If you become disabled and you no longer receive compensation from the City, your employment will be deemed terminated and you will be entitled to a distribution of your vested account balance. In addition to your participation in this Plan, you are covered by the State of Colorado Police and Fire Death and Disability Fund, which is administered by the Fire and Police Pension Association (FPPA).
Disability Retirement – Permanent Occupational and Total Disabilities Only Summary of Rules, Regulations and Procedures
Overview
Active participants in the City of Aurora-Police Money Purchase Pension Plan (MPPP) who become disabled are eligible for disability benefits provided through the Statewide Death and Disability Plan, administered by the Fire and Police Pension Association (FPPA). These benefits are offset (reduced) based upon the balance of your MPPP retirement account. In other words, a portion of the benefit is funded by your retirement account, and the remainder is paid from the FPPA Statewide Death and Disability Plan.
Step-by-step Summary of the Process
FPPA approves your eligibility for disability benefits and determines the total benefit amount, based upon the type of disability and your current base salary.
The MPPP is instructed to provide your account balance as of the effective date of your disabled status to the FPPA. This excludes amounts rolled over from other retirement plans and mandatory contributions in excess of 16 percent.
The offset amount, which is the portion of your disability benefit funded by your retirement account, is calculated by FPPA using a formula that considers your current age, life expectancy, disability type, and account balance.
For example, if the total benefit is determined to be $2,000 monthly, and the current value of your MPPP account could provide a lifetime benefit of $700 monthly, then your FPPA benefit would be $1,300.The Participant provides the MPPP with a copy of the FPPA offset amount and benefit calculations, along with documentation describing whether the disability resulted from an on-duty or off-duty injury or disease.
On-Duty Disability
These benefits are exempt from federal and state income taxes and may not be held in a tax-deferred retirement account (such as MPPP); therefore, the Participant must also complete a MPPP Distribution form, indicating a lump-sum distribution. Upon receipt of the offset distribution the Participant may invest it or spend it. The benefit to you is that you won’t pay taxes or have penalties on the distribution. The amount (if any) that is over and above the offset may be rolled over to an IRA.
Off-Duty Disability
These distributions are subject to ordinary income tax and may remain in a tax-differed retirement account (such as MPP), or rolled-over to an IRA. The Participant must also complete a MPPP Distribution form, and may choose to receive installment distributions, a partial-sum distribution, a lump-sum distribution, or postpone distribution until a future date.The MPPP’s attorneys must review and confirm FPPA’s calculations prior to approving a distribution from the retirement plan, which is conducted within twenty (20) days of receipt of the documents described in section 4 (above). The MPPP attorneys provide you with an opinion letter for your records that states the offset amount is exempt from income taxes. Additionally, the MPPP attorneys provide written instructions to MPPP’s custodian regarding distribution and income tax withholding.
IMPORTANT: The legal costs (flat-fee of $2,000) incurred during this process are paid by the participant before the distribution is made.Upon MPPP’s receipt of the attorney’s approval and instructions, the distribution request is forwarded to the Plan’s record-keeper and custodian for distribution instructions.