Q&A – Your Rights to Federal Disability Retirement

Dec 16, 2020

How does Social Security Affect Federal Disability


Our recent webinar covered Federal Employees’ Rights to Federal Disability Retirement. This is an especially important topic that brought up a lot of great questions during the webinar.

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This article outlines some of those questions and goes in-depth into the answers to those questions. Our hope is to help you understand your benefits and your rights so you can make educated decisions moving forward.

If you have any other questions that are not answered in this Q&A regarding Federal Disability Retirement, we recommend that you check out our other posts in our Q&A series.

Q: If I apply for FERS Disability Retirement and I get terminated before my retirement is resolved, am I still able to apply for disability retirement?

A: Yes! It would still be your right to apply for Federal Disability Retirement because you have 1 year from your date of separation to submit an application. This is an extremely strict deadline, so make sure you are aware of your date of separation and apply in a timely fashion. Our law firm is designed to help federal employees gather all the necessary medical documents and build a compelling legal argument to submit to the OPM (Office of Personnel Management).

Q: How is the FERS High 3 Average calculated?

A: The OPM utilizes the High 3 average to determine Federal Disability Retirement annuity payments. The High 3 Average can be difficult to calculate, but essentially it is the average of your highest 36 consecutive months of basic pay.

In many cases, federal employees find that their most recent 36 months of pay is their highest and can calculate and estimated annuity from that. However, the OPM will make the final calculation on your High 3 average.

To estimate your Federal Disability Retirement annuity, you will receive 60% of your high-3 average salary the first year you are approved for disability retirement and from year two until you reach the age of 62, you will receive 40% of your High-3 each year. Check out our calculator to learn how much you will earn on Federal Disability Retirement.

Q: Will I receive COLA while on Federal Disability Retirement?

A:Your COLA will be awarded after your first 12 months on Federal Disability Retirement based on your annuity. Your base Federal Disability annuity will remain the same until you are 62. However, your Cost-of-Living Adjustment (COLA) will change to account for inflation. Your locality pay will also be included in your High 3 and will not change if you move after retirement.

Q: Can I apply for Federal Disability Retirement if I am released to full duty?

A: Yes, if you are on full duty you can still apply for retirement. It is helpful to your case if you are on modified duty, but it is not required to be considered for approval.

Q:If I get approved for Federal Disability Retirement do I have to use all my sick and annual leave?

A: This simple answer is no, you do not have to use all of your sick and annual leave. Your sick leave is added to your years of service in monthly increments and your annual leave is paid in a lump sum upon separation. The Office of Personnel Management (OPM) will make sure that you receive payment for the time you accrued. However, in many cases, if you have been unable to work you have likely already used up most of your sick and annual leave.

Q: Is Social Security Disability (SSDI) separate from Federal Disability Retirement? If so, will my social security be deducted from my disability retirement benefit if I am approved?

A: Yes, Social Security Disability is a separate benefit from Federal Disability Retirement and if approved for both, there will be an offset. If you are approved for social security disability, you will receive 100% of your Social Security Disability as the primary benefit, and the first year you will receive your Federal Disability Retirement annuity minus 100% of your Social Security Disability payment. The second year and each year after, you will receive your Federal Disability Retirement annuity minus 60% of your Social Security Disability. 

Q: Does applying for Social Security Disability play any role in the determination of Federal Disability Retirement?

A: To apply for Federal Disability Retirement, you must show proof that you have applied for Social Security Disability. If you apply and are denied for SSDI because of your income, then OPM can ask you to reapply after you have been approved for Federal Disability Retirement. But at the end of the day, you do not have to be approved for SSDI to be approved for Federal Disability Retirement.

Q: Will my years on OWCP Workers’ Compensation prior to receiving Federal Disability Retirement count as creditable years of service?

A: Yes, once you switch over to your Federal Disability Retirement benefit, you will be retroactively credited the years while on OWCP Workers Compensation as creditable years of service.

Q: Should I begin the OPM Disability Retirement process with a request for reasonable accommodations or an FMLA request?

A: The Office of Personnel Management (OPM) requires that you go through the reasonable accommodations process and we are happy to assist clients with that as it pertains to their Federal Disability Retirement application. However, the OPM does not require you to submit an FMLA request unless you feel that it is helpful to your specific situation. Give us a call and we can help you determine the best course of action.

Q: Will I continue to accrue annual leave while waiting for my approval for Federal Disability Retirement?

A: If you are currently working then you will accrue leave time as usual. If you are in a Leave Without Pay (LWOP) status, you do not accrue annual leave. In most cases, you will get approved for annual leave backpay if you have been separated for any reason. On top of the annual leave backpay, any unused sick time you have will be added on to your service record.

Q: Is Federal Disability Retirement taxed?

A: Federal Disability Retirement income is taxed on the federal level as regular income, not as earned income. State tax on Disability Retirement income will vary state by state. This means that there is no employment tax (Social Security and Medicare) so the overall tax burden is lower.

Q: What is the difference between OWCP Workers’ Compensation payments and Federal Disability Retirement payments?

A: OWCP workers compensation payments are available to federal employees who make a claim for a work-related injury. OWCP workers’ compensation payments are 66% of your current pay without a dependent and 75% of your current pay with a dependent. This benefit is subject to change at any time and has a lot of restrictions that prohibits you from finding an outside job for supplemental income.

Federal Disability Retirement is an option available to FERS employees that are not able to perform 100% of their required duties due to an illness or injury. Unlike OWCP workers’ compensation, this medical issue does not have to be a work-related injury.

For the first 12 months on the disability retirement benefit, you will receive 60% of your High 3 average. After the first 12 months you will receive 40% of you High 3 average. This benefit is set and will not change once you are approved. It also gives you the option to earn supplemental income that is up to 80% of your current job’s salary.

Keep in mind that you are not able to receive these benefits at the same time. You can elect to switch to Disability Retirement once you are approved for the benefit or choose to remain on OWCP Wage Loss.

Q: Is the one-year deadline to apply for Disability Retirement based on the injury date?

A: The one-year deadline to apply for Federal Disability Retirement is based on your date of separation. This is an extremely strict deadline, so make sure you are aware of your date of separation.

If you have not been separated from your job the one-year deadline does not apply and you are able to apply any time after you have been employed in full-time status for at least 18 months.

Q: How long does the Federal Disability Retirement process take?

A: The OPM’s processing times can vary depending on their backlog. It can take anywhere from 6-12 months to receive a decision for disability retirement. This is a great time to apply as recently, we have seen decisions made in as little as 2-4 months.

Q: Will my agency continue to pay the employers share of my health insurance during disability retirement?

A: Your agency will no longer pay it but OPM will take over and pay half of the employee’s portion.* While on disability retirement, your dependents will be allowed to remain on your health insurance. However, this is subject to change based on which survivor annuity is elected at the time of application.

*If you are employed by the Postal Service then the postal service will pay 55% because that is what has been negotiated with the union.

Q: What are my different TSP options?

A: After retirement you are still able to contribute to your TSP account however, the agency will no longer match it. You are given the option to cash it out, roll it over or leave it alone. However, there may be a penalty for cashing out depending on your circumstances. For details on the best option for you, contact TSP directly or a financial planner that has experience with helping federal employees.

Q: Am I able to withdraw from my TSP account without penalty after I’m on Federal Disability Retirement?

A: The same rules apply to Federal Disability Retirement as they do for regular FERS retirement. It will depend on your age and circumstance which is why we recommend that you consult a financial expert or contact TSP directly.

If you have more questions that were not answered in this Q&A session, checkout the other posts in our Q&A series, as they may provide answers to your questions.

If you have specific questions regarding your Federal Disability Retirement case, then contact us today to schedule a FREE consultation.

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