Human Resources (HR)


Standard Operating Procedures


Retirement Short-Term Disability

Original Effective Date:


Revised Effective Date:






Note: Complete guide, forms and instructions on Short-Term Disability, pages 148-177,

The Disability Income Plan (DIP), Retirement Employer Manual:


1.       To determine eligibility for Short-Term Disability, review guidelines in the Retirement Employer Manual, page 150.

2.       60-Day Waiting Period instructions, Retirement Employer Manual, page 149.

3.       Form DIP-1, “Application for Short-Term Disability Benefits,” completed by or on behalf of the employee submitted directly to Health Benefit Representative.  Form DIP-1, page 166-167.

4.       Form DIP-3, “Employee Request For Payment And Certification Of Disability By Physician” submitted to Health Benefit Representative only after the disability has lasted more than 60 days. Form DIP-3, page 168.


At this point, you are in a position to make the disability determination based upon the Physician’s statement of disability on the Form DIP-3.  DHHS Payroll requires the following forms be submitted with the Form DIP-3:

1.       Form DIP-E1, “Employer Master Worksheet for Determining
Eligibility for Short-term Benefits.”  Sample copy of Form DIP-E1, page 175-176.

2.       Form DIP-E2, “Employer’s Monthly Calculation and Authorization
for Payment of Short-term Benefits,” page 177.

Notes on completing and submitting the DIP-E2:

The DIP-E2 submitted to payroll must document if the employee is vested or not vested, subject or exempt. If the employee is vested (5 years of retirement credit), payroll will pay their health insurance premium while on short term disability. If they are not vested, then the employee must pay their own health insurance premium. Remember, you can not tell if an employee is vested by the state service time listed in PMIS. It must be five years working with the State, not local government time, mental health time and other time that we have credited as state service. The only way to be sure if the employee is vested in the Retirement System is to check with Retirement.

Subject or Exempt is referring to the Bailey Court Case. Is the employee subject to State taxes on their retirement benefits? Were they vested in the Retirement System by August 12, 1989? If so, they are Exempt, if not, they are Subject. Payroll needs this information to key the disability payments so they will appear in a certain block on the employee's W-2 form and not be taxed by the State. If the employee is Exempt from state tax on their retirement benefits, you must send payroll a new W-4 tax withholding form, with the Exempt block checked, with the initial short term disability payment request. Once the employee returns to work you must submit a new W-4 with the tax withholdings the employee had prior to the Exempt W-4 or whatever change the employee may wish to make at that time. You must remove the Exempt status in order for State taxes to be withheld from the employee's earnings. The vested employee does owe state taxes on their earnings but not the disability benefit. You do not want the employee to owe the state money at tax time because the Exempt status on their W-4 was not removed, once they returned to work. Include a W-4 in the employee's short term file with a note to send to payroll when the employee returns to work. If the employee does not return to work you do not have to submit a new W-4 unless you are paying out leave. State taxes will be due on any payout.

Make copies for file of Forms DIP–1, DIP-3, DIP-E1, DIP-E2 and send originals to DHHS payroll for benefit payment.


If you are unable to make the disability determination, you may ask the Medical Review Board of the Retirement System to make a determination of disability for short-term disability by submitting to the Retirement System, 325 North Salisbury Street, Raleigh, North Carolina 27603-1385, the following forms:


1.       Form DIP-5, “Request For A Determination Of Eligibility For Short-Term Disability Benefits And/Or A Preliminary Determination Of Eligibility For Long-Term Disability Benefits By The Plan’s Medical Board.”  Form DIP-5, Retirement Employer Manual, Page 170.

2.       Form DIP-1, “Application for Short-Term Disability Benefits.” 
Form DIP-1, Retirement Employer Manual, Page 166 - 167.

3.       Form DIP-3, “Employee Request For Payment And Certification Of Disability By Physician.”  Form DIP-3, Retirement Employer Manual, Page 168.

4.       Form 7A, “Medical Report.”  Form 7A, Retirement Employer Manual, Page 171-174.

5.       Job Description.

6.       A cover letter addressed to the Medical Review Board
requesting a review for short-term disability.