What financial information must I file with PERAC after my disability allowance becomes effective?

You are required to file an Annual Statement of Earned Income with PERAC on or before April 15th of each year, certifying the full amount, if any, of your earnings from earned income during the preceding year.

Are there forms that I must submit along with my Annual Statement of Earned Income?

• Other Forms to be Submitted
  If you filed a federal income tax return for the preceding year, even if it was filed jointly and the only income is attributable to your spouse, you must attach a copy of the first two pages of your Federal Form 1040, 1040A, or 1040EZ.

If you requested an IRS extension on filing your tax returns, you must attach a copy of the extension request form.

If your Federal tax return is filed electronically, you must print out a copy of your completed tax return in order to attach the required copies to the Annual Statement of Earned Income. If you file by telephone, you must submit a copy of the telephone (TeleFile) filing worksheet with the confirmation number on it.

If you derived income from employment, you must attach copies of any and all W-2 or 1099 forms related to that employment. Forms 1099 that are associated with interest or dividend and Form 1099R (issued by retirement boards to their retirees) should not be submitted.

If you engaged in any self-employment during the preceding calendar year, you must attach all Schedule Cs and/or K-1 forms.

If you derived income during the preceding calendar year from a business in which you, your spouse or dependent child had a proprietary (ownership) interest, you must attach a copy of the first two pages of the Corporate Return Form 1120 or 1120S, Partnership Form 1065, Sole-Proprietorship Schedule Cs, and any and all K-1 forms.

You may be asked to provide additional information.

What are the consequences of failing to file an Annual Statement of Earned Income and the other documents required by PERAC?

• Consequences of Failing to File
  In accordance with recent changes to Section 91A for calendar years after 2004, if a disability retiree fails to submit an Annual Statement of Earned Income and the tax forms required by PERAC, and does not show good cause for this failure, the retiree’s rights to a disability retirement allowance will be terminated for the period of non-compliance. Prior to any termination of benefits, a disability retiree must be given notice and an opportunity to be heard by the retirement board.

What is the definition of earned income?

• Defining Earned Income
  PERAC defines the term "earned income" as implying some labor, management, or supervision in production thereof; not income derived from ownership of property. This definition has been affirmed by the Supreme Judicial Court.
  

For the purposes of G.L. c. 32, if an individual operates a business for profit, individually or through an agent, that individual does not have the option of classifying such income as dividends as opposed to wages. Profits derived from the operation of a business through some labor, management, or supervision of production of such profits are earned income, regardless of how a retiree categorizes such income for income tax or other purposes.

If I did not earn any income during the preceding year, what forms do I have to complete and submit?

• No Earned Income
  You are required to complete the Annual Statement of Earned Income and return it to PERAC. This is true even if you don’t file tax returns.

Should I use gross or net amounts when reporting earnings?

• Gross or Net Amounts
  When reporting wages earned as an employee, the gross amount from the W-2 form should be referenced. When reporting earnings from self-employment, use the net amount and include all Schedule Cs.

Does PERAC validate the earnings reported by disability retirees?

• Validation of Earnings
  The reported earnings are validated in a number of ways. Since retirees sign their Annual Statements of Earned Income under the pains and penalties of perjury, it is very important to report fully and accurately.