By Molly Friedman, Esq., 301.563.6685
Your Federal Disability Retirement Benefit amount depends on a variety of factors, including your age, salary, length of time as a federal employee, and whether you receive Social Security Disability (SSD) benefits.
First, it is essential to know what system you are retiring under: Civil Service Retirement System (CSRS) or Federal Employees Retirement System (FERS). Since there are very few federal employees still in CSRS, the following outlines the basic calculation for individuals retiring under the FERS system. The Office of Personnel Management (OPM) administers both systems.
The central piece of information in computing your FERS Federal Disability Retirement benefit payment is what is known as your “high-3” or “high-three.” Your high-3 is the average of your salary for the three consecutive years where your salary was the highest. Most often, these are your final three years of service. However, it can be any three years in a row where you earned the most. As an example, if you earned $95,000 in 2017, $100,000 in 2018, and $105,000 in 2019, your high-3 would be $100,000.
Also, whether you receive Social Security Disability benefits is a factor used to calculate your disability retirement. As part of the application for FDR benefits, the claimant must certify that they have applied for Social Security Disability (SSD) benefits.
It is crucial to inform OPM Retirement Services as soon as you receive SSD benefits and provide them your Notice of Award from SSA so that OPM can recalculate your benefits.
For the first 12 months of your eligibility for FERS disability retirement benefits, your gross benefit is 60% of your high-3 minus 100% of any Social Security Disability benefits you receive. To determine the monthly benefit, divide the total annual amount by 12. Then, subtract your monthly Social Security Disability benefit amount. For example, if your high-3 is $100,000, your disability annuity would be $60,000, or $5,000 per month. If your SSD benefit is $2,000 per month, then your monthly benefit for each of the first 12 months that you receive SSD would be $3,000.
After the first 12 months of eligibility, your disability retirement annuity will be recomputed. Your annuity is calculated by taking 40% of your high-3 and subtracting 60% of any SSD benefits you receive. Using our example from above, after the first twelve months, your benefit would be $40,000 per year/ $3,333.33 per month (40% of your high-3) minus $1,200 (60% of your monthly SSD benefits). This computes to a gross monthly FERS Disability Retirement Benefit of $2,133.33.
FERS disability retirement benefits may include back pay. You will be eligible to be paid back to your LDOP (Last Date Of Pay), which is the last date that you worked or received any paid leave, including vacation, sick, and administrative leave pay, as well as donated leave.
Note that your first 12-month period to receive the 60% annuity is the first 12 months of payments that you receive. OPM will initially put you in interim pay status. OPM only calculates and pays all back benefits you may be owed when it puts you into final pay status. That generally occurs after about four to eight months of interim pay. When you go into final pay status, OPM will send you an “OPM Retirement Booklet,” which explains how it calculated your high-3, what is your LDOP, and what your deductions are, which often include taxes, medical insurance, and life insurance. The booklet does not document any offset for SSD benefits. Nor does it document any offset for survivor benefits.
Your FERS disability retirement annuity ends at age 62. When you turn 62, your regular retirement annuity will begin. That annuity will be recomputed utilizing your high-3 and years of creditable service. An excellent feature of the FERS disability retirement program is that your years of creditable federal service will continue to accrue for the time while you were receiving Federal Disability Retirement benefits as if you had continued to work until age 62. Your high-3 will also be adjusted to account for the annual Cost of Living Adjustment (COLA) that occurred each year while you were receiving benefits, except for the first 12 months of eligibility — you are not eligible for the COLA increase that occurred during the period of time when your benefits were calculated using 60% of your high-3.
If, at age 62, you have 20 years of federal service or more, your annual annuity is 1.1% of your high-3 for every year of service. If you have less than 20 years of creditable federal service at age 62, then your annual annuity is 1% of your high-3. You may also be eligible for enhanced annuity calculation at 1.7% if you performed your federal service in certain high-risk occupations, such as certain types of law enforcement, firefighters, nuclear materials couriers, air traffic controllers, or Capitol Police.
Even before age 62, if your “earned” annuity based on your high-3 creditable years of service is higher than your disability retirement benefit amounts, you are entitled to receive the higher amount. In that rare circumstance, which only occurs if you already have close to 30 years of creditable service, you should not apply for disability retirement. Instead, you should apply for immediate retirement. You are entitled to obtain an estimate of your retirement benefits from your agency at any time, and we recommend that you always do that before you apply.
The information above calculates the gross annuity amount. However, the actual payment you receive each month may be reduced based on several other expenses, including ongoing insurance costs. This depends on the medical and life insurance coverage you elect when you apply. Furthermore, your annuity will be impacted if part of your service was completed under the Civil Servant Retirement System.
Additionally, your annuity is reduced to account for survivor benefits, depending on what you elected when completing your FDR benefits application. If you elect survivor benefits of 25%, then your annuity is reduced by 5%. If you elect survivor benefits equaling 50%, your annuity is reduced by 10%.
The good news is that once you are checking whether OPM is paying you the correct amount, the hardest part is over- getting your claim for Federal Disability Retirement Benefits approved. We at Andalman & Flynn are available to guide you through the application process and maximize your chances of winning. Contact Andalman & Flynn for a free consultation and learn how we can use our over 30 years of experience working to assist federal employees in obtaining Federal Disability Retirement Benefits to fight for you.
Andalman & Flynn, P.C. serves clients throughout Maryland and the District of Columbia, offering compassionate, quality service and results-driven representation across a broad range of legal areas. With a concentration on disability benefits law and family law, our firm focuses on cases that impact the rights of everyone, and we are there for clients when responsive legal help is most critical. For more information about Andalman & Flynn, please visit our website or call 301.563.6685.