(a) An employee is eligible for an occupational disability benefit if employment is terminated because of a total and apparently permanent occupational disability before the employee's normal retirement date.

(b) The occupational disability benefits accrue beginning the first day of the month following termination of employment as a result of the disability and are payable the last day of the month. If a final determination granting the benefit is not made in time to pay the benefit when due, a retroactive payment shall be made to cover the period of deferment. The last payment shall be for the first month in which the disabled employee

(1) dies;

(2) recovers from the disability;

(3) fails to meet the requirements under (f), (j), or (m) of this section; or

(4) reaches normal retirement age.

(c) If the disabled employee becomes ineligible to receive occupational disability benefits before the normal retirement date, the disabled employee shall then be entitled to receive retirement benefits if the employee would have been eligible for the benefit had employment continued during the period of disability. The period of disability constitutes membership service in regard to determining eligibility for retirement.

(d) The monthly amount of an occupational disability benefit is 40 percent of the disabled employee's gross monthly compensation at the time of termination due to disability. Notwithstanding AS 39.35.790(b), at the time a member is appointed to disability, the member becomes fully vested in the employer contributions made under AS 39.35.750(a). A disabled member is fully vested in the contributions to the member's individual account made under this subsection. An employee is not entitled to elect distributions from the employee's individual contribution account under AS 39.35.810 while the employee is receiving disability benefits under this section. While an employee is receiving disability benefits, based on the disabled employee's gross monthly compensation at the time of termination due to disability, the employer shall make contributions

(1) to the employee's individual account under AS 39.35.730 on behalf of the employee, without deduction from the employee's disability payments; and

(2) on behalf of the employee under AS 39.35.750.

(e) An employee is not entitled to an occupational disability benefit unless the employee files an application for an occupational disability benefit with the administrator within 90 days after the date of terminating employment. If the employee is unable to meet a filing requirement of this subsection, the filing requirement may be waived by the administrator if there are extraordinary circumstances that resulted in the employee's inability to meet the filing requirement.

(f) A disabled employee receiving an occupational disability benefit shall undergo a medical examination as often as the administrator considers advisable, but not more frequently than once each year. The administrator shall determine the place of the examination and engage the physician or physicians. If, in the judgment of the administrator, the examination indicates that the retired employee is no longer incapacitated because of a total and apparently permanent occupational disability, the administrator may not issue further disability benefits to the employee.

(g) A disabled employee's occupational disability benefit terminates the last day of the month in which the disabled employee first qualifies for normal retirement. At that time, the employee's retirement benefit shall be determined under the provisions of AS 39.35.820 - 39.35.840, 39.35.870, and 39.35.880. An employee whose occupational disability benefit terminates under this subsection shall be considered to have retired directly from the plan.

(h) Notwithstanding (g) of this section, at the time a peace officer or firefighter receiving occupational disability benefits under this section first attains eligibility for normal retirement, the employee shall irrevocably elect to receive retirement benefits in the amount calculated as the

(1) employee's retirement benefit calculated under the provisions of AS 39.35.820 - 39.35.840; or

(2) employee's retirement benefit calculated as if the provisions of AS 39.35.370(c) were to apply; however, pension benefits paid under this paragraph must be paid first from the peace officer's or firefighter's individual contribution account, and the remaining benefits must be paid from the trust account established under AS 39.35.750(e); the peace officer or firefighter may not elect other distributions from the peace officer's or firefighter's individual contribution account under AS 39.35.810.

(i) Notwithstanding (b)(3) of this section, a peace officer or firefighter who retires under (h) of this section is not subject to the requirements of (f) or (j) of this section during retirement.

(j) An employee appointed to disability benefits shall apply to the division of vocational rehabilitation within 30 days after the date disability benefits commence. The employee shall be enrolled in a rehabilitation program if the employee meets the eligibility requirements of the division of vocational rehabilitation. Unless the employee demonstrates cause, benefits shall terminate at the end of the first month in which a disabled employee

(1) fails to report to the division of vocational rehabilitation;

(2) is certified by the division of vocational rehabilitation as failing to cooperate in a vocational rehabilitation program;

(3) fails to interview for a job; or

(4) fails to accept a position offered.

(k) Upon the death of a disabled employee who is receiving or is entitled to receive an occupational disability benefit, the administrator shall pay the surviving spouse a surviving spouse's pension, equal to 40 percent of the employee's monthly compensation at the time of termination of employment because of occupational disability. If there is no surviving spouse, the administrator shall pay the survivor's pension in equal parts to the dependent children of the employee. While the monthly survivor's pension is being paid, the survivor is not entitled to elect distributions from the employee's individual contribution account under AS 39.35.810. The first payment of the surviving spouse's pension or of a dependent child's pension shall accrue from the first day of the month following the employee's death and is payable the last day of the month. The last payment shall be made the last day of the last month in which there is an eligible surviving spouse or dependent child, or the last day of the month in which the employee would have first qualified for normal retirement if the employee had survived, whichever day is sooner. A retirement benefit shall be determined under the provisions of AS 39.35.820 - 39.35.840, 39.35.870, and 39.35.880 based on the date the employee would have first qualified for normal retirement if the employee had survived. In addition to payment of the member's individual account, the surviving spouse or, if there is no surviving spouse, the surviving dependent children of the member, shall receive an additional benefit in an amount equal to the accumulated contributions that would have been made to the deceased member's individual account under AS 39.35.730(a) and 39.35.750(a), based on the deceased member's gross monthly compensation at the time of occupational disability, from the time of the member's death to the date the member would have first qualified for normal retirement if the member had survived. Earnings shall be allocated to the additional benefit calculated under this subsection based on the actual rate of return, net of expenses, of the trust account established under AS 39.35.750(e) over the period that the contributions would have been made. This additional amount and allocated earnings shall be paid in the same manner as determined for the member's individual account under AS 39.35.820 - 39.35.860 to the extent permitted by the Internal Revenue Service. For the purpose of determining eligibility of an employee's survivor who is receiving a benefit under this subsection for medical benefits under AS 39.35.870 - 39.35.880, an employee who died while receiving disability benefits shall be considered to have retired directly from the plan on the date the employee would have first qualified for normal retirement if the employee had survived. The period during which the employee was eligible for a disability benefit and the period during which a survivor's pension is paid to a survivor under this subsection each constitute membership service for the purposes of determining eligibility for medical benefits under AS 39.30.300 - 39.30.495 and AS 39.35.700 - 39.35.990.

(l) While a survivor under (k) of this section is receiving a survivor's pension, the employer of the deceased employee shall make contributions with respect to the survivor based on the deceased employee's gross monthly compensation at the time of termination due to disability

(1) that would have been paid to the employee's individual account under AS 39.35.730 and 39.35.750(a), to the trust account established under AS 39.35.750(e), without deduction from the survivor's pension; and

(2) to the appropriate accounts and funds under AS 39.35.750(b) - (e).

(m) In this section, “occupational disability” means a physical or mental condition that the administrator determines presumably permanently prevents an employee from satisfactorily performing the employee's usual duties or the duties of another comparable position or job available to the employee and for which the employee is qualified by training or education; however, the proximate cause of the condition must be a bodily injury sustained, or a hazard undergone, while in the performance and within the scope of the employee's duties and not the proximate result of the wilful negligence of the employee.