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Disability Retirement


The federal government allows employees who are unable to work to retire under a disability retirement. It is in the best interest of both employees and the federal government for employees to remain gainfully employed in their current grade or pay level, as long as they can provide useful and efficient service without endangering themselves, others or government property.
Disability retirement should be the very last option and should be used only when attempts have been made to preserve an individual's employment, and those attempts have failed.

Order our Disability Retirement guide to educate yourself on the rules and regulations concerning disability retirement for federal employees.

To read today's top news stories on federal employee pay, benefits, retirement, job rights and other workplace issues visit FederalDaily.com.
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keahi89  
#1 Posted : Tuesday, August 17, 2021 2:29:19 PM(UTC)
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hello!! new to the board. tried to search around for the answer, but to no avail. also, just got off the phone w/ opm this morning and the girl basically read off the disability retirement pamphlet... which i've already read. lol!! anyways, my question is this: is there any time limit/frame to come back to the disability retirement?? it talks about reinstatement of disability annuity after you dip back below the 80%. but is there a time frame? for example, can you go over the 80% for five years and then get reinstated? what about all the way till your 60? do you then get reinstated and then the recomputation at 62?

what compounds the confusion for me is that they also talk about "future annuity rights" (deferred, discontinued service, or mra provision) if your disability annuity stops. when do they start determining this?? i would rather them not so that i can get the recomp at 62 as if i worked till 62.

with all that being said, just know that i'm not planning on going over the 80% and that i am fully aware that life just seems a lot simpler if you stay under. what brought all this up was a recent scare (good one, i guess), in which i am getting a pretty large inherited ira. fairly new changes make it so i have to withdraw the whole thing within 10 yrs and i didn't know if these required distributions would be considered earned income in reference to the disability retirement. anyways, thanks in advance for any insight on this matter.
GSBS  
#2 Posted : Tuesday, August 17, 2021 8:32:59 PM(UTC)
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Originally Posted by: keahi89 Go to Quoted Post
hello!! new to the board. tried to search around for the answer, but to no avail. also, just got off the phone w/ opm this morning and the girl basically read off the disability retirement pamphlet... which i've already read. lol!! anyways, my question is this: is there any time limit/frame to come back to the disability retirement?? it talks about reinstatement of disability annuity after you dip back below the 80%. but is there a time frame? for example, can you go over the 80% for five years and then get reinstated? what about all the way till your 60? do you then get reinstated and then the recomputation at 62?

what compounds the confusion for me is that they also talk about "future annuity rights" (deferred, discontinued service, or mra provision) if your disability annuity stops. when do they start determining this?? i would rather them not so that i can get the recomp at 62 as if i worked till 62.

with all that being said, just know that i'm not planning on going over the 80% and that i am fully aware that life just seems a lot simpler if you stay under. what brought all this up was a recent scare (good one, i guess), in which i am getting a pretty large inherited ira. fairly new changes make it so i have to withdraw the whole thing within 10 yrs and i didn't know if these required distributions would be considered earned income in reference to the disability retirement. anyways, thanks in advance for any insight on this matter.
Welcome, good question, I recently read about this with those OPM articles but they leave you wondering what you actually just read? The annuity should be restored at a certain point, the OPM have their special formula. You should be ok though, just don't go above the 80%, and besides you have the IRA to enjoy as well! Wages & certain 1099 R's would only apply to the 80% figure of what your former position currently pays. I never worked again


What Does The Term "Earned Income" Mean?
1. Any salary or pay you received working for someone else (including overtime, vacation pay, bonuses, and
severance pay, etc.)
2. If you are self-employed, any net profit you made from working or managing your own business.
3. Deferred income (income you earned but didn't receive during this calendar year).
4. If you are reemployed in Federal service, the gross income before your employing agency offsets your salary.

file:///home/chronos/u-15a08f437b2f7b4472274f3cb7bc10de57d9ae89/MyFiles/Downloads/RI30-002_January2012.pdf

*NOTE: This is an old form which instructs users not to submit if you have no income. Now if you don't return the form, they mess with you!

Edited by user Tuesday, August 17, 2021 8:39:31 PM(UTC)  | Reason: Not specified

thanks 1 user thanked GSBS for this useful post.
keahi89 on 8/18/2021(UTC)
Wonder Woman  
#3 Posted : Wednesday, August 18, 2021 11:49:24 PM(UTC)
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First of all, an inherited IRA is not earned income so that does not count towards your threshold. There does not appear to be an expiration if your disability pension is stopped due to earnings over your threshold.

I'm not sure what is meant by future annuity rights, but that might be tied to federal reemployment.

Edited by user Thursday, August 26, 2021 8:36:40 AM(UTC)  | Reason: Not specified

ET1  
#4 Posted : Thursday, August 26, 2021 5:57:54 AM(UTC)
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First of all, Disibility retirement means very different things for different people. Everyones situation is extremely different and unique. As to your question, and assuming you are not on Social Security disability, still qualify as being disabled, and are not reemployed in the Federal Gov; here is some insight.

The type of income that apply to the FERS 80% income limit is most often found on a W-2; in Box 3 (Social Security Wage) and/or Box 5 of a W-2 (Medicare Wages). Or your personal income if you are self Employed. Most other types of income, not from Earned WAGES, do not count toward the FERS income limit; including rental property, IRA, 401k, and inheritance (there is an entire detailed list).

Going over the 80% income limit for any particular year is not recommended, because you will lose monthly disability payments starting June 30th of the year following the year you reported on. And not see them again until after the year on July 1st (paid the following month) that you under-report your wages. (Ex. Over 80% wage reported for tax year 2021, lose disability payments starting June 30th, 2022). (Ex. Under 80% limit reported for tax year 2024, gain disability payments starting July 1st,2025).

And additional loses include; loss of OPM health care coverage, optional vision, dental, life insurance coverage. As well as loosing out on a year (1%) that would have counted toward a year worked for your age 62 retirement re computation.

These loses also make reemployment in Federal service very unattractive.

If you are fortunate enough to work, here are some helpful hints:

1. 401k and IRA deductions still count toward your 80% limit (Not in Box 1, but still in Box 3 and 5)
2. Health care, HSA, and FSA deductions DO NOT COUNT toward your 80% limit. (Not in Box 3 and 5)

Edited by user Thursday, August 26, 2021 5:58:36 AM(UTC)  | Reason: Spelling

TheRealOrange  
#5 Posted : Thursday, August 26, 2021 7:22:39 AM(UTC)
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If you are concerned about what counts toward the 80%, you can consult the Federal regulation; 5 CFR § 831.1209 - Termination of disability annuity because of restoration to earning capacity (link below). The following do not count:

(f) Income not included. Other types of income not considered in determining earning capacity include -

(1) Investment income, such as interest or dividends from savings accounts, stocks, personal loans or home mortgages held, unless the disability annuitant receives the return from capital investment in the course of his or her trade or business;

(2) Capital gains from sales of real or personal property that the disability annuitant owns, unless received in the course of his or her trade or business:

(3) Rents or royalties, unless received in the course of his or her trade or business;

(4) Distributions from pension plans, annuity plans, Individual Retirement Accounts (IRA's), Simplified Employee Benefit-IRA's (SEP-IRA's), Keogh Accounts, employee stock ownership plans, profit sharing plans, or deferred income payments that are received by the annuitant in any year after the calendar year in which the funds were contributed to the plan;

(5) Income earned before the commencing date of civil service retirement annuity payments;

(6) Scholarships or fellowships;

(7) Proceeds from life insurance, inheritances, estates, trusts, endowments, gifts, prizes, awards, gambling or lottery winnings, and amounts received in court actions whether by verdict or settlement, unless received in the course of their trade or business;

(8) Unemployment compensation under State or Federal law, supplemental unemployment benefits, or workers' compensation:

(9) Alimony, child support, or separate maintenance payments received;

(10) Pay for jury duty; and

(11) Entitlement payments from other Federal agencies, such as benefits from the Social Security Administration or the Veterans Administration, Railroad Retirement System retirement pay, or military retirement pay.

https://www.law.cornell.edu/cfr/text/5/831.1209
Wonder Woman  
#6 Posted : Thursday, August 26, 2021 8:43:13 AM(UTC)
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That's a handy list, TheRealOrange! Thanks for sharing, helpful for all of us.

For ET1, did you mean Medicare wages box 5 (which represents gross earnings minus any non-taxable income)? I ask because SS wages box 3 is capped at a certain amount... so you can make "too much" money but your box 3 won't go above a certain amount; it's currently capped at $142,800. Now I realize that's a high number and most likely above anyone's 80% threshold, but for accuracy purposes don't we mean box 5?

Can you share your source? I'd love to understand and read more.
ET1  
#7 Posted : Thursday, August 26, 2021 4:38:51 PM(UTC)
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Wonder Woman, thank you for the interest. I am more of a Horseshoe's man than a Bean Counter and often over look the specifics. As for sources; I live this, have been there, and got the T-shirt to prove it.

But getting into the mud and playing with the specifics. In order to make $142,000 (80%) a year in Disability income, you would need to have made $177,500 in wages. Even today that puts us way off the GS scale and for the most part makes your question a moot point. Also, OPM bounces your provided Wage number off of the Social Security database to ensure accuracy.

Be careful with your Box 5 statement as 401k contributions are not taxed, but are included in both Box 3 and 5 on the W-2. In most cases Box 3 and 5 are more or equal to the amount in box 1.

However, and trying to be specific, through an employers benefits/ cafeteria plan, Health care, vision, and dental insurance payroll deductions are not in Box 1, 3, or 5. As well as HSA and FSA contributions. This can help lower your overall wage amount (Not counted towards FERS wage income), but still provide you with a better primary Health care Insurance plan and/or savings in an FSA or HSA.

Information for Disability Annuitants

https://www.opm.gov/reti...rms/pamphlets/ri98-2.pdf


Civil Service Retirement System (CSRS) and Federal Employees Retirement System (FERS) Handbook for Personnel and Payroll Offices
(There is a lot of information here, focus on chapters 50 though 61)

https://www.opm.gov/reti...forms/csrsfers-handbook/


And oh..... I have so much more you can dive into. Government publications go “Deep baby.”
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