If you are looking for information on disability insurance as a Federal government employee, it is important to understand that you do not have a typical group “disability insurance” program. As a Federal government employee subject to FERS, you have what’s called disability retirement benefits. There is not truly a difference in the two, and realistically benefits are paid very similar to a typical group disability insurance program, minus a few exceptions.
Federal government employees subject to FERS, have access to a number of retirement benefits, including a retirement annuity (similar to a pension), and a Thrift Savings Plan (similar to a 401(k)). Most individuals who work for the Federal government are aware of these two benefits. What many individuals do not know is that the retirement annuity may also provide early retirement benefits in the case of total disability.
The disability retirement benefits under FERS have fairly strict guidelines to qualify for benefits. Although the available list includes a number of requirements, the two most important ones are:
– You must complete 18 months of Federal civilian service that is credible under the FERS.
– The disability must be expected to last at least one year.
In other words, Federal employees must have at least 18-months of Federal civilian service in order to qualify, and the debilitating injury or illness must be expected to last at least one year. A typical long-term disability insurance program would begin paying benefits after satisfying a 90-day elimination period, which means Federal employees are not as well protected for disabilities lasting less than 1 year.
The benefit structure is also less favorable than a typical group disability insurance program. As stated on the OPM website, the method of calculating benefits for Federal workers under age 62 is as follows:
– During the first 12 months: 60% of your high-3 average salary minus 100% of your Social security benefit for any month in which you are entitled to Social Security benefits.
– After the first 12 months: 40% of your high-3 average salary minus 60% of your Social Security benefit for any month in which you are entitled to Social Security disability benefits.
Benefits paid for under the FERS disability retirement benefit are generally taxable when paid during a claim. Therefore, the 60% and 40% benefits that are payable may end up actually being less than this amount on an after-tax basis.
To summarize, Federal employees do not have a group disability insurance program, but they do have FERS disability retirement benefits available, provided they have at least 18-months of Federal civilian service.
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