UNDERSTANDING OFFSET #2

HF1234/SF1959 SUPPLEMENT

The purpose of the proposed Offset #2 language is to better align income between Police & Fire disability recipients and active mem-
bers. This change also aligns this offset process with other comparable Plans, such as the State Patrol Plan and PERA’s Correctional Plan.

Offset #2 is a reduction to the duty disability benefit when the sum of the duty disability benefit plus reemployment earnings exceed
100% of an active member’s salary in a similar position. The reduction is equal to $1 for every $2 when the sum exceeds 100% up to
125%, and $1 for every $1 when the sum exceeds 125%.

Police & Fire disability benefits provide a portion of income replacement to members when they are unable to work due to a disabil-
ity. When a disability recipient is able to return to the workforce and earn wages, the disability benefit is no longer needed in its full
capacity. Duty disability recipients also may receive a tax-free benefit (or mostly tax-free if they have over 20 years of service) and
employer-paid health insurance.

HOW DOES OFFSET #2 WORK?

Let’s say a Police & Fire member, age 40 at the time of disability, with 15 years of service credit and an average salary of $100,000
goes on duty disability. The member’s disability benefit would be 60% of average salary, or $60,000. Suppose they then get another
non-public safety job and earn $45,000. The proposed Offset #2 would be calculated:

Offset #2 = (Disability benefit + Reemployment Earnings) – Current Salary of Similar Position

= ($60,000 + $45,000) - $100,000
= ($105,000 - $100,000) / 2 (reduction is $1 for $2 over 100% but less than 125%)
= $2,500
If PERA receives the reemployment information in advance, we would spread the offset amount over each monthly benefit for the year.
Therefore, the member would see a reduction of approximately $208 per month ($2,500/12) to their monthly disability benefit.

WHAT HAPPENS UNDER CURRENT LAW?

Under current law, no offsets apply because the total benefit ($60,000) plus reemployment earnings ($45,000) is less than 125%
of average salary for a member in a comparable position ($100,000). The disability member would receive more total net income
than a comparable active member.

WILL THIS IMPACT ME?

This offset only impacts Police & Fire disability recipients if the combination of their disability benefit plus reemployment earnings
exceeds the current salary of a similar position. The offset will not exceed the member’s disability benefit. Offset #2 examples are
provided below for reference (note - Offset #1 is not included in the examples, see Understanding Offset #1 for more information).

DUTY DISABILITY RECIPIENT - OFFSET #2 ACTIVE MEMBER

1 2 3 4 5 6 7
Disability Benefit $60,000 $60,000 $60,000 $60,000 $60,000 $60,000 $0
Reemployment $0 $5,000 $10,000 $25,000 $50,000 $100,000 $100,000 Earnings
Offset #2 $0 $0 $0 $0 -$5,000 -$47,500 -$11,800 PERA Contribution
Net Disability Benefit $60,000 $60,000 $60,000 $60,000 $55,000 $12,500 $0
Total Earnings $60,000 $65,000 $70,000 $85,000 $105,000 $112,500 $88,200 Net Earnings

QUESTIONS?
If you have any further questions on how this offset may impact you, please contact our Member Service Center at 1.833.454.0154,
or email us at [email protected].

60 EMPIRE DRIVE, SUITE 200, ST. PAUL, MN 55103-2088 1.800.652.9026 | 651.296.7460 | mnpera.org
5.1.23
 UNDERSTANDING OFFSET #2
HF1234/SF1959 SUPPLEMENT

OFFSET EXAMPLES
The purpose for the offset changes are to better align net income for disability recipients who return to work (income = net disability
benefit + reemployment earnings) comparable to active members (income = salary - PERA contributions). To learn more about
Offset #1, please refer to the Understanding Offset #1 supplement.

AGE 30, 5 YEARS OF SERVICE CREDIT ACTIVE MEMBER

1 2 3 4 5 6 7
Disability Benefit $60,000 $60,000 $60,000 $60,000 $60,000 $60,000 $0
Reemployment 0 5,000 10,000 25,000 50,000 100,000 100,000 Earnings
Offset #1 0 -2,500 -5,000 -7,080 -7,080 -7,080 -11,800 PERA Contribution
Offset #2 0 0 0 0 -5,000 -47,500 0
Net Income $60,000 $62,500 $65,000 $77,920 $97,920 $105,420 $88,200

AGE 35, 10 YEARS OF SERVICE CREDIT ACTIVE MEMBER

1 2 3 4 5 6 7
Disability Benefit $60,000 $60,000 $60,000 $60,000 $60,000 $60,000 $0
Reemployment 0 5,000 10,000 25,000 50,000 100,000 100,000 Earnings
Offset #1 0 -2,500 -5,000 -5,900 -5,900 -5,900 -11,800 PERA Contribution
Offset #2 0 0 0 0 -5,000 -47,500 0
Net Income $60,000 $62,500 $65,000 $79,100 $99,100 $106,600 $88,200

AGE 40, 15 YEARS OF SERVICE CREDIT ACTIVE MEMBER

1 2 3 4 5 6 7
Disability Benefit $60,000 $60,000 $60,000 $60,000 $60,000 $60,000 $0
Reemployment 0 5,000 10,000 25,000 50,000 100,000 100,000 Earnings
Offset #1 0 -2,500 -3,933 -3,933 -3,933 -3,933 -11,800 PERA Contribution
Offset #2 0 0 0 0 -5,000 -47,500 0
Net Income $60,000 $62,500 $66,067 $81,067 $101,067 $108,567 $88,200

AGE 50, 15 YEARS OF SERVICE CREDIT ACTIVE MEMBER

1 2 3 4 5 6 7
Disability Benefit $60,000 $60,000 $60,000 $60,000 $60,000 $60,000 $0
Reemployment 0 5,000 10,000 25,000 50,000 100,000 100,000 Earnings
Offset #1 0 -2,500 -5,000 -11,800 -11,800 -11,800 -11,800 PERA Contribution
Offset #2 0 0 0 0 -5,000 -47,500 0
Net Income $60,000 $62,500 $65,000 $73,200 $93,200 $100,700 $88,200

60 EMPIRE DRIVE, SUITE 200, ST. PAUL, MN 55103-2088 1.800.652.9026 | 651.296.7460 | mnpera.org
5.1.23