Federal employees have access to disability retirement benefits through the Federal Employees Retirement System (FERS), but this coverage might not fully meet their needs. Federal employees are entitled to this benefit and can supplement coverage with private disability insurance. Disability Retirement is not the same as Disability Insurance, so it’s important to understand the differences between these programs to protect your income when you cannot work due to an accident or illness. It should also be noted that federal employees cannot access State Disability Insurance since they do not pay into the State program.
FERS Disability Coverage for Federal Employees
If a federal employee cannot work due to an accident, illness, or some other medical condition they have two options available- Leave and Disability Retirement. Leave pay is limited to how much an employee has accrued as well as used. An employee who never takes time off and has worked a long time may have hundreds of leave hours, while an employee who takes a lot of time off or has been sick, may not have many leave hours remaining. Additionally, at retirement leave hours are credited towards years of service for pension calculations, so every 174 hours of leave you have at retirement is credited as one additional month of service. That is a very valuable benefit!
There is also Disability Retirement through FERS, which defines disability as an inability to perform effectively in their current role due to a medical condition. Benefits are based on your High-3 Average Salary or the average of your three highest annual salaries. However, there are limitations to Disability Retirement:
Benefits are taxable, unlike some private disability benefits.
Qualifying for benefits can be challenging and time-consuming.
Coverage initially pays 60% of income for the first year of disability, then reduces to 40%.
Application for SSDI benefits is required before FERS eligibility.
SSDI benefits are deducted from the total FERS benefit.
Given these restrictions, federal employees might find their actual coverage less than anticipated or may not meet their income requirements.
Challenges in Accessing FERS Disability Benefits
Despite being a free benefit for FERS-covered employees, obtaining Disability Retirement benefits can be challenging. Eligibility requirements include:
At least 18 months of federal government service.
A disability is expected to last a minimum of one year, impairing the ability to perform effectively in the current position.
The employing agency's certification that they cannot accommodate the medical condition within the current role.
The inability to perform any other work within the same agency, at a similar grade or pay level, considering the medical condition.
Applying for Social Security disability benefits first, as these may offset FERS benefits.
Duration and Conditions of FERS Benefits
FERS may require periodic medical updates to continue benefits, potentially involving costs for medical examinations. Failure to provide proof of ongoing disability can lead to suspended benefits. Benefits cease upon medical recovery, reemployment in a federal role comparable to the retired position, or if income exceeds 80% of the basic pay from the pre-retirement position.
Supplemental Disability Insurance Options
Federal employees can also purchase individual disability insurance policies to supplement FERS benefits. These policies consider federal disability benefits when determining coverage amounts, ensuring appropriate insurance without being over insured. You could enroll in an individual plan or join a group/association plan.
Why Supplement FERS?
Supplementing FERS with a private plan is advisable for several reasons:
FERS disability benefits are taxable, while supplemental insurance benefits are often tax-free.
FERS disability benefits are based on your High-3 Average Salary, while supplemental insurance benefits are based on your current salary.
Supplemental plans often pay benefits faster with less strict definitions of disability and even offer short-term coverage.
Supplemental plans do not require you to use Leave hours, enabling you to save them for pension calculations.
Supplemental plans are often much more comprehensive containing additional benefits like partial disability coverage, and vocational, and rehabilitative benefits.
This is Where FedAdvantage steps in
Our disability insurance can help protect your financial stability when FERS falls short! FedAdvantage offers 5 different disability plan options exclusively to Federal Employees at special Group Rates! You can even request a free Disability Impact Analysis, which will use the numbers you provide to show what would happen if you suffered an average disability length of 3 years! It will show you three scenarios, no disability insurance, with FedAdvantage Basic coverage, and what happens if you pay the premium but never get disabled.
In summary, while federal employees have access to Disability Retirement through FERS, it is not the same thing as Disability Insurance. Disability Retirement is a last resort for an employee who can no longer work. It will require you to drain your hard-earned Leave assets and pay you a portion of your current salary. Disability Insurance will provide benefits quicker, and income tax-free, oftentimes being very close to your take-home pay. You can access disability benefits short-term should you be unable to work for a limited period and return to work when you recover.
