The FERS Disability Retirement Option

As a Federal employee, you are not offered short-term disability coverage. However, you do have protection against a long-term disability via the FERS Disability Retirement Option. While many people dismiss the need for disability protection, the Social Security Administration states that 25% of people who are 20 years old today will be disabled for 90 days or more before reaching age 67. Considering the high probability of experiencing a disability at some point, every Federal employee should understand the eligibility requirements and benefits of the FERS disability retirement.

Eligibility

To be eligible for the Disability Retirement, you must meet the following requirements:

  • Minimum Service: At least 18 months of service
  • Application Deadline: If you separate from service, you must submit your application within twelve months of separating.
  • FERS Coverage: Must have been covered by FERS at the time of disability
  • Disability Duration: Your disability must be expected to last at least one year
  • Agency Certification: Your agency must certify that it cannot accommodate your disability in your current position or any vacant position you are qualified for at the same grade and within the same commuting area.
  • Social Security: You must also apply for Social Security disability benefits. If you do not apply for Social Security disability or withdraw your application, OPM will dismiss your application.
  • Initial Medical Documentation and Periodic Medical Exams: You must provide sufficient medical documentation to support your application. Once your application is approved, you may be required to provide medical information periodically. 

Benefit

The computation of your FERS disability benefits will depend on your age and years of service. Your benefits will also be recomputed twice, once after the first twelve months and again at age 62. Once you reach age 62, your pension will be recomputed as if you had continued working until age 62 and retired under the non-disability provisions. Meaning your time on disability retirement will be added to the service years used to calculate your new pension.

The formula for your disability benefit is as follows: For the first twelve months, you will receive 60% of your high-3 salary minus 100% of your Social security benefit for the first year.

1st Yr Benefit = 60% of “High 3 Salary” – 100% of Social Security Benefit

After the first year, you will receive 40% of your high-3 salary minus 60% of your Social Security benefit.

2nd Yr + Benefit = 40% of “High 3 Salary” – 60% of Social Security Benefit

However, you are entitled to your earned pension in both instances if it is larger.

Cost of Living Adjustments

COLA’s are not payable for the first 12 months when your Benefit is calculated using the 60% of your high 3, but COLAs that occur after the first 12-months are payable.

Special Retirement Supplement

If you retire under the FERS disability provision, you will not be eligible for the Special Retirement Supplement.

Earnings Limit

If you are age 60 or over, there is no limit on the amount of your earnings. However, if you are under age 60 and earn 80 percent or more of what your basic pay would be if you continued working for the Federal government, OPM will stop your benefits.

Final Thoughts

People sometimes dismiss the need for disability protection and focus on protecting against premature death instead. Yet, the probability that you will suffer a disability is much greater than that of dying prematurely. Therefore, the FERS disability option is a critical part of your overall risk management plan. To learn about the right amount of disability protection, read this article. If you need help creating your risk management plan, consult with a qualified financial planner.

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2023 Legislative Change Notice

The SECURE ACT 2.0 passed and impacted many of the articles on this website. While the articles were correct when written, it’s impossible to re-write every article. Please consult a qualified professional (i.e., CFP®, CPA, or attorney) before implementing any strategy.

Author: Jose Armenta, MsBA, CFP®, ChFC®, EA

Hi, I’m Jose Armenta, a Certified Financial Planner practitioner. For over 14 years, I have worked with or among federal employees, from serving in the Marine Corps to my stint as a police dispatcher and now as a financial planner specializing in helping FERS federal employees. In that time, I have spoken to hundreds of federal employees about their benefits and retirement. Helping federal employees maximize their benefits, reduce taxes, and live confidently is a passion of mine. When I am not perfecting financial plans, you’ll find me at the shooting range, playing the drums, or breaching blanket forts with my three little ones.