Benefit Interaction Part 1: FERS Disability Vs Social Security Disability

Sep 20, 2016

benefit interactionIn this two-part post, we are going to look at the benefit interaction between receiving a FERS Disability and a Social Security Disability. While you don’t have to be approved, one of the requirements of filing for Federal Disability Retirement (FDR) is that you apply for Social Security Disability (SSD). With that being said, if you happen to be approved for both, you can receive both benefits concurrently but have a benefit interaction. Although, your benefit payout calculation can be a bit tricky.

If you happen to be approved for both SSD and FDR, the SSD would be the primary benefit and your FDR would be offset by that amount. Here are the formulas for computing your annuity while receiving both FDR and SSD:

  1. Year 1=SSD + (60% FDR minus 100% SSD)
  2. Year 2 (up to age 62) =SSD + (40% FDR minus 60% SSD)

During year one of your FERS disability, you receive 60% of your High-3 Salary. So your disability is offset by all of your SSD benefits. In year 2, and every year after until age 62, you receive 40% of your High-3 Salary. This time, however, your disability amount would be offset by 60% of your SSD benefits. Let’s look at the following example to get a better understanding of how this works.

Example :

In this example, the person is receiving both FDR and SSD concurrently, so that means the SSD benefit is primary.

High 3 salary=$50,000

1st year FDR=$30,000 or $2,500/mo

2nd year FDR=$20,000 or $1,667/mo

*SSD=$18,000 or $1,500/mo

*SSD monthly payments are based off your average lifetime earnings before the disability began, and the amount of income on which you paid Social Security taxes. It is not based on the severity of the disability.

Let’s plug in the numbers from our example into the above formulas:

Year 1=$1,500+($2,500-$1,500) =$2,500 so the same as if you were just getting FDR

Year 2=$1,500+($1,667-$900) =$2,267 so in this case, a little more per month with both benefits

Another thing to keep in mind is that if you are receiving SSD benefits, you are allowed to be employed but you can only earn up to $1,130 per month. Contrary, you can earn up to 80% of your previous positions current earnings while receiving FDR. Using the High 3 salary from our example, that would mean you can earn $40,000 per year or $3,333 per month. Knowing this, let’s now look at what you can expect to earn while receiving FDR and SSD:

Year 1 (w/SSD) =$2,500 (from above example) +$1,130 (money you’re allowed to earn/mo) =$3,630

Year 1 (w/o SSD) =$2,500 (from FDR) +$3,333 (money you’re allowed to earn/mo) =$5,833

Year 2 (w/SSD) =$2,267 (from above example) +$1,130=$3,397

Year 2 (w/o SSD) =$1,667 (from FDR) +$3,333=$5,000

Social Security Disability is a benefit designed to help those who are totally disabled and can’t find ‘substantial gainful employment’. If you merely have an occupational disability, it is to your advantage to continue working in the private sector earning up to 80% of your previous salary while receiving FDR benefits. Receiving both these benefits concurrently is really only beneficial if you are permanently disabled and can’t find substantial gainful employment. Next, we’ll look at the interaction between receiving a FERS Disability and OWCP payments.

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