A retired Knoxville Fire Department captain has filed a class action lawsuit alleging that his disability pension had been wrongfully designated as taxable income.
Derrell Frye filed suit on behalf of all similarly situated Knoxville firefighters and police officers whose line-of-duty disability pension payments have been taxed. The Knoxville News Sentinel estimates the number at between 350 and 500 plaintiffs, although the attorney for the pension board, Bud Gilbert, says less than 100 people are effected.
Named as defendants in the action are the city of Knoxville, the Knoxville Pension Board and the City Employees’ Pension Fund. The suit claims “IRS tax forms were improperly issued indicating that their benefits were taxable” and seeks “damages resulting from the payment of federal income taxes on benefits that were exempt from such taxation”.
Gilbert was quoted as saying “this situation is much more complex than it appears in the lawsuit” and “is affected by tax codes, changes in pension plans over the years and amendments to the City Charter.”
Oddly enough the suit was filed in state court despite the obvious Federal income tax connection that would seem to warrant it going to Federal court. The suit was filed last Wednesday.