Current Pension Topics
NYCERS's Disability Hardball

By JOEL L. FRANK

The Social Security Administration, according to its Web site, poses five questions in deciding whether a person is disabled. It begins with, "Are you working?", then asks whether the condition the person suffers from interferes with basic work-related activities, is the same in its impact as medical conditions considered disabling, and whether it interferes with the person's ability to do the work they did previously.

The fifth question concerns whether, if the person can't do his or her old job, they are capable of doing any other type of work. "If you can adjust to other work, your claim (for Social Security disability benefits) will be denied."

The Web site continues: "Disability under Social Security is based on your inability to work. We consider you disabled under Social Security rules if you cannot do work that you did before and we decide that you cannot adjust to other work because of your medical condition(s). Your disability must also last or be expected to last for at least one year or to result in death."

The New York City Employees' Retirement System's definition of disability is: "An Ordinary Disability Retirement benefit is payable when a disability prevents a NYCERS member from performing the routine duties of his or her job title."

I have recently received a few calls from city workers who have been awarded Social Security Disability yet denied an Ordinary Disability Retirement from NYCERS. I find this bizarre inasmuch as the definition of "disability" under NYCERS is much more liberal than the definition under Social Security.

Case in point: A city electrician for the Fire Department is found by the Social Security Administration to be unable to perform his normal duties as an electrician as well as unable "to adjust to other work." (Steps 4-5). He has been found to be totally disabled under the rules of Social Security. So why did the NYCERS Medical Board, consisting of three doctors, tell him to go back to work as an electrician for the Fire Department? This is ridiculous and must be remedied. Once an individual is found by Social Security to be unable to do his or her regular work or "to adjust to other work," he or she should be granted, automatically, an Ordinary Disability Retirement from the state or city retirement system in which he or she is a member. I call on the unions to make this a legislative and/or contractual item forthwith. This nonsense and cruelty has been going on for all too many years.

Q.: I am 55. Upon retirement can I take money from my 457(b) and 401(k)? And must I pay back the loans I have taken from these two accounts?

M.F.

A.: During retirement you are free to make withdrawals from these accounts at will. Required Minimum Distributions (RMD) must begin at age 70-1/2. Withdrawals are subject to Federal income tax. You are not required to pay back the loans. If you do, well and good. If you do not, the loan balance will be reported to the IRS as a taxable distribution.

Tip: "Borrowing" from a pre-tax account is borrowing from oneself. Borrowing is best when you borrow someone else's money, not your own. If you have $25,000 in a pre-tax account and borrow (withdraw) $10,000, your investment is reduced to $15,000. You have lost for all time the growth that would have been generated by the $10,000. If you always have an outstanding loan from a pre-tax investment account, your account balance will be substantially less upon retirement, even if you pay back all of the loans. This is because the various loans (withdrawals) you took were not generating investment gains because they were removed from the investment account.

Mr. Frank is a fee-only Retirement Financial Planner. He can be reached by telephone at (732) 536-9472, by fax at (732) 536-7373, or via e-mail at rollover@optonline.net.