If you’re applying for Federal Disability Retirement, then you understand how important this income will be for your future. That’s why understanding how to maximize your income is critical to building a substantial and secure financial future.
As an injured or disabled federal employee you may be eligible to utilize multiple benefits to counteract the financial impacts your injury or disability will cause. That may sound like great news! “Yes, give me all the benefits and maximize my income.” But unfortunately, many of these benefits can affect one another when you are approved for both. Before we get into these benefits and maximizing your income, there are a few concepts you need to understand first.
1. Benefit Interactions
A benefit interaction is a term used to describe how multiple federal benefits interact with each other and could potentially lead to an increased or decreased annuity, depending on which benefits are involved.
2. Offsets
Building on the interaction concept; when two or more benefits counteract each other, the benefit interaction would be considered an offset. However, that doesn’t necessarily cause a negative interaction.
Now, that may already have your head spinning, and you can see why benefit interactions can be so confusing and have significant impacts on your income. In this article we’re going to focus on how these benefits could interact positively and increase your income while receiving Federal Disability Retirement. Let’s dig into each benefit and try to clarify what kind of impact it could have.
Social Security Disability Insurance
When you apply for Federal Disability Retirement, it is required that you also submit an application for Social Security Disability Insurance (SSDI). Even though an acceptance of SSDI is not necessary to qualify for Federal Disability Retirement, sometimes you could be approved for both benefits. If this does happen to you, then you must know that these two benefits will offset.
If you receive both benefits at the same time, then your Federal Disability Retirement will be reduced by 100% of your Social Security Disability benefit for the first year that you are receiving both benefits. After that, your Federal Disability Retirement annuity will be reduced by 60% of your SSDI benefit until you are 62 years old.
Here is an example offset calculation for Federal Disability Retirement and Social Security Disability Insurance based on a $72,000 High 3 Average .
Just because these benefits seem like they are interacting negatively with each other, does not mean that your income is reduced. As you can see from the example above, after the first year, receiving both benefits at the same time will net you a higher monthly income than if you were only receiving one benefit at a time. Which can be very beneficial for those that are totally disabled and unable to continue to work in the private sector.
OWCP Federal Workers’ Compensation – Schedule Award
One of the most common benefits we see our clients are eligible to receive is OWCP Federal Workers’ Compensation. One part of the OWCP Federal Workers’ Compensation benefit is a schedule award lump-sum payment that is given to qualifying employees that have an approved permanent impairment to a body part. Keep in mind that this body part must be listed on the OWCP Schedule in order to be entitled to an award.
A crucial benefit of a schedule award is that it interacts positively with your Federal Disability Retirement annuity. Meaning, that you will be able to receive 100% of your schedule award while also receiving 100% of your Federal Disability Retirement annuity. This can be extremely beneficial for federal employees that are concerned about their future ability to work due to their injury. This positive interaction will allow you to receive a higher combined income and set you up for a more financially secure future.
OWCP Federal Workers’ Compensation – Medical Coverage
On top of being able to receive a schedule award, as part of the OWCP Federal Workers’ Compensation benefit, you are entitled to medical coverage that does not count as earned income that would impact your Federal Disability Retirement. This medical coverage will pay for certain medical services that are related to your accepted OWCP claim. However, you must keep in mind that not all medical services qualify and sometimes you must get pre-authorization from the OWCP for certain procedures.
It’s important to note how beneficial this medical coverage can be to federal employees that have significant medical expenses related to their on-the-job injury because the OWCP will be providing coverage. This allows federal employees to continue to use their OWCP benefits for medical coverage instead of relying on Federal Disability Retirement annuity payments to pay for medical expenses.
OWCP Federal Workers’ Compensation – Wage Loss Payments
One of the OWCP Federal Worker’s Compensation benefits that doesn’t interact with your Federal Disability Retirement is wage loss payments. Wage loss payments are given to those who are unable to work due to an accepted OWCP claim. However, unlike a Schedule Award or the Medical Coverage, you will not be able to receive those wage loss payments while you are on Federal Disability Retirement.
If you are approved for both benefits at the same time, you have the option to put your Federal Disability Retirement annuity on hold and remain on Workers’ Compensation to be able to receive those wage loss payments. OWCP Federal Workers’ Compensation is not intended to be used as a long-term benefit which is why it’s very beneficial to be able to have Federal Disability Retirement approved and ready to go once your OWCP Federal Workers’ Compensation claim is closed.
Veterans Administration Disability
Many veterans go on to work in the federal government. If you are one of those veterans and find that an injury caused by active duty has worsened and is impairing your ability to work, then utilizing both Federal Disability Retirement and Veterans Administration Disability can provide the much-needed income you deserve. If you apply and are approved for Federal Disability Retirement while also receiving VA Disability, you can receive 100% of both benefits at the same time!
Maximizing Your Income In the Private Sector
If you find that you do not qualify for any of the benefits that we previously discussed, you still have options to maximize your income! One of the main benefits of Federal Disability Retirement is that you have the option to work in the private sector while receiving your disability retirement annuity.
This piece of the benefit allows you to make up to 80% of your old position’s current salary IN ADDITION to your monthly disability retirement annuity. Essentially allowing you make up to 140% of your federal salary in year 1, and 120% in years 2+ and in turn maximizing your income.
While not everyone is able to continue working, this is a great benefit to those who can.
As you can see, there are many ways to maximize your income. You don’t want to miss out on the income you have available, which is why it is crucial to go over all your options with an experienced firm. Our team has the experience and expertise to help you protect your financial future and create a stress free and financially secure retirement. Check out another one of our articles on how to financially prepare for retirement for more information!
Call our office to schedule a free consultation and make sure you’re receiving all the benefits you deserve.
