefits within 3 - 4 weeks of Medical Board approval if all of your properly completed paperwork has been submitted to the Retirement Systems Division.

Your first monthly disability retirement benefit will be mailed to you. Thereafter, we will direct deposit your monthly benefit into your bank account on the 25th day of each month. In December, your benefit will be deposited on the 20th. If the pay date falls on a Saturday, Sunday or holiday, your deposit will be made on the last work day before the pay date. Direct deposit is fast, automatic and free. 

Reduced payment survivor plans under Options 2, 3, 6-2 and 6-3 are also available; however, Option 4 is not available.

On an annual basis, you may earn up to the difference between your highest consecutive 12 months of salary in the 48 months preceding your disability retirement date and the amount of your annual disability retirement benefits, without affecting your disability retirement benefit. If you earn more than this amount, your disability retirement benefit will be reduced to an amount equal to the amount you exceeded the earnings limits. The amount you are allowed to earn is increased each January by any increase in the annual national consumer price index.

If you exceed your earnable allowance limit, the Retirement Systems Division is required to reduce your benefit equal to the amount you exceeded the earnings limits. If you are eligible to convert to a service retirement, the benefit will remain reduced and continue to be reduced each year based on earnings unless you contact the Retirement Systems Division to make an irrevocable election to convert to an early service retirement. If you are not eligible to convert to an early service retirement the benefit will remain reduced and continue to be reduced every year based on your earnings until eligible for an early service retirement or until you contact RSD to make an irrevocable election to convert to an early service retirement. The early service retirement will be based on your salary and years of service prior to your disability date.

State law requires each TSERS disability retiree to complete and submit a Statement of Income form to report earnings from employment each year to the Retirement System until you reach the date as of which you would have been first eligible for unreduced retirement had you been able to continue working. If you do not provide the information within 120 days of the request, your disability retirement benefit may be suspended until the information is provided, and if the requested information is not provided after an additional 180 days, your benefit including health coverage through the State Health Plan may be terminated.

The frequency of your re-examinations will be determined by the Medical Board depending on your disabling condition.

The Retirement Systems Division will send you the re-examination forms and notification 90 days prior to your re-examination date. After 60 days have passed, you will be sent a final notice which will inform you of the date that your disability benefit will be suspended if you have not submitted the requested information. Upon suspension, your disability benefit will not be reinstated until you have submitted the requested information and have been re- approved by the Medical Board. If you do not provide the requested information within one year, your benefit including health coverage through the State Health Plan may be terminated.

Your disability retirement benefits will end:

• if a licensed physician does not continue to certify your disability when a re-examination is requested by the Medical Board
• if you return to work as a contributing TSERS member
• when you become eligible for an unreduced service retirement benefit (see next question)
• if you do not provide the annual Statement of Income within 120 days of the request, your disability retirement benefit may be suspended until the information is provided, and if the requested information is not provided after an additional 180 days, your benefit including health coverage through the State Health Plan may be terminated.
• if you do not provide the requested information for re-examination within one year of the request, your benefit including health coverage through the State Health Plan may be terminated.
• at your death

When you reach the eligibility requirements for an unreduced service retirement, the Retirement System will send you a letter notifying you that you are being converted from disability retirement to service retirement. Upon conversion to service retirement, your monthly benefit amount will continue to be the same amount, but you will no longer be subject to medical re-examinations or disability retirement earnings limitations, and you will no longer have to submit an annual Statement of Income form. However, you will be subject to the return-to-work laws that apply to retirees who are receiving TSERS service retirement benefits (see guidance on Return-to-Work). One return-to-work law which will not apply to you, at the time of your service retirement, is the six-month waiting period.

After you retire, each year by January 31 we will send you a Form 1099-R, which is similar to Form W-2 (Statement of Income and Tax Withheld), which you received annually while you were employed. The 1099-R shows the amount of your retirement benefits, the taxable portion (if any) of those benefits, the amount of tax withheld (if any), and other related information. We also send copies to the Internal Revenue Service and the North Carolina Department of Revenue. Therefore, you should report your retirement benefits on your federal and North Carolina tax returns regardless of whether you owe any income tax.

Federal Income Tax

Part of your retirement benefit may not be subject to federal income tax because the tax was withheld while you were working. Included in the non-taxable part of your retirement benefits are contributions you made before July 1, 1982, and any non-rollover service purchases you made.

North Carolina Income Tax

If you are a North Carolina resident and have maintained five or more years of retirement service credit as of August 12, 1989, your TSERS retirement benefit is not subject to North Carolina income tax. If you do not have five years of maintained retirement service credit as of August 12, 1989, the taxable portion of your retirement benefit is subject to North Carolina income tax.

If you are not a resident of North Carolina, you may not owe North Carolina income tax on your TSERS retirement benefit. However, you may owe state income tax in the state where you live. Contact your tax advisor, the North Carolina Department of Revenue or the Department of Revenue in your resident state for information relative to your situation. NC Retirement Systems can withhold only North Carolina income tax. We cannot withhold any other state’s income tax from your monthly benefit.

You may contact us at the number and email listed below.