Disability Insurance

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Disability Simplified

FERS Disability Benefits Explained

FERS disability insurance

The Federal Employee Retirement System(FERS) is a program that provides benefits to Federal employees from three different sources (Basic benefits, Social Security and Thrift Savings plan) and is paid in multiple ways, one of which is through disability retirement benefits. As a Federal employee under FERS, this is where your disability benefits can be drawn from. We have provided information below to assist Federal employees in better understanding the disability benefits they have.

How To Qualify For FERS Disability Benefits

There are a few requirements that must be satisfied in order to qualify for FERS disability benefits.

  • Must complete at least 18 months of creditable Federal service according to FERS.
  • The disability must be expected to last at least one year.
  • Benefits must be applied for prior to separation of service or within 1 year thereafter.
  • You are required to apply for social security benefits.

How To Calculate Your FERS Disability Benefits

FERS disability benefits are computed in different ways depending on your age and your number of completed years of service. Once you have qualified for benefits, they are computed as follows.

  • Benefits for the first 12 months of disability: You are eligible for 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.
  • Benefits after the first 12 months of disability: You are eligible for 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 after age 62: Depending on your number of years of service, you are either eligible for 1% or 1.1% of your high-3 average for each year of service.

Why FERS Disability Falls Short

There are three primary concerns with FERS disability

  • Taxation of benefits - FERS disability benefits will be taxed as ordinary income because they are employer-provided. Therefore, although Federal employees may be eligible for coverage equal to 60% of income, it will not actually be equal to 60% of income after being taxed.
  • Benefit reduction from 60% to 40% - The FERS disability benefit reduces from 60% coverage in the first year of a disability claim to only 40% each year thereafter. It is fair to say that most people cannot survive on 40% of their income, especially after being taxed.
  • Social Security Offset - FERS disability benefits will offset dollar-for-dollar, with up to 100% of all Social Security benefits received in the first year of a disability claim and up to 60% of all Social Security benefits each year thereafter.

Federal Employee Disability Insurance

FERS disability insurance

For Federal employees under FERS, a personal disability insurance policy allows you to more adequately protect yourself, your family and your future income by supplementing the percentage of income that FERS does not cover.

Our firm works with a number of insurance companies that offer high quality disability insurance to Federal workers. As a Federal employee, we encourage you to get informed about the options available to you by calling us at 800-817-4522 or submit a quote request today.

How to Obtain Individual Disability Coverage

In order to obtain individual disability insurance, Federal employees must apply with an insurance company, which includes completing a paper application, medical screening and providing proof of income. As a Federal government employee there are certain limitations you may encounter regarding available benefit amounts , and the primary determining factor will be your number of completed years of service:

  • Federal employees with less than 18 months of service – few limitations
  • Federal employees with less than 10 years of service – mild limitations
  • Federal employees with 10 or more years of service – limited to select carriers

Advantages of Individual Disability Insurance

  • Personal benefits do not offset with SSA benefits
  • Policy is portable in case you change employers
  • Benefits are generally paid income-tax free
  • Pays completely independent of FERS benefits