Work Related Disability Retirement Benefit
For Members in Plan 1 and Plan 2
If you suffer an occupational illness or injury on the job and the cause is determined to be compensable under the Virginia Workers' Compensation Act, you may be eligible to retire on work-related disability. VRS does not determine whether your disability is work-related; you must file a claim under the act.
If you apply for work-related disability retirement, you must include a copy of the letter from the Virginia Workers' Compensation Commission approving your claim or a copy of a workers' compensation award letter as well as an accident report, if applicable. Contact your human resource office for assistance with applying for workers' compensation.
Select from the following links for more details:
Work-Related Disability Benefit Calculation
If you retire on work-related disability, you will receive a refund of your member contribution account balance in addition to a monthly benefit. The monthly benefit calculation will be adjusted first by any primary Social Security benefits you are eligible to receive:
If you are eligible for a full Social Security benefit, the VRS work-related guaranteed benefit will be equal to 50 percent of your average final compensation. You will receive the guaranteed benefit or the full VRS formula amount, whichever is higher. Select Non-Work Related Disability Retirement Benefit from the right column for more information.
If you are eligible for a Social Security Disability Insurance (SSDI) benefit, the VRS work-related guaranteed benefit will be equal to 66⅔ percent of your average final compensation. You will receive the guaranteed benefit or the full VRS formula amount, whichever is higher, until the effective date of your eligibility for SSDI. VRS will then adjust your benefit to 50 percent of your average final compensation; you will receive this amount if it is higher than the full VRS formula amount. If applicable, this adjustment will be retroactive to your effective SSDI eligibility date and reflected in your VRS benefit.
If you are not eligible for a full Social Security benefit and your SSDI claim is denied, the VRS work-related guaranteed benefit will be equal to 66⅔ percent of your average final compensation. You will receive the guaranteed benefit or the VRS formula amount, whichever is higher. You must submit a copy of your SSDI denial letter or your letter appealing the denial with your VRS disability retirement application. For more information, call the Social Security Administration toll free at 1-800-772-1213 or visit the Social Security Administration Web site.
The benefit amount will then be adjusted by any workers' compensation benefits you receive:
If your workers' compensation benefit is equal to or greater than your VRS disability retirement benefit, you will not receive a VRS benefit unless your workers' compensation benefit is reduced or ends.
If your workers' compensation benefit is less than your VRS disability retirement benefit, VRS will pay the difference between the two benefits to bring you to your VRS benefit amount.
If you receive a lump-sum workers' compensation settlement, VRS will determine the monthly value of the settlement and then adjust your VRS benefit accordingly.
Taxes and the Work-Related Disability Retirement Benefit
Refunds of pre-tax member contributions and interest are subject to income taxes. The Internal Revenue Service (IRS) also may impose an additional 10 percent tax penalty if you receive a refund before age 59½; there are exceptions to this rule. To defer taxes, the refund can be rolled over to an Individual Retirement Account (IRA) or another qualified plan. For more information, read the IRS 402(f) Special Tax Notice 28.5kb.
If you retire on work-related disability with the guaranteed benefit, your benefit will not be subject to federal or state income taxes. The work-related benefit based on the VRS formula amount is subject to income taxes. For more information, contact a tax advisor, call the Internal Revenue Service (IRS) toll free at 1-800-829-1040 or visit the IRS website.
Important Note if You Retire on Work-Related Disability
If you do not comply with the provisions of the Virginia Workers' Compensation Act and your workers' compensation benefits end, or if you are approved to work with job modifications, your VRS disability retirement benefit will continue to be offset by the workers' compensation amount. If you are notified of a change or end to your workers' compensation benefits, send a copy of the notification letter to VRS at P.O. Box 2500, Richmond, VA 23218-2500 as soon as possible.