Human Resources Academy II for Community College Districts

2. C ALCULATING D ISABILITY A LLOWANCE For most candidates the disability allowance is 50% of final compensation. 105 “Final compensation” is generally the highest average monthly compensation earned by a member during any period of three consecutive years (36 months) of credited service or, with 25 years of service, the best compensated one-year period, whichever is less. For example, consider an employee “Pat” who has worked for the District for 30 years and has a final salary prior to retirement of $130,000. During the prior two years, Pat earned $120,000 and $110,000. The formula utilized to determine Pat’s final compensation would be the past three years because the average of $120,000 would be less than Pat’s final salary of $130,000. An alternative formula is used for members who become disabled between the ages of 45 and 60 but have less than 10 years of service credit. Such an individual’s allowance will be either 50% of the individual’s final compensation or will be calculated on the basis of 5% for each year of service, whichever is less. 106 To determine the final disability allowance, the monthly salary ($10,000 in the example used above) is divided in half, and must then be reduced by the full amount paid or payable from other public systems, including Workers’ Compensation, Social Security disability, Federal military disability, income protection plans (if premiums were paid by the school employer and not the member), and any other disability program financed with public funds. 107 Members with eligible children receive an additional 10% of final compensation for each child, up to a maximum of four children. The maximum allowance payable to a member is 90% of final compensation. Please note that service credit is typically not a factor in determining the disability allowance. 3. W ORKING W HILE R ECEIVING A D ISABILITY A LLOWANCE Education Code section 24015 allows an individual to earn money, and even to be employed to perform creditable service, while receiving a disability allowance. However, the law establishes two separate earnings limits for individuals receiving a disability allowance: a single-month earnings limit and a six-month earnings limit. 108 Each year an index factor is used to determine an indexed final compensation. This indexed final compensation is then used as a measure of current salaries. If the sum of an individual’s disability allowance plus his or her earnings from all employment exceeds the single month indexed final compensation, the excess is considered an overpayment and triggers a recovery procedure. 109 If an individual’s average earnings for the prior continuous six months amount to 66⅔% of the indexed final compensation, the person is presumed capable of performing gainful employment and no longer disabled. 110

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