let’s looks at the difference between the Civil Service Retirement System (CSRS) and the Federal Employees Retirement Systems (FERS), specifically how they relate to Federal Disability Retirement. This post will focus on the computation of benefits and benefit offsets of these two. Every federal worker falls into one of these retirement systems. While most of those workers fall under FERS, it’s important to discuss these differences.
FERS
This amount is computed differently depending on the person’s age and the amount of service at retirement. It is recomputed after 12 months and again at age 62 (if under age 62 at the time of retirement).
Formula
If the employee is age 62 or older at retirement, or they meet the age/service requirements for an immediate voluntary retirement:
- The employee would receive 1 percent of their High-3 salary for each year of service if they are age 62 or older with less than 20 years of service, or they are under the age of 62 and qualify for an immediate retirement.
- 1 percent of the High-3 salary for each year of service is paid if the employee is 62 or older with 20 or more years of service.
If an employee is under age 62 at retirement and not eligible to receive an immediate voluntary retirement:
- During the first 12 months, the disability annuitant receives 60 percent of their High-3 salary MINUS 100 percent of any Social Security benefit received. Remember you must apply for Social Security Disability to be approved for Federal Disability Retirement.
- After the first 12 months, the amount is 40 percent of the High-3 salary MINUS 60 percent of any Social Security benefit received.
- At age 62, the benefit is re-calculated. If the actual service plus the time as a disability annuitant is equal to less than 20 years, the annuitant receives 1 percent of their High-3 salary for each year of service. If the actual service plus the time as a disability annuitant equals more than 20 years, the annuitant receives 1.1 percent of their High-3 salary for each year of service.
*The average salary is increased by all FERS Cost of living adjustments during the time a disability annuity is received. COLA’s aren’t paid during the first 12 months as a disability annuitant.
Reductions in Disability Annuity
- Survivor Benefits—If you are married, your benefits will be reduced for a survivor benefit, unless your spouse consented to your elections of less than a full survivor annuity. If the total of the survivor benefits equals 50 percent of your benefit, your annuity is reduced by 10 percent. If the total equals 25 percent, then your annuity is reduced by 5 percent.
- Unpaid Service if ‘Earned Annuity is Paid—If there is a CSRS component in your annuity, the CSRS portion of the benefit will be reduced by 10 percent of any deposit owed for and CSRS non-deduction service performed before October 1, 1982. However, this doesn’t apply if the deposit was paid before retirement.
COLA’s for FERS Disability Retirees
If you’re under the age of 62 and your annuity was computed using 60 percent of your High-3 salary, you are not eligible to receive COLA’s in the first 12 months. COLA’s after this time are payable. Further, if you are age 62 at retirement or if you meet the age and service requirements for an immediate FERS annuity, all COLA’s occurring after the beginning date of your annuity are paid.
Social Security Benefits
OPM will reduce your monthly annuity by all your Social Security benefit if you are under 62 and your annuity was calculated using 60 percent of your High-3 salary. If you are receiving an annuity calculated using 40 percent of your High-3 salary, the amount will be reduced by 60 percent of your Social Security benefits. Of course, this only applies to months where you are entitled to receive both Social Security and FERS benefits.
Benefits from OPM and OWCP at the Same Time
If you are eligible to receive both Federal Disability Retirement and Federal Workers’ Compensation benefits concurrently, you must choose which would be the most advantageous. If receiving benefits from OWCP, your payments from OPM will be suspended. Once your OWCP payments cease, you can ask OPM to pay your FERS benefit. However, you can receive a Scheduled Award from OWCP concurrently with your OPM federal disability retirement payments.
CSRS
Federal workers who retire under CSRS are entitled to an ‘earned’ annuity computed under the CSRS formula. The law guarantees a minimum annuity to employees who retire because of a disability.
This guaranteed minimum applies if you are under the age of 60 when you retire and your earned annuity, based on your actual service, is less than the minimum.
The guaranteed minimum is the lesser of the following:
- 40 percent of your High-3 salary.
- The regular annuity obtained after increasing your service by the time between your retirement and your 60th birthday.
Reductions in Disability Annuity
- Survivor Benefits—If you’re married, your benefit is reduced for the survivor benefit. The exception to this is if your spouse consented to your election of less than a full survivor annuity. Also, your annuity is reduced if a court order requires a former spouse survivor benefit.
- Unpaid Service—If no deductions were withheld on your creditable civilian service performed before October 1, 1982, and no deposit was paid, your annuity will be reduced. The annual reduction is 10 percent of the total deposit due. Any non-deduction service performed on or after that date can’t be used to compute annuity unless the deposit is paid in full.
- Refunded Service—Creditable service for which you took a refund but didn’t pay a redeposit can’t be used in the computation of annuity.
- CSRS Offset—If you had service that was subject to withholding for both CSRS and Social Security, you are subject to a reduction in your annuity. This only applies if the Social Security Administration (SSA) can pay you a benefit based on the portion of your federal service that was under both systems. This is called the CSRS Offset.
COLA’s for Disability Retirees
Your annuity is increased by Cost of Living Adjustments (COLA’s) that occur after retirement. The first COLA increase is prorated based on how long you have been retired when that COLA is granted.
Benefits from OPM and OWCP at the Same Time
If you are eligible to receive both Federal Disability Retirement and Federal Workers’ Compensation benefits concurrently, you must choose which would be the most advantageous. If receiving benefits from OWCP, your payments from OPM will be suspended. Once your OWCP payments cease, you can ask OPM to pay your CSRS benefit. However, you can receive a Scheduled Award from OWCP concurrently with your OPM federal disability retirement payments.
Our experienced team here at Harris Federal Law Firm has helped both CSRS and FERS employees with their federal disability retirement cases for years. If you are looking for a federal disability retirement lawyer, reach out for a free consultation today.
