Social Security Disability? Federal Disability Retirement? What’s the difference? These two benefits are easily confused, especially by federal employees.
Social Security Disability (SSD) is available to anyone who pays Social Security taxes, including federal employees. That would include all FERS and CSRS Offset employees. It is a total and permanent disability benefit that is awarded if you lose your ability to complete any gainful employment activity. The dollar amount awarded is based on the amount of taxes paid in. The Social Security website has a Benefit Calculator that allows you to enter your earnings and age to calculate your estimated benefits.
Federal Disability Retirement (FDR) is available to all federal CSRS employees with over 5 years of service and to all FERS employees with at least 18 months of credible service. It is awarded to applicants who are no longer able to be fully successful in their bid assignment, and no reasonable accommodation is available to them within their same pay grade and seniority levels. For the purpose of this article, I will be referring to a FERS disability retiree.
Under FERS Disability Retirement, you receive 60% of your “High 3” during the first 12 months of disability, then 40% of your “High 3” until you reach your 62nd birthday. You are allowed to earn up to 80% of your salary working in the private sector in addition to the annuity payments as long as the work you perform is within your physicians’ restrictions. Annuitants are allowed to continue their life and health insurance provided they continue to make premium payments. While on the disability retirement, you continue to earn credible years of service towards your full retirement, which will be recalculated adding the additional years to the earned service record, on your 62nd birthday.
If an individual is also unable to perform any gainful employment and is approved for SSD, the SSD and Federal Disability Retirement will offset. The annuitant will always receive the full SSD payments, but the FDR payments will be reduced by a percentage of the SSD. During the 60% year of the FDR, the FDR benefit will be reduced by 100% of the SSD payment. During the 40% years of the FDR, the FDR benefit will be reduced by 60% of the SSD payment. For an easier visual representation, check out this SSDI Calculation example.
Having both benefits in place does equate to a higher annuity, but also severely restricts any earnings potential the annuitant might hope for. If our example FERS FDR annuitant was not qualified for SSD, they would be able to earn $3,333 per month in addition the 60% or 40% annuity. They could not earn that if they were receiving SSD.
These benefits are complex in their interaction. Please contact us for a free consultation to discuss how they might impact your retirement plans.