FERS/SSDI offset

I'm a bit confused.  I've noticed at least a couple of situations on this forum in not the too distant past in which others have commented on losing SSDI, but FERS not covering the difference (?).  I thought FERS awarded 60% for the first and 40% for consecutive years.  Apart from the SSDI shortfall, how could FERS be shortchanging those who lose SSDI?  I think Mr. McGill even commented once about going to bat for someone he represented in this situation.  Can someone clarify this?

I am positive I read that too and wondered the same thing?

I am still in the process of appealing a couple of decisions which directly impact upon this issue of SSDI/FERS offset, and the subsequent loss of SSDI but OPM refusing to recalculate to make up for the loss of the offset.  Without getting into too much detail, essentially OPM's argument is that, while an individual may lose the eligibility for SSDI because of income from work, they nevertheless continue to remain "entitled" to it, and therefore the offset still continues in effect because the law (they claim) requires that one lose entitlement, not eligibility.  It is up with the MSPB right now, and may need to go to the U.S. Court of Appeals for the Federal Circuit.

Sincerely, Robert R. McGill, Esquire

I think the FERS/SSDI offset situation that Mr. McGill discussed is very different from the one discussed on this forum a few weeks ago.

The situation that Mr. McGill discussed is OPM not recalculating  disability annuities due to one reaching the SSDI income ceiling. 

The situation discussed a few weeks ago was dealing with someone wanting to refuse SSDI payments due to personal issues, and OPM not recalculating  the disability annuity.

One may be easier to fight for than the other!!

I suppose that the bottom line to this line of questionning is that with or without SSDI one will receive 60% of their high three the first year and 40% thereafter?

Well, yes...and no.

The offset (if there is one) takes place before anything else takes place. In other words, the "high-3" is calculated. The offset (if there is one) takes place. THEN, the 60% or 40% is applied.

Thanks for your response!  Would you be able to give a scenerio or two for we febble-minded?  Honestly, I think I get what you're saying, but I don't understand how this impacts the retiree.

I MAY have misspoken. The SSDI Offset (if there is one) may be applied either before OR after the 60% or 40% of the high-3 is computed (I'm not sure which). In other words, you WILL NOT "see" the offset stated anywhere in the "Your Federal Retirement Benefits" Booklet that you receive from OPM upon your case being finalized. You simply have to "assume" that the offset took place as it would already be your "Gross Pay". 

Furthermore, if and when there is a January COLA, the offset is not recomputed. In other words, the offset becomes smaller and smaller with each COLA (I checked with OPM a number of times, and I was told that the offset is not recomputed with each COLA).

Confusing, huh!!!

For the sake of argument, let's say my high three was exactly 100K/yr (not fact).  Let's also say that I didn't qualify for SSDI, but was awarded FERS.  Would that mean that I would get 60K the first year and 40K following? 

Different scenerio with the same 100K 3-yr average.  I qualify for both FERS and SSDI.   I still get 60K (FERS) the first year with a 100% SSDI offest.  SSDI kicks in the second year.  Without offset I would normally get, let's say 48K/yr in SSDI.  Second year, 40K from FERS; & with the 60% SSDI offset of the 48K, I would then get 19, 200/yr (40% of 48K).  Is this correct?

Final scenerio:  Same as second, but SS during the third year of disability retirement announces that I am no longer entitled to SSDI.  FERS; however, continues.  Would I then just get the 40K/yr, or is there faulty reasoning in my scenerios?  If so, how would these scenerios work out using the same high three of 100K?

Ok,

Scenario #1 -- Yes. Yes.

Scenario #2 -- Taking into account No COLA. (if using COLA example of 5%; add 5% CSRS & SSA; 4%                             FERS)

                     First Year -- 48K SSDI; 12K FERS (60k - 48K)

                                       (although there is a 100% offset, you would still receive two payments)

                     Second Year -- 48K SSDI; 11.2K ($11,200) FERS

                                           $48,000 x 60% = $28,800

                                           $40,000 - $28,800 = $11,200

Scenario #3 -- If everything works as it "should", yes, 40K from FERS; but, per Mr. McGill, OPM sees things differently, and you would still get $11,200 from FERS (cases are now pending before the MSPB).

AttyMcGill:

I am still in the process of appealing a couple of decisions which directly impact upon this issue of SSDI/FERS offset, and the subsequent loss of SSDI but OPM refusing to recalculate to make up for the loss of the offset.

is this a new interpretation by opm?  does this only apply when you go back to work and earn too much to remain eligible for ssdi or does opm take the same position if you are medically found able to work under their definition, but have not yet rejoined the workforce in any capacity?  if it's both, what a huge disincentive to return to work.

assuming opm only takes this position if you go back to work and lose your ssdi due to too much earned income, can you get medically disqualified for ssdi before you return to work to preserve your full fers benefit?

WOW!  Your explanation explains something that I previously misunderstood.  I thought the offset was against the amount paid by SS, not FERS.  Based on the information you gave, FERS is the one that is reduced, not SSDI.  Boy, that sucks big time.  I sure hope whomever has been shafted by this, as evident by prior posts, get favorable rulings.  Good luck to Mr. McGill and those affected by this FERS/SSDI "policy".

BikerDude:

WOW!  Your explanation explains something that I previously misunderstood.  I thought the offset was against the amount paid by SS, not FERS.  Based on the information you gave, FERS is the one that is reduced, not SSDI.  Boy, that sucks big time.  I sure hope whomever has been shafted by this, as evident by prior posts, get favorable rulings.  Good luck to Mr. McGill and those affected by this FERS/SSDI "policy".

To help explain this I'll provide a little history (taken from both the OPM Website and "Wikipedia", the free encyclopedia)...

Congress created the Federal Employees Retirement System (FERS) in 1986, and it became effective on January 1, 1987.  Since that time, new Federal civilian employees who have retirement coverage are covered by FERS. Way back in the early 1980's Congress became concerned about the state of the Social Security Trust Fund. It was felt by moving newly hired Federal Employees from CSRS to a retirement system covered by Social Security would help bridge this growing gap.

Most new Federal employees hired on or after January 1, 1984, are automatically covered under FERS (those newly hired and certain employees rehired between January 1, 1984, and December 31, 1986, were automatically converted to coverage under FERS on January 1, 1987 -- I.E., those hired between January 1, 1984, and December 31, 1986, were covered by BOTH the old Civil Service Retirement System (CSRS) and the new Federal Employees Retirement System (FERS).

FERS is a retirement plan that provides benefits from three different sources:   a Basic Benefit Plan (can be considered as a "CSRS Component"), Social Security, and the Thrift Savings Plan (TSP). The Basic Benefit and Social Security parts of FERS require you to pay your share each pay period.  Your agency withholds the cost of the Basic Benefit and Social Security from your pay as payroll deductions (Social Security Tax is 6.2% of Gross Pay and the Basic Benefit Plan Deduction is 0.8% of Gross Pay).  Those covered by the Civil Service Retirement System (CSRS), a defined benefit retirement plan that provides retirement, disability, and survivor benefits, have 7% of Gross Pay deducted plus a Medicare tax (currently 1.45 percent of pay). Those covered by CSRS pay no Social Security Tax.

So, now you are probably wondering what all this has to do with FERS Disability Retirement and SSDI. Well, it is simply. As we all know, Social Security has a very strict definition of disability. Furthermore, as you can see from the above, those covered by FERS pay a very small percentage of Gross Pay to the Basic Benefit plan, "CSRS Component". To make up for this "short fall", the part of the law covering FERS Disability Retirements created the 60/40 of the High-3 Salary Computations and the SSDI Offsets. (Under regular retirements the Basic Benefit Annuity is as follows: Age 62 or Older With Less Than 20 Years of Service -- 1 percent of your high-3 average salary for each year of service; Age 62 or Older at Separation With 20 or More Years of Service -- 1.1 percent of your high-3 average salary for each year of service).

One thing I left out is those under FERS also pay the of Medicare Tax 1.45%; therefore, both FERS and CSRS Employees both pay 8.45% of Gross Pay towards "retirement systems".

Thanks for the history.  I'm still hoping for some clarification on the point I raised above.  Mr. McGill, are you able to shed some more light on this situation? 

If I knew that OPM was taking this position, I might never have pursued my SSA case, just so that I could preserve my right to return to the workforce at some point without risking my FERS benefit.  Who knows what the future will bring and it is very disappointing that the government is taking a position that creates a disincentive to return to work.  Maybe this is a new position that wouldn't have helped me several years ago.

It would be helpful to know if this limitation only applies if you go back to work and earn too much.