DFRDB invalidity benefits are paid where a contributing member is retired on the ground of invalidity or of physical or mental incapacity to perform his or her duties (a medical discharge). Members are classified as Class A, Class B or Class C according to their percentage of incapacity for civilian employment (as assessed by Comsuper).
A Class A invalidity retiree is entitled to “invalidity pay” (a pension) at a rate of 76.5% of his or her annual rate of pay at the time of discharge. There is no refund of contributions.
For the purposes of the SRC Act, 20% of the initial invalidity pension is deemed to be employee-financed, and thus is disregarded under the superannuation rules (ss 20, 21, 21A). This disregarded amount remains constant - it is not increased if the pension increases through indexation. The overall effect of this approach is that the amount of pension taken into account under the superannuation rules will slowly increase (>80%) over time.
A Class B invalidity retiree is entitled to “invalidity pay” (a pension) at a rate of 38.25% of his or her annual rate of pay at the time of discharge. If, however, the member has served for 23 years or more, the invalidity pay is paid at the higher retirement rate to which the member is entitled. There is no refund of contributions.
For the purposes of the SRC Act, 20% of the initial invalidity pension is deemed to be employee-financed, and thus is disregarded under the superannuation rules (ss 20, 21, 21A). This disregarded amount remains constant - it is not increased if the pension increases through indexation. The overall effect of this approach is that the amount of pension taken into account under the superannuation rules will slowly increase (>80%) over time.
A Class C invalidity retiree generally does not receive a pension, but rather receives a lump sum comprising a refund of contributions and a further 50% of the amount of the refund (Lump sum = Contributions x 1.5). The 50% add-on is deemed to be government-financed (an employer benefit), and thus may be taken into account as a superannuation lump-sum benefit when assessing compensation under the SRC Act.
Where, however, the member would have been entitled to a retirement pension but for the medical discharge, invalidity pay (a pension) at the same rate as the retirement pension is paid rather the 150% lump sum refund of contributions. This invalidity pension may, in part, be commuted to a lump sum.
For the purposes of the SRC Act, 20% of the initial invalidity pension is deemed to be employee-financed, and thus is disregarded under the superannuation rules (ss 20, 21, 21A). This disregarded amount remains constant - it is not increased if the pension increases through indexation. The overall effect of this approach is that the amount of pension taken into account under the superannuation rules will slowly increase (>80%) over time.
Note that invalidity classifications will be reviewed from time to time, and may be reclassified to a higher or lower class of incapacity. If, however, a member is classified as Class C at discharge, the classification and benefit are not subject to review.
Where a classification is changed, a new assessment is undertaken in order to establish the 20% employee contribution which is disregarded under the superannuation rules. This reassessed 20% disregarded amount remains frozen (as discussed above).