Learn how to calculate your FERS federal disability benefits. Plus find out if you’re eligible for FERS disability retirement benefit at age 62 or younger.
Calculating FERS Disability Retirement: A Guide to Federal Disability Retirement Options
This guide aims to clarify the process, eligibility, and benefits of FERS disability retirement benefits, and how a FERS disability retirement interacts with other federal retirement options available to federal employees. One of the primary benefits of a FERS disability annuity is the financial support it provides to federal employees who can no longer work due to a disability. FERS disability annuitants may also be eligible for Social Security disability benefits, which can further supplement their income, but these also offset the dollar amount received from a FERS disability annuity.
Understanding the Annuity Calculation for Federal Disability Retirement
The annuity calculation for FERS disability retirement involves the employee’s highest three years of pay known as the High-3 average salary. For those who have received a disability, the annuity is initially calculated at 60% of the average salary for the first year and then adjusted to 40% for subsequent years. Additionally, the FERS disability pension will be offset by 100% of any Social Security Disability Insurance (SSDI) benefits for the first 12 months and 60% of SSDI benefits in subsequent months.
How FERS Disability Benefits Interact with Social Security Disability Benefits
It is essential to understand the differences between FERS disability benefits and Social Security disability benefits. While both provide financial assistance to individuals with disabilities, they are governed by different criteria and agencies. FERS disability retirement is managed by the OPM, while Social Security disability benefits are administered by the Social Security Administration (SSA). Employees may be eligible for both benefits, but the amount received from each may vary based on the individual’s work history and the severity of their disability. Even if an employee might be eligible for FERS disability benefits and not SSDI benefits, they are required to apply for Social Security disability benefits before they can apply for a FERS disability annuity.
Requirements and Eligibility for FERS Disability Retirement
Eligibility Criteria for Federal Employee Disability Benefits
To be eligible for FERS disability, federal employees must have completed at least 18 months of federal service. Additionally, they must have received a disability that prevents them from performing their job duties effectively. Their agency must also attempt to make reasonable accommodations for their disability before approving the application to OPM. The medical condition must be documented by a qualified medical professional and must be expected to last for at least one year. It is important to note that employees must also apply for Social Security disability benefits to qualify for FERS disability retirement even if they are not approved for those benefits from the SSA.
Minimum Requirements for Disability Retirement
The minimum requirements for applying for disability retirement under FERS include having a qualifying disability, meeting the service requirement, and being unable to perform the essential functions of their job. Employing agencies must also demonstrate that they have made reasonable efforts to keep the worker employed in their position or to find other suitable employment within the federal service. If an employee has been separated from federal service for more than one year, they are longer be eligible for FERS disability retirement benefits. Submitting one’s application on time is essential for receiving a FERS disability pension.
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Age Considerations for FERS Disability Retirement
Age plays a significant role in determining eligibility for FERS disability retirement. While there is no minimum age requirement to apply for disability retirement, if an employee is under the minimum retirement age and applies for disability retirement, their annuity will be calculated differently than if they were applying for regular retirement at age 62 or older. Additionally, employees who are age 62 at retirement may have different options available to them regarding their retirement benefits.
Restoration to Earning Capacity for FERS Disability Annuitants
If you are a FERS disability annuitant under age 60, you must report your annual earned income, which includes salary/wages and/or net self-employment income. If you do not respond to the Office of Personnel Management (OPM)’s request for this income information, your annuity payments will be suspended until your eligibility for continued FERS disability annuity payments is confirmed.
Your earning capacity is considered restored if, in any calendar year, your income from salary, wages, or net self-employment (or a combination of both) reaches or exceeds 80% of the current salary for the position you held immediately before your disability retirement.
Transitioning from Disability Retirement to Regular Retirement
Employees who begin their retirement journey through FERS disability retirement may eventually transition to regular retirement once they reach the minimum retirement age or age 62. This transition is seamless, as the employee’s disability annuity can convert to a regular retirement annuity. The calculation for the regular retirement benefit will take into account the employee’s total years of service, including the time spent as a disability annuitant. This ensures that employees do not lose out on benefits accrued during their time in federal service. This is referred to as their “earned” annuity. At 62 with 20 years of service, the FERS annuity will be calculated with a 1.1% multiplier. At 62 with at least 5 (but less than 20) years of service, a 1.0% multiplier is used.
Check out our free FERS calculation tool to estimate your FERS income and High-3 Salary.
Other Federal Benefits with FERS Disability Retirement
Understanding the FERS Retirement System
The Federal Employees Retirement System (FERS) is a retirement system that provides retirement benefits to federal employees. It is designed to ensure that employees receive retirement benefits upon reaching retirement age or in the event of disability. FERS consists of three main components: the FERS basic annuity, Social Security benefits, and the Thrift Savings Plan (TSP). The FERS disability retirement is a specific provision within this system that allows eligible federal employees to receive benefits if they are unable to continue working due to a qualifying disability. Additionally, we’ll look at how retiring with a disability affects participation in FEGLI and FEHB programs.
Thrift Savings Plan with Disability Benefits
Early penalty-free withdrawals from the TSP are allowed in the event of a total and permanent disability. It is important to note that someone who is eligible for a FERS disability retirement might not meet this definition. The disability requirement for FERS is a federal worker’s inability to perform their job’s duties and may not be defined as total and permanent, which is also what the SSA requires before approving SSDI benefits.
| Disability, not total/permanent, unable to complete federal job duties |
Total and Permanent Disability | |
|---|---|---|
| FERS Disability Benefits | YES | YES |
| Can Get Another Job | YES | NO |
| Social Security Disability Benefits | NO | YES |
| Penalty-Free Early TSP Withdraw | NO | YES |
Check out our TSP calculator to estimate your retirement savings income.
Impact of Disability Retirement on Life Insurance and Health Benefits
Federal employees retiring with FERS disability benefits may have access to life insurance coverage through the Federal Employees Group Life Insurance (FEGLI) program and the Federal Employee Health Benefits (FEHB) program. When an employee transitions to disability retirement, they can maintain their life insurance coverage and health benefits, but there us a 5 year rule for both. Regarding FEHB plans, this is no different than the rule that applies to a regular non-disability FERS retirement. FEHB coverage must’ve been maintained for the last 5 years of their employment before applying for retirement. There is a similar 5-year rule for FEGLI benefits if retiring with a FERS disability pension.
Learn about FEHB, FEGLI, the TSP, Social Security, and FERS at our Free FERS Retirement Workshop
How to Apply for FERS Disability Retirement?
Required Documentation for Your Application
When applying for FERS disability retirement, certain documentation is required to support the application. This includes medical records that detail the nature of the disability, treatment history, and any other relevant information from healthcare providers. Additionally, employees must provide documentation of their federal service, including pay stubs and employment records, to verify their eligibility. The more comprehensive the documentation, the better the chances of a successful application. It is also advisable to include any correspondence with the Social Security Administration regarding Social Security disability benefits, as this can further strengthen the application. And again, applying for SSDI is a requirement for applying for FERS disability benefits.
Steps to Complete the Application Process
Applying for FERS disability retirement involves several steps that must be carefully followed to ensure a successful application. The first step is to complete the disability retirement application, which can be obtained from the OPM website or through your agency’s human resources department. The application must be filled out completely and accurately, detailing the nature of the disability and how it affects the employee’s ability to work. Once the application is completed, it must be submitted to the appropriate agency for review. It is advisable to keep copies of all submitted documents for personal records.
Time Limits for Filing for Disability Retirement
There are specific time limits for filing an application for disability retirement under FERS. Employees must file their application within one year of being separated from federal service or within one year of receiving a disability diagnosis. It is crucial to adhere to these time limits, as missing the deadline may result in the denial of the application. Employees should also be aware that the OPM may take several months to process disability retirement applications, so it is essential to plan accordingly and submit the application as early as possible.
How Does FERS Disability Retirement Affect Other Retirement Options?
Disability Retirement vs. Early Retirement
When considering retirement options, it is important to differentiate between disability retirement and early retirement. Disability retirement is specifically designed for employees who can no longer perform their job duties due to a qualifying disability, while early retirement allows employees to retire before reaching the standard retirement age, typically with a reduction in benefits. Employees who qualify for disability retirement may find that it provides more substantial financial support than early retirement, making it a more favorable option for those facing significant health challenges.
How FERS Disability Retirement Differs from Regular Retirement
FERS disability retirement is distinct from regular retirement in several key ways. While regular retirement typically requires employees to reach a certain age, such as their minimum retirement age or age 62, and to have completed a minimum number of years of service, FERS disability retirement is available to employees who have become disabled and can no longer perform their job duties with considerably less service required (18 months as opposed to 5 years). This means that even if an employee is younger than the minimum retirement age, they may still qualify for disability retirement benefits if they meet the necessary criteria. Additionally, the calculation of the disability annuity differs from that of regular retirement, as seen in the infographic above.
Reach Out to Us!
If you have additional federal benefit questions, contact our team of CERTIFIED FINANCIAL PLANNER™ (CFP®) and Chartered Federal Employee Benefits Consultants (ChFEBC℠). At PlanWell, we are federal employee financial advisors with a focus on retirement planning. Learn more about our process designed for the career fed.
Preparing for federal retirement? Check out our scheduled federal retirement workshops. Sign up for our no-cost federal retirement webinars here! Make sure to plan ahead and reserve your seat for our FERS webinar, held every three weeks. Want to have PlanWell host a federal retirement seminar for your agency? Reach out, and we’ll collaborate with HR to arrange an on-site FERS seminar.
Want to fast-track your federal retirement plan? Skip the FERS webinar and start a one-on-one conversation with a ChFEBC today. You can schedule a one-on-one meeting here.
