Congratulations on your approval for federal disability retirement! This is a significant accomplishment that can bring positive changes to your life. This article will guide you through the next steps and important considerations after receiving your approval letter.
Post-Approval Process:
Communication with Your Agency:
Following approval, you’ll need to communicate with your agency regarding out-processing procedures if you’re still employed. If you’ve already left your agency, the Office of Personnel Management (OPM) should have the necessary information.
Interim Payments:
Once OPM receives your file, they’ll initiate interim payments to cover expenses during the processing period. These payments are generally about 80% of your anticipated annuity payments. The timeframe for receiving your first interim payment can vary depending on OPM’s backlog.
Back Pay:
If eligible, your first interim payment should include back pay calculated from your last documented pay date with your agency. Ensure this information with your agency is accurate, as it’s challenging to modify once it reaches OPM.
Disability Retirement Annuity:
OPM will begin regular disability retirement annuity payments after finalizing your case. The first year, you’ll receive 60% of your high-three average salary. This reduces to 40% of your high-three average salary for subsequent years until age 62. Remember that these payments are considered taxable income.
Benefit Options and Considerations:
Working in the Private Sector:
One advantage of federal disability retirement is the opportunity to work in the private sector. Since your disability is occupational, not total, you have career options with a wage-earning capacity limit. You can earn up to 80% of your federal position’s current salary in addition to your disability retirement payments.
Examples of jobs previous retirees have held include:
- Delivery services
- Customer service roles
- Ride-sharing services
It’s crucial to differentiate between earned and passive income. Only earned income, such as salaries, wages, and self-employment income, counts towards the 80% earnings cap. Passive income, like real estate or tax-sheltered investments, does not. Consulting with a CPA or tax attorney is advisable for specific guidance.
Annual Reviews:
OPM conducts annual income reviews to ensure you haven’t exceeded the earnings limit. You’ll be required to complete a disability earning survey online annually. Exceeding the limit can result in the suspension of your annuity payments and a loss of creditable years of service accrued while receiving disability retirement.
In addition to income, OPM might request updated medical documentation or physician-completed forms for annual medical reviews. Maintaining regular contact with your physician (every 4-6 months) and ensuring they provide detailed, supportive documentation is crucial.
Benefit Elections:
- Health and Life Insurance: You can continue your federal health and life insurance coverage if you were enrolled for five years before disability retirement. If not, you can request a waiver from OPM.
- Spouse Survivor Annuity Benefit: This provides your spouse with financial security should you pass away before them. You can choose between a 50% or 25% survivor benefit based on your unreduced annuity payments. Opting out is possible, but it means your spouse wouldn’t receive any part of your annuity or be able to continue on your health insurance plan.
- Thrift Savings Plan (TSP): Three options exist: leaving funds to accumulate interest, rolling them over to an IRA or another employer’s 401(k), or cashing out (potentially incurring penalties depending on your age).
Reaching Age 62:
At 62, your disability retirement automatically converts to regular retirement. Creditable years of service earned while on disability retirement factor into the calculation. Here’s how your annuity is calculated:
- Less than 20 years of service: 1% of your high-three average salary for each year of service.
- More than 20 years of service: 1.1% of your high-three average salary for each year of service.
Special provisions employees receive a different calculation: 1.7% of their high-three average salary for the first 20 years of service. Years on disability retirement count towards this calculation.
Seeking Assistance:
Navigating the complexities of federal disability retirement can feel overwhelming. Don’t hesitate to seek assistance from qualified professionals. Consider scheduling a free consultation with a law firm specializing in federal employee benefits. They can answer your questions, evaluate your situation, and provide guidance throughout the process.
Additional Resources:
- Office of Personnel Management (OPM) Retirement Services
- Thrift Savings Plan (TSP)
- Federal News Network (FedWeek)
- National Active and Retired Federal Employees Association (NARFE)
- Government Executive
Summary:
Transitioning to life after federal disability retirement involves understanding your benefits, options, and responsibilities. Staying informed and proactive helps you maximize this benefit and plan for a financially secure future. Remember to leverage available resources and seek expert guidance whenever needed.