In this article, Bo explains in detail how Federal Disability Retirement can earn you more money once you hit your full retirement date. Learning about the additional years of creditable service that you can earn while receiving the FERS disability payments can be very helpful when making your decision about filing for benefits.
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Common Misunderstandings About Federal Disability Retirement
At Harris Federal, we help federal employees understand their rights. In this article, we will touch on a portion of the Federal Disability Retirement benefit that we feel is often overlooked and misunderstood.
FERS disability retirement offers a lot of great benefits to federal employees who develop medical conditions that prevent them from fully performing their job. Most people who somewhat understand the benefit know it will pay them a portion of their salary and even allow them to keep their federal health and group life insurance if chosen.
But perhaps the most interesting part of the benefit is not commonly known. Under the FERS system every year that you’re on Federal Disability Retirement will count as another year of credible service.
Remember, as a FERS employee, a disability retirement is sixty percent of your High-3 average for the first year of eligibility, and then forty percent for every other year all the way until your 62nd birthday. When you turn 62, the benefit will recalculate into a regular retirement and it will add all of those additional years to the years that you have already earned while you were employed at your employing agency.
A Helpful Example
For example, let’s say an employee at the IRS is 51 years old and has 19 years of credible service when they get approved for FERS disability retirement benefits. The High-3 calculation is $67,000. They will receive 60% of that for the first year on the disability annuity or around $40,200. That breaks down to around $3,350 per month gross income.
After the first 12 months have elapsed, the benefit would drop to the 40% calculation or around $26,800 a year or $2,233 a month gross.
That annuitant can supplement what they receive from the benefit with a private sector job as long as the work they are performing is not outside of their medical restrictions and potentially earn up to 80% of their previous job’s current salary. In this case that would be around $53,600 a year.
But here is the important part that I want you to understand:
Every year that they were drawing that benefit the credible years of service kept adding up. When they turn 62, the benefit will recalculate under normal immediate retirement rules taking into account the additional 11 years while on the benefit.
Our example employee had 19 years in the system plus 11 years on the disability benefit giving them a total of 30 years of credible service. This part of the benefit will significantly raise their lifelong retirement payments.
Hopefully, this article shed some light for you on an often overlooked and misunderstood part of a Federal Disability Retirement for FERS employees. Remember, it’s our goal at Harris Federal Law Firm, to help as many federal employees as possible and that means spreading information. Please schedule a FREE consultation to answer any questions you may have and see if you qualify for Federal Disability Retirement.
