Federal Workers – Watch Out for Those Benefit Offsets!

Jan 28, 2016

offsets federal worker benefits

At Harris Federal, we have represented federal workers for over a decade. Something we have encountered, of which many federal employees are unaware, is that there are offsets for OWCP workers’ compensation wage loss and schedule award benefits with social security disability and FERS disability annuity payments. Unfortunately, the agencies sometimes take a while to catch the offsets, which may result in years of overpayment, which you then owe back to the federal government.

It is nearly impossible to get out of repaying your overpayments. This is why it’s important to understand how these offsets work, so you can catch the overpayment before it accrues to the point of significant concern.

The Benefit Offset Between Social Security and Workers’ Compensation

The Social Security Administration (SSA) offsets its annuity payments for clients who are receiving OWCP workers’ compensation benefits. If you are receiving wage loss payments or a schedule award, then the SSA will deduct a percentage of its annuity payments based on the amount you’re entitled to through OWCP.

The OWCP benefits are meant to be temporary, and the agency’s goal is to eventually send you back to work, even if your injury or disability hinders your work performance. For this reason, many federal workers opt to apply for FERS disability retirement benefits, which continue until the claimant can withdraw from their TSP and pension at the age of 62.

It’s important to understand the following:

  • You can NOT continue to receive OWCP wage loss benefits, while also earning federal disability retirement annuity
  • You CAN receive an OWCP schedule award (pay for a statutory number of weeks based on which body parts are disabled) in conjunction with federal disability retirement annuity
  • You MUST apply (not necessarily be approved) for social security disability in order to file for FERS disability retirement

Since it’s only a matter of time before the OWCP terminates a federal worker’s wage loss payments, many of our clients choose to apply for FERS disability retirement, so they have financial support until they can access their full retirement fund. If their OWCP claim also entitles them to a schedule award, then they will wait and receive it once their OWCP wage loss payments have expired.

Strategic Planning for Federal Workers

So, first you have OWCP wage loss benefits…second you apply for FERS disability retirement…then you stop receiving OWCP wage loss, and receive payments for your schedule award, while also getting monthly disability retirement annuity until you turn 62.

Throughout the entire process, you may also receive a social security disability annuity.

The social security disability annuity is what makes matters tricky. Remember, your social security disability payments are reduced based off of your OWCP benefit. So if your schedule award is relatively substantial, then your Social Security disability payments will reduce significantly.

The Office of Personnel Management (OPM) oversees all FERS disability retirement cases, and your FERS disability retirement annuity is offset by your Social Security disability payment. In theory, it would seem like the offset would be based off of the amount you actually receive for social security disability, taking into account the reduction for the OWCP schedule award. This is NOT the case. The court has ruled and upheld that the OPM can offset its disability retirement annuity based on the total amount of money you are entitled to receive from the SSA, NOT the amount you actually receive.

This is all based off of the precedential case of Johnson v OPM, 70 MSPR 109 (1996)

Johnson v OPM, 70 MSPR 109 (1996)

Johnson received OWCP wage loss for a period of time, and was later approved for FERS disability retirement, which she opted to apply retroactively. Her OWCP wage loss benefits then changed to a schedule award. Johnson’s Social Security disability was reduced by $375.74 per month by the OWCP schedule award.

In a notice of December 15, 1994, OPM advised Johnson that she had incurred an overpayment of $1,739.83 (September through November 1994), because OPM had failed to compute her FERS disability annuity by offsetting the full, unreduced, assumed social security disability benefit.

The court ruled in favor of OPM, and Johnson had to pay back the $1,739.83.

Over the years, several federal workers have taken similar cases to the court system; however, the Merit Systems Protection Board (MSPB) and Federal Circuit has consistently upheld the Johnson decision.

The law is incredibly complex, and it’s critical you seek experienced legal professionals to represent your case. At Harris Federal, we can help. Contact our firm to speak with a representative about your case.

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