Disability benefits under FERS: What exactly are you getting?

Although I hope it never happens to you, at some point in your career you may become disabled and unable to work. Here are some things you should know about qualifying for disability under the Federal Employees Retirement System and how those disability benefits are calculated.

First of all, to be eligible for disability retirement benefits, you must:

* Have completed at least 18 months of federal civilian service under FERS.

* Become disabled because of a disease or injury so that you are no longer able to successfully perform the critical or essential elements of your job.

* Have a disability that is expected to last at least one year.

* Have certification from your agency that says that it can not accommodate your disabling condition in your present position and that it has considered you for any vacant position it has at the same grade or pay level, within the same commuting area, for which you are qualified for reassignment.

* Apply before you quit your job or within one year thereafter. The Office of Personnel Management must receive the application within one year of the date of your separation.

* Apply for Social Security disability benefits.

The next question is, What kind of benefits can you expect to get? Disability benefits under FERS are computed in different ways depending on the retiree's age and amount of service at retirement.

If at disability retirement you are already 62 years old or meet the age and service requirements for an immediate voluntary retirement, you will receive an annuity based on the general FERS annuity computation. This is equal to 1 percent of your "high-3" average salary, multiplied by your years and months of service.

Your high-3 average salary is figured by averaging your highest basic pay during any three years of consecutive service. Those three years are usually your final three years of service, but can be from an earlier period. Your basic pay is the basic salary you earn for your position excluding any overtime or bonus pay.

If you are at least 62 years old at retirement and have completed at least 20 years of service, your annuity will be computed using 1.1 percent of your high-3 average salary.

If at disability retirement you are younger than age 62 and not eligible for voluntary retirement because you haven't worked long enough to qualify, you will receive the following benefit:

* For the first 12 months, 60 percent of your high-3 average salary, minus 100 percent of your social security benefit for any month in which you are entitled to social security disability benefits. After the first 12 months, 40 percent of your high-3 average salary minus 60 percent of your Social Security benefit for any month in which you are entitled to social security disability benefits.

However, you are entitled to your "earned" annuity (1 percent of your high-3 salary multiplied by your years and months of service), if it is larger than your disability annuity.

When you reach age 62, your annuity will be recomputed to provide you with the annuity you would have received if you had continued working until the day before your 62nd birthday and then retired under FERS' nondisability provisions. The total service used in the computation will be increased by the amount of time you have received a disability annuity. The average salary used in the computation will be increased by all FERS cost-of-living increases that occurred during the time you received a disability annuity — even if the adjustment did not affect your annuity. The FERS basic annuity formula (1 percent of your high-3 salary multiplied by your total years and months of service) is then applied.

If your actual service plus the credit for time as a disability retiree equals 20 or more years, the formula would be 1.1 percent of your high-3 average salary multiplied by the total of your years and months of service.

Keep in mind that your basic annuity is reduced to provide survivor annuity benefits if you are married — unless you and your spouse jointly waive survivor benefits — or if you are required by a qualifying court order to provide benefits for a former spouse.

— Zall is a free-lance writer based in Silver Spring, Md., who specializes in taxes, investments and business issues. He is a Certified Internal Auditor and a Registered Investment Advisor. He can be reached via e-mail at miltzall@starpower.net