Administration reports flag IRS guidance on disability tax, recommends litigation monitoring and death-audit upgrades

Pension administration staff briefed trustees on several operational items on Feb. 25, including IRS guidance on the taxable portion of disability pensions, a new verification form for disability recipients, consideration of securities litigation monitoring and problems with current death-audit software.

Dustin, the pension administrator, said the IRS has issued guidance affecting how plans report taxability of duty and non-duty disability pension payments and that the agency "is gonna start looking at this." He said staff will coordinate with finance this year to ensure recipients are correctly reported to avoid later surprise tax liabilities.

Verification of disability status

Administration will send a verification form developed by Pedro Herrera to disability recipients. Dustin said the form is intended to be a routine confirmation, not a punitive step, and staff will provide clarifying information about any required medical confirmation. Trustees asked the administrator to clarify whether recipients bear the cost of any medical verification; Dustin said he would get that clarification before the May meeting.

Securities litigation monitoring

Dustin reported he attended sessions recommending securities litigation monitoring services. He said other pension boards commonly retain multiple specialized firms for monitoring and that the administrator will ask Pedro to present recommended firms at the May meeting. The monitoring firms typically work on contingency, taking a portion of recoveries set by courts; Salem Trust already receives some notifications for class actions, but dedicated monitors provide active, portfolio-level tracking.

Death-audit software and proof-of-life checks

The administrator reported shortcomings in the current death-audit service after two decedents went undetected for months. Families have agreed to return funds in those cases, but Dustin recommended upgrading to a higher-level death-audit service (quoted in prior vendor discussions at roughly $2,400–$3,000 annually) and reinstating proof-of-life verifications to maintain up-to-date contact and beneficiary information. Trustees discussed frequencies and noted police and fire funds still perform an annual proof-of-life.

Other items

Dustin said the FPPTA summer conference (June, Omni Champions Gate) is filling quickly and asked trustees to indicate interest; he will circulate dates and registration details. He also said the proof-of-life form Pedro developed would be distributed to trustees via e-mail.

Why this matters: Accurate tax reporting, correct disability eligibility records and reliable death audits protect beneficiaries and the plans from overpayments and tax problems. Litigation monitoring can capture recoveries for losses tied to corporate misconduct.

Speakers

- Dustin — Pension administrator (presenter of administration updates). - Pedro Herrera — referenced as creator of the disability verification form and provider of litigation-monitoring recommendations (will present in May). - Brandon — trustee who added clarifying comments about litigation participation and Salem Trust notifications.

Provenance

- Topic intro: "Dustin, is, the pension administrator's reports and presentations?" (seg_187) - Topic finish: Discussion and vote to change May meeting time; administrative items concluded (seg_303).

Ending

Trustees asked for clarification about costs and procedures for the disability verification and asked administration to present litigation-monitoring firm recommendations at the May meeting. Administration will also pursue a death-audit software upgrade and reinstate proof-of-life verifications.