Quick Takeaways
- Federal Disability Retirement can serve as a bridge to 62: You’ll receive 60% of your high-three average salary the first year, then 40% every year after until age 62, when it converts to your regular FERS retirement.
- You keep building creditable years of service while on Disability Retirement: Even though you’re not actively working for the federal government, your time on this benefit counts toward your eventual FERS retirement calculation.
- MRA plus 10 retirement comes with a permanent reduction, but Disability Retirement doesn’t: MRA+10 payments are cut 5% for every year you are under age 62, a reduction Disability Retirement avoids.
- You can work in the private sector while on Disability Retirement: Your earned income just can’t exceed 80% of your former federal position’s current salary.
- Special provisions employees with a mandatory retirement age still build service credit on Disability Retirement: Law Enforcement Officers, air traffic controllers, and federal firefighters continue earning creditable years all the way until age 62.
Common Questions
Q: What is minimum retirement age (MRA)?
A: Your MRA is the earliest age you can retire with full benefits, provided you’ve completed the required years of service — for anyone born in 1970 or after, that age is 57.
Q: How is the FERS basic benefit calculated?
A: If you have less than 20 years of service, it’s 1% times your high-three average times your creditable years of service. At 20 years or more, the multiplier increases to 1.1%.
Q: What are the eligibility requirements for Federal Disability Retirement?
A: You need 18 months of creditable civilian service (not counting bought-back time), you must be a FERS employee or regular/SLC career employee, and your disease or injury must have affected your ability to perform your job efficiently.
Q: Can I work while on Federal Disability Retirement?
A: Yes — you can work in the private sector as long as your earned income doesn’t exceed 80% of your former federal position’s current salary.
Q: What happens to special provisions employees’ mandatory retirement age if they go on Disability Retirement?
A: They still build creditable years of service up until age 62, even though their job type would otherwise require mandatory retirement earlier.
Full Webinar Transcript
Understanding the Federal Employee Retirement System (FERS)
Michelle Green (Case Manager Supervisor): What is [Federal Employee Retirement System]? This is the retirement plan every federal employee enters into. You might have heard of FERS being referred to as a three-legged stool or a three-tiered system because it has three major components: your basic benefit, Social Security, and your Thrift Savings Plan.
So the first, basic benefit — this is paid monthly after you retire, and this is based on your creditable years of service and your high-three average. If you have less than 20 years of service, you will receive a monthly annuity payment based on the following calculation: it is 1% times your high-three average times your creditable years of service. If you have more than 20 years of service, it works the same way, just the calculation is a little different — you get 1.1% times your high-three average times your creditable years of service.
Katelyn Elliot (Senior Disability Consultant): The second part of FERS is your Social Security benefit. Your Social Security retirement benefit is a monthly payment you receive that supplements your income when you retire. FERS employees pay Social Security taxes, and the amount you receive from the SSA [Social Security Administration] depends on how many years you paid into Social Security and how much you paid.
Michelle: And finally, the third part is the Thrift Savings Plan. This functions like a 401(k) for federal employees, and it gives you a way to save and invest for retirement. You’re automatically enrolled to contribute 5% of your salary. The agency does match your contributions, but it’s important to keep in mind that if you are contributing below 5%, that means you are not receiving the full matching amount.
Understanding Minimum Retirement Age
Katelyn: What is minimum retirement age? Your minimum retirement age, or MRA, is the earliest age you can retire and receive full benefits, as long as you have completed the required number of years of service. There’s a chart where you can find your MRA based on your age — for example, for those who are born in 1970 or after, your MRA is going to be age 57.
What Are the Different Types of Retirement?
Michelle: Let’s talk a little bit about the different types of retirement. So the first I want to bring up is the immediate voluntary retirement. This is the straightforward retirement option for federal employees. To qualify for this type of retirement, you have to meet one of the following age and service requirements: at age 62, you must have at least 5 years of service; at age 60, you must have at least 20 years of service; or, as Katelyn just mentioned, there is a minimum retirement age, and for that you must have at least 30 years of service.
Katelyn: Early optional retirement — you might have heard this referred to as MRA plus 10, or MRA plus 10 years of service. This is for people who have met their MRA and have at least 10 years into FERS. The annuity is calculated at the 1% model, but payments will be reduced by 5% per year each year under the age of 62.
Michelle: It is worth mentioning that special provisions employees do have an immediate voluntary retirement option. Special provisions federal employees are Law Enforcement Officers, air traffic controllers, and federal firefighters, and you will receive a higher retirement calculation if you are in one of these positions. It is 1.7% that is used for the first 20 years of service; every year after that is 1% for each additional year. To qualify for this you must be age 50 with 20 years of service, or any age with 25 years of service.
Katelyn: Special provisions employees are also subject to a mandatory retirement requirement. This means that they must retire once they’ve met a certain age — this depends on their job. Law Enforcement Officers must retire at age 57 with 20 years of service, air traffic controllers must retire at age 56 with 20 years of service, and federal firefighters must retire at age 55 with 20 years of service.
Michelle: Another option for retirement under the FERS system is a deferred retirement. This retirement is for federal workers who left service before they were eligible for a retirement annuity. They can still get their retirement money when they reach the right age, even if they’re no longer working for the federal government. At age 62, the years-of-service requirement is between 5 and 10, or MRA plus 10. If you start collecting this retirement at your minimum retirement age, your payments are reduced by 5%.
Katelyn: Phased retirement is a newer option for federal employees who are eligible for immediate retirement. This allows a full-time employee to work part-time while they begin to withdraw retirement benefits. A phased retiree partially retires from some of their job duties and typically focuses on mentoring and training other employees.
Michelle: Participation in this retirement is, of course, voluntary, but to be eligible you must be eligible for an immediate retirement.
Federal Disability Retirement – Explained
And that brings us to Federal Disability Retirement. So this is an early retirement option for federal employees who are struggling in their job due to a medical condition. The Office of Personnel Management [OPM] provides this benefit, and it lasts until age 62, when you will receive your regular FERS retirement.
Katelyn: If you’re struggling in the workplace due to any medical conditions, Disability Retirement may be something you want to consider. There are a few eligibility requirements you’ll need to be mindful of. Firstly, you’ll need to have 18 months of creditable civilian service — this doesn’t include bought-back time, you’ll need to have worked in a civilian position for 18 months. You must be a FERS employee or regular/career employee if you work for USPS. And then you must have become disabled because of disease or injury for efficient service in your current position.
Qualification Requirements for Federal Disability Retirement
Michelle: So what are the criteria for qualifying for Disability Retirement? Number one: you must have a diagnosed medical condition resulting from disease or injury.
Katelyn: Your diagnosed medical condition must be expected to last at least one year.
Michelle: You must exhibit a service deficiency after a period of useful and efficient service.
Katelyn: Your medical condition must cause your service deficiency.
Michelle: Your medical condition must have arisen or worsened while in your federal position.
Katelyn: Your agency must be unable to accommodate you without removing essential functions of your job.
Michelle: And finally, your agency must be unable to reassign you to a vacant position at your pay level in your area.
Katelyn: Briefly, we’ll go over some highlights of Disability Retirement, but we’re happy to go over this more in a free consultation, of course. First is a monthly annuity payment — the first year on Disability Retirement, you’ll receive 60% of your high-three average salary. Then every year after that first year, until the age of 62, you’ll receive 40% of your high-three. At age 62, it’s going to be recalculated and you’ll receive your regular retirement annuity.
At the same time, while you’re on Disability Retirement, you’re still building years into FERS — so you’ll build time into the system, but you don’t have to work in the federal government for it. You can work in the private sector, as long as your earned income doesn’t exceed 80% of your federal position’s current salary.
Lastly, you’re also allowed to keep your Federal Employee Health Benefits [FEHB] and life insurance. You can also keep your qualified dependents on your FEHB.
Michelle: If you are eligible to retire early under the minimum retirement age provision with more than 10 years of service and you have a health condition, it is worth considering Federal Disability Retirement instead. This benefit can serve as a bridge to 62, letting you get your standard retirement benefits early without any cuts to your annuity.
Katelyn: There are some special provisions considerations here — a lot of special provisions employees ask us, “I have a mandatory retirement age, will I still build years of service until the age of 62?” Yes, special provisions disability retirees do build years until the age of 62. Once you turn 62, your retirement benefits will shift from Disability Retirement to those specified by your job’s special provisions, and they will include the additional years of creditable service you earned.
Michelle: So to recap our discussion: there are many different types of retirement for federal workers that they may want to consider when looking toward their future.
Katelyn: Federal Disability Retirement can serve as your bridge to 62, letting you get your standard retirement benefits early if you’re struggling with a medical condition. Disability Retirement is particularly useful for people on OWCP [Office of Workers’ Compensation Programs], veterans, employees who have been on leave for a long period of time, and those who are struggling to get a reasonable accommodation — but it’s certainly not limited to those people.
We Are Here to Help!
Michelle: Navigating the complex application process can be overwhelming, but our experienced team is dedicated to providing our clients support and expertise, ensuring a smooth path to securing the benefits they deserve. We’ve helped 14,000+ federal employees secure their future (updated from the original recording’s figure to reflect the firm’s current total), and we’re happy to help you.
If you’re interested in discussing this benefit and going over your potential case, please give our office a call to schedule a free consultation with one of our consultants.