Federal Disability Retirement benefits help any career federal employee that cannot continue to do their job due to a medical condition. Let’s dive into the highlighted benefits of Federal Disability Retirement to find out how it can benefit you.
The Misunderstood Aspect: Accruing Years of Creditable Service
One of the most misunderstood aspects of the disability benefit has to do with continuing to accrue credible years of service while drawing the retirement annuity.
Calculation of Retirement Benefits
If you are under the FERS system, your calculation will start at 60% of your High-3 average during the first year after the approval for federal disability retirement benefits. After the first year, the benefit drops to 40% of your High-3 average until your 62nd birthday. On that day, your retirement will be recalculated using immediate retirement calculation rules.
The good news is that the entire period that you spent on the disability retirement benefit will count as credible service and add on to the existing, previously earned years from your working federal career.
If you were approved for Federal Disability Retirement when you were 45 with 18 years of federal service already earned, when you turn 62 years old, the benefit will recalculate using your age (62) and your new total service years of 35 (18 +17).
This makes a big difference in how much money you will receive after your 62nd birthday.
Recalculation of Benefits: An Example
Let’s say our example employee’s High-3 average was $50,000 per year. If they retired under regular retirement rules and calculations, they would be entitled to 18% of that number from FERS. That comes out to $9,000 per year, or $750 per month. They would also be eligible for their Social Security payments (as long they they qualify) and any money that they have in their Thrift Saving Plan.
However, if they had gone out on the federal disability retirement and earned the extra 17 years of service, the calculation would not only add 17% for the extra years, but it would meet the 20 years + age 62 multiplier that boosts the retirement calculation by .1% per year. That would give a total of 38.5% of the High-3 with all of the COLA’s adding on at the time of the recalculation.
The payments would now be $19,250 per year or $1,604.17 per month in addition to your regular Social Security benefits and TSP whenever you become eligible for those.
So as you can see, the additional years of service really add up!
