Understanding the Rules for FERS Disability Retirement – Part IV

The federal government allows employees covered by the Federal Employees Retirement System (FERS) and who are unable to work due to either a mental or a physical condition to retire under what is called a FERS “disability retirement”.

Since it is in the best interest of both agency and the employee to remain gainfully employed as long as the employee can provide useful and efficient service, disability retirement should be considered as a last option. Disability retirement should be used only when attempts have been made to preserve an employee’s federal employment, and those attempts have failed.

This column is the fourth of four columns presenting the rules for FERS disability retirement and discusses the computation of the FERS disability annuity.

SEE ALSO:

• Understanding the Rules for FERS Disability Retirement – Part I
• Understanding the Rules for FERS Disability Retirement – Part II
• Understanding the Rules for FERS Disability Retirement — Part III

A FERS disability annuity is computed in one of three ways depending on the employee’s age when the employee is approved for a FERS disability retirement. In most cases, a FERS disability annuitant’s annuity is initially computed, recomputed after the first 12 months of retirement, and finally when the disability annuitant becomes age 62.

Computation of the Disability Annuity for FERS Employees Younger Than Age 62 at the Time of Retirement (and Ineligible for an Immediate FERS Retirement)

FERS employees who qualify for a disability retirement in most cases when they are under age 62 and ineligible for immediate (voluntary) retirement. As a result, their initial disability annuity (during the first 12 months of disability retirement) is computed under one formula. After one year, the disability annuity is recomputed under a different formula. Starting in the 13th month of disability retirement, the disability annuity will remain the same until the month the disability annuitant becomes age 62. At that time, the disability annuity is recomputed for the final time.

The following table summarizes how the disability annuity is computed at the different stages of the disability annuitant’s retirement.

Table. FERS Formulas for Computing a Disability Annuitant’s Annuity

The following example illustrates the various calculations associated with a disability retirement:

Michael, age 46, has been approved for a FERS disability retirement. He also applied for and was approved for Social Security disability benefits. Relevant information:

Years of service under FERS before being approved for FERS disability retirement: 20
High-three average salary: $80,000
Social Security disability benefit: $8,000 per year

Table. Michael’s FERS Disability Annuity Amounts at Various Stages of Michael’s Disability Retirement

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The following is additional information about a FERS disability retirement:

1.  If a FERS employee is approved for a FERS disability retirement, then the employee can choose to give a spousal survivor annuity, either the maximum (50 percent) spousal survivor annuity or the less than maximum (25 percent) spousal survivor annuity. In either case, the retired FERS employee’s annuity will be reduced by either 10 percent (maximum spousal survivor annuity) or five percent (less than maximum spousal survivor annuity).

2.  If a FERS employee wants to pay a deposit for temporary service that occurred before Jan. 1, 1989, and/or to pay a deposit for post-1956 military service, the deposit(s) must be paid in full before separation even though both deposits will not be used in the (disability) retired FERS employee’s FERS annuity calculation until age 62.

3.  A FERS disability annuitant is eligible to retain all federal employee insurance benefits (health, life, dental, vision and long-term care) throughout retirement (assuming he or she met the prerequisites to keep the health insurance (FEHB program) and/or life insurance (FEGLI program) before retiring).