You are eligible for Federal Disability Retirement benefits after you have 18 months of creditable service. You must also meet the requirements laid out by OPM (Office of Personnel Management).
Under the Federal Employees Retirement System (FERS), there are four types of retirement; voluntary, early, deferred, and disability. This post will focus on how your Disability Retirement annuity is computed, which is dependent upon your age and years of service at retirement.
Understanding Your High-3 Average Salary
Your basic annuity is calculated based on your length of service and your High-3 average salary. Let’s break this down. In determining your length of service, add all periods of creditable service, and eliminate any partial month from the total. Your High-3 salary is your highest average basic pay earned during any three consecutive years of service. Finally, basic pay is your base salary you earn for your position, including increases in salary for which retirement deductions are withheld. This includes shift rates; however, it does not include overtime or bonuses.
If your total service is less than three years, your average salary is figured by averaging your basic pay during all your periods of creditable service.
Disability Retirement Annuity Computation
This computation is a little tricky. It is computed differently depending on your age and the amount of service you have at retirement. Also, the benefits are recomputed after the first 12 months and again at age 62.
The following applies if you’re 62 or older at retirement or you meet the service requirements for immediate voluntary retirement:
- If you’re under the age of 62, or you are 62 with less than 20 years of creditable service, you receive one percent of your High-3 salary for each year of service.
- If you are 62 or older and you have 20 or more years of service, you will receive 1.1 percent of your High-3 salary.
*A 0.1 percent bonus is applied when you have more than 20 years of service and you’re over the age of 62.
The computation gets a little tricky if you’re under the age of 62 and are not eligible for immediate retirement.
- The first year, you will receive 60 percent of your High-3 salary minus 100 percent of your Social Security Disability benefits (if any). However, you are entitled to your earned annuity if it is the larger amount.
- The second year, and every year after until age 62, you receive 40 percent of your High-3 salary. This amount is offset by 60 percent of your Social Security Disability benefits (if any). Again, you would be entitled to your earned annuity if it is the larger amount.
- At age 62, your annuity is recomputed. The amount used represents the annuity you would’ve received had you kept working and retired on a voluntary retirement. At this point, your annuity amount is computed in the same way as if you were eligible for immediate voluntary retirement (shown above).
*Remember to apply for Social Security Disability when filing for Federal Disability Retirement, however, you don’t have to be approved.
How Your Annuity Grows Over Time
The amount of time you receive a disability annuity increase your years of creditable service. The average salary used for computation is increased by all FERS COLA increases paid during the time you received a disability annuity.
How Other FERS Retirement Types Compare
For context, here’s how disability retirement calculations differ from other FERS retirement types:
Voluntary Retirement: If you are under age 62 at the time of separation OR age 62 or older with less than 20 years of service, you receive one percent of your High-3 salary for each year of service. If you are age 62 or older at separation with 2 or more years of service, you receive 1.1 percent of your High-3 for each year of service.
Early Retirement: Your annuity is computed the same way as voluntary retirement, however, if you are retiring under MRA+10 (minimum retirement age), you are subject to an age reduction.
Deferred Retirement: The computation is the same as voluntary retirement and subject to the age reduction unless you postpone the start date of your annuity.
Get Help Understanding Your Federal Disability Retirement Benefits
Applying for Federal Disability Retirement can be an uncertain time. The payouts can be confusing to understand. To find out how these benefits and computations affect your specific situation, don’t hesitate to call us at 877-226-2723. Our experienced team has been helping federal workers for years. You can also fill out this inquiry form, and the consultation is always free!
