Federal Worker Disability Retirement: The 80% Rule

When a Federal or Postal employee files for Federal Disability Retirement benefits, and obtains an approval from the Office of Personnel Management, under FERS he or she will receive 60% of the average of one’s highest three consecutive years of pay, then 40% every year thereafter until age 62, at which point the disability annuity is recalculated based upon the total number of years of Federal Service, including those years that the disability retirement annuitant has been on Federal Disability Retirement.  Thereafter, the now “former” Federal or Postal employee has the capability to work at another, private-sector job, and earn up to 80% of what one’s former Federal or Postal job currently pays, on top of the disability annuity that one is receiving.

While some may wonder whether this is a “fair” benefit, especially in these trying economic times, it might be wiser to consider whether or not it is prudent to consider the economic incentives inherent in such a system.  For, by allowing for the Federal or Postal Disability Retirement annuitant to go out and attempt to earn income in another, different kind of job, it allows for continuing productivity, payment of taxes and FICA back into the “system”, as opposed to limiting the individual to merely receiving a government benefit. As all of “economics” is ultimately based upon incentives to the working population in order to encourage a system of the highest extent of productivity, this system creates an economic incentive to those who are merely disabled from performing a certain kind of job.  They can continue to remain productive — just in a different kind of job from the one in which he or she is disabled.

Sincerely,

Robert R. McGill, Esquire

FERS Disability Retirement: SSDI & FERS Offset

Federal and Postal Disability Retirement annuitants under FERS were required to file for SSDI as part of the process.  Most Federal and Postal employees who filed for Federal Disability Retirement benefits under FERS, never obtain an approval for SSDI.  This is natural, of course, and is part of the overall “framework” of the interaction between FERS Disability Retirement benefits and SSDI.  FERS Disability Retirement (as well as CSRS Disability Retirement) encourages Federal and Postal Workers to become employed in the private sector, and to become “productive” (translation:  continue to pay more taxes) in some other area of employment. 

Because Disability Retirement benefits under FERS or CSRS does not pay a great amount (60% of the average of one’s highest three consecutive years the first year under FERS, and 40% thereafter; a different computation methodology for CSRS employees, who are becoming rarer each year), the paradigm and plan of the Federal payment system for Disability Retirement annuitants had an implicit public policy approach of “encouraging” all such annuitants to find other employment.  Unless, of course, in addition to the FERS Disability Retirement annuity, one became entitled to SSDI payments, in which case the “cap” for income from other employment becomes much, much lower.  Many considerations should be thoughtfully approached when filing for SSDI, including plans for future employment.  Otherwise, some problems may be encountered if the annuitant receives both FERS Disability Retirement benefits, SSDI, and exceeds the cap from other employment.  More to Follow.

Sincerely,

Robert R. McGill, Esquire

CSRS & FERS Disability Retirement: The 80% Rule

I recently wrote an article on FedSmith.com concerning the legal process of filing for Federal Disability Retirement benefits under FERS or CSRS, and a reader posted a comment implying and suggesting a lack of understanding about a benefit which would allow for payment of 40% of the average of one’s highest three consecutive years, and in addition, to allow for that annuitant to make up to 80% of what the former federal position currently pays.

I beg to differ. The purpose of allowing an annuitant to potentially go out and earn additional compensation in the private sector are multi-fold: it allows for an individual to remain productive; he or she continues to contribute in the workforce and, as a consequence, pays taxes, FICA, etc.; the amount of 40% (after the first year) is an incentive to go out and do something else. Further, Federal Disability Retirement benefits are part of a compensation package offered to a Federal or Postal employee — it is part of the total employment package, and there is certainly nothing wrong with taking advantage of that employment benefit if and when the need arises. The truth is that most people don’t get anywhere near the 80% mark, but hover closer to the 40 – 50% mark, and together with the disability annuity, are able to make a decent living. All in all, the 80% rule is a smart and thoughtful incentive for those who are disabled.

Sincerely,

Robert R. McGill, Esquire