WikiLeaks Document Release
http://wikileaks.org/wiki/CRS-RS22838
February 2, 2009
Congressional Research Service
Report RS22838
Disability Retirement for Federal Employees
Patrick Purcell, Domestic Social Policy Division
March 18, 2008
Abstract. Federal civilian employees earn 13 days of paid sick leave per year. Sick leave can be used because
of the worker's own illness or injury or to care for an ill or injured family member. A worker's employing agency
can advance up to 30 additional days of sick leave to an employee who has exhausted his or her accrued sick
leave. A federal worker with a long-term disability can separate from service through a disability retirement. A
federal employee who sustains a disabling injury on the job can receive benefits under the Federal Employees'
Compensation Act (FECA). FECA benefits consist of cash compensation, payment of medical costs related
to the injury, vocational rehabilitation assistance, the cost of attendant care services, and burial benefits. A
disabled federal employee may not receive a disability retirement annuity and FECA benefits simultaneously.
Order Code RS22838
March 18, 2008
Disability Retirement for Federal Employees
Patrick Purcell
Specialist in Income Security
Domestic Social Policy Division
Summary
Federal civilian employees earn 13 days of paid sick leave per year. Sick leave can
http://wikileaks.org/wiki/CRS-RS22838
be used because of the worker's own illness or injury or to care for an ill or injured
family member. A worker's employing agency can advance up to 30 additional days of
sick leave to an employee who has exhausted his or her accrued sick leave. A federal
worker with a long-term disability can separate from service through a disability
retirement. A federal employee who sustains a disabling injury on the job can receive
benefits under the Federal Employees' Compensation Act (FECA). FECA benefits
consist of cash compensation, payment of medical costs related to the injury, vocational
rehabilitation assistance, the cost of attendant care services, and burial benefits. A
disabled federal employee may not receive a disability retirement annuity and FECA
benefits simultaneously. This report will be updated as legislative developments
warrant.
Federal civilian employees may be compensated for periods of illness, injury, or
disability through one of three systems: paid sick leave, disability retirement, or workers'
compensation benefits for injuries sustained at work. In most cases, short-term illness or
injury is compensated through paid sick leave. A federal employee who experiences a
permanent disability can take a disability retirement before reaching the statutory
retirement age. Disability retirement benefits differ between the two federal retirement
systems: the Civil Service Retirement System (CSRS) and the Federal Employees'
Retirement System (FERS). Federal employees hired before 1984 are covered by CSRS
and those who were hired in 1984 or later are covered by FERS.1 Employees enrolled in
CSRS do not pay Social Security taxes and do not earn Social Security benefits while
employed by the federal government. Employees enrolled in FERS pay Social Security
taxes and earn Social Security benefits. Until age 62, disability retirement annuities under
FERS are offset in part by the amount of Social Security benefits the annuitant receives.
1
Federal employees covered by CSRS were given the opportunity to switch to FERS during open
seasons held in 1987 and 1998. For more information on CSRS and FERS, see CRS Report 98-
810, Federal Employees' Retirement System: Benefits and Financing, by Patrick Purcell.
CRS-2
Sick Leave
Workers who experience short-term illnesses or injuries can use paid sick leave to
take time off from work. Federal employees accrue sick leave at the rate of 4 hours for
each two-week pay period up to a total of 104 hours (13 days) per year.2 Unused sick
leave continues to accrue without limit throughout a federal employee's career. If an
employee has exhausted his or her accrued sick leave balance, the worker's employing
agency can advance up to 30 days of sick leave per year.3 Ill or injured workers who have
exhausted their accrued sick leave but who expect to be able to return to work can use
their accrued annual leave or, in some cases, can take leave without pay until they have
recovered and can return to work.
The federal government does not offer short-term disability insurance to workers
who have exhausted their accrued sick leave and annual leave. The Federal Employees
Leave Sharing Act of 1988 (P.L. 100-566) authorizes a voluntary leave bank program
through which federal agencies may allow employees to donate unused annual leave to
employees who have exhausted their accrued sick leave.4 Employees cannot donate
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unused sick leave.
When a worker covered by CSRS retires, any unused sick leave that he or she has
accrued is added to the employee's length of service for purposes of computing the
employee's CSRS annuity.5 Workers covered by FERS forfeit any unused sick leave
when they retire.6
Disability Retirement
Civil Service Retirement System (CSRS)7
Eligibility. A federal employee enrolled in CSRS is eligible for a disability
retirement if
! he or she has completed at least five years of creditable civilian service;
! the employee has a disability that results in deficient performance,
conduct, or attendance or that is incompatible with the individual
continuing to perform useful and efficient service in his or her job;
! a physician certifies that the disability is expected to last a year or more;
2
5 USC �6307(a). If an employee separates from employment with a negative sick leave
balance, it will be charged first against his or her annual leave and then against earnings.
3
5 USC �6307(d).
4
5 USC �6361-�6371.
5
5 USC �8339(m).
6
See CRS Report RL32596, Sick Leave: Usage Rates and Leave Balances for Employees in
Major Federal Retirement Systems, by Curtis W. Copeland.
7
5 USC �8337.
CRS-3
! the worker's employing agency is unable to accommodate the disability
in the worker's current job or in an existing vacant position at the same
grade or pay and in the same commuting area, and
! an application for disability retirement is filed with the employing agency
before separation or with the Office of Personnel Management within one
year of the date of separation from employment.
To be eligible for a disability retirement annuity, the employee does not have to be
disabled for any employment in the national economy. Eligibility requires the employee
to be unable to perform the job to which he or she was assigned or a job at the same pay
in the same commuting area.
Unless the Office of Personnel Management (OPM) certifies that the individual's
disability is permanent, an employee who has retired due to disability is required to
undergo periodic medical reevaluations until age 60. If the individual recovers, disability
annuity payments continue temporarily while the individual seeks reemployment. The
disability annuity terminates at the earliest of (1) the date on which the individual is
reemployed by the government, (2) one year from the date of a medical examination
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showing that the individual has recovered from the illness or disability, or (3) six months
from the end of the calendar year in which the individual demonstrates that his or her
earning capacity has been restored. The individual's earning capacity is deemed to have
been restored if, in any calendar year, his or her income from wages, self-employment,
or both is equal to at least 80% of the current rate of pay for the position he or she
occupied immediately before retiring.8
Annuity. Under CSRS, a disabled worker is eligible for a retirement annuity equal
to the greater of (1) the annuity that he or she would receive under the regular retirement
formula, or (2) a minimum benefit that is the lesser of
! 40% of the average of the employee's highest three consecutive years of
basic pay, ("high-three" pay), or
! the annuity that would be paid if the employee continued working until
age 60 at the same high-three pay, including in the annuity computation
the number of years of service and the years between the date of
retirement and the date on which the individual would reach age 60.
The method of computing a CSRS disability retirement annuity assures that an
employee will not receive a larger annuity through a disability retirement than he or she
would receive from having worked to the minimum age and years of service required for
a normal retirement. In general, a worker who becomes disabled after 22 or more years
of federal service will receive an annuity computed under the regular CSRS annuity
formula, regardless of his or her age. Because CSRS has been closed to new entrants
since 1984, most federal employees covered by CSRS now have 24 or more years of
8
Earnings include wages, salaries, income from self-employment, and deferred compensation
earned during the calendar year. Earnings do not include gifts, pensions, annuities, Social
Security, workers' compensation, insurance proceeds, unemployment compensation, interest,
dividends, rents, inheritances, capital gains, prizes, awards, or net business losses.
CRS-4
service. Under CSRS, a regular retirement annuity after 24 years of service would replace
44.25% of the worker's high-three average pay. A CSRS annuity after 30 years of service
would replace 56.25% of a worker's high-three average pay. A federal employee covered
by CSRS can take regular retirement with an immediate, unreduced annuity at age 55 or
later with at least 30 years of service, at age 60 or later with at least 20 years of service,
or at age 62 with at least five years of service. CSRS retirement annuities are indexed
annually to the rate of growth of the Consumer Price Index (CPI), regardless of whether
the individual retired due to disability or under normal retirement rules.9
Federal Employees' Retirement System (FERS)10
Eligibility. A federal employee who is enrolled in FERS must have completed at
least 18 months of service to be eligible for a disability retirement. All other eligibility
rules for disability retirement under FERS are the same as under CSRS.
Annuity. Federal employees enrolled in FERS also are covered by Social Security,
and the amount of a disability annuity under FERS is offset until age 62 by a portion of
any Social Security Disability Insurance (SSDI) benefit that the individual receives.
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Federal employees covered by FERS who apply for disability retirement also must apply
for Social Security disability benefits.11 Eligibility for Social Security disability benefits
requires a determination by the Social Security Administration that the individual is
unable to perform substantial gainful activity in any job in the national economy.12
Therefore, an individual covered by FERS may be determined to be disabled for purposes
of his or her job with the federal government, but not with respect to other employment.
In such a case, the individual would be eligible to receive a FERS disability annuity but
be ineligible for SSDI. A federal employee who is disabled under both the FERS and
Social Security statutes would be eligible to receive both a FERS disability annuity and
a Social Security benefit, subject to the provisions of federal law integrating the two
benefits.
For federal employees under 62 years of age, the FERS disability retirement annuity
in the first year of disability is 60% of the individual's high-three average pay minus
100% of any Social Security benefit that he or she is receiving. In years after the first year
of disability, the FERS disability annuity is 40% of the individual's high-three average
pay minus 60% of any Social Security benefit that he or she is receiving. The FERS
disability annuity remains at that level -- adjusted annually by the FERS cost-of-living
9
For more information on COLAs under CSRS and FERS, see CRS Report 94-834, Cost-of-
Living Adjustments for Federal Civil Service Annuities, by Patrick Purcell.
10
5 USC �8451- �8456.
11
FERS disability benefits usually begin before the application for SSDI has been processed. If
SSDI benefits are approved, the FERS disability annuity is offset by 100% of the SSDI benefit
for the first 12 months of the annuity and 60% thereafter, retroactive to the SSDI eligibility date.
12
The Social Security Act deems anyone who earns more than a certain monthly amount to be
engaging in substantial gainful activity (SGA). In 2008, the monthly SGA amount for statutorily
blind individuals is $1,570. For non-blind individuals, the monthly SGA amount for 2008 is
$940. SGA for the blind does not apply to Supplemental Security Income (SSI), while SGA for
the non-blind disabled applies to both Social Security and SSI benefits. See 42 U.S.C. �423(d).
CRS-5
adjustment -- until the individual reaches age 62. When a FERS disability annuitant
reaches age 62, the FERS annuity is adjusted to the amount that the individual would have
received if he or she had continued to work until age 62. This ensures that an individual
who retires from federal employment as the result of disability does not receive a higher
annuity after this age than he or she would have received as the result of taking a normal
retirement. The adjusted annuity at age 62 is equal to 1.0% of the individual's high-three
average pay (increased by the FERS cost-of-living adjustments since the date of the
disability retirement) multiplied by the sum of years of service performed before the date
of disability retirement plus the number of years since that date. If the total number of
years is 20 or more, the annuity is 1.1% of high-three average pay multiplied by this
number of years. If an employee covered by FERS becomes disabled at age 62 or later,
his or her FERS annuity is computed under the regular FERS retirement rules.
In most cases, the adjusted FERS benefit payable at age 62 will be lower than the
annuity that was paid before age 62. However, at age 62 and later, the offset to the FERS
annuity for any Social Security benefits that the individual may be receiving will cease.
Also, a worker who was receiving a FERS annuity but was not eligible for SSDI can apply
for Social Security retired worker benefits at age 62, provided that he or she has
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completed the required 40 quarters of employment covered by Social Security. The
Social Security benefit will compensate in part for the reduction in the FERS annuity.
FERS disability annuities are adjusted for inflation beginning in the second year of
payment. If the CPI has increased by 2.0% or less during the year ending on September
30, the FERS cost-of-living adjustment in the following January is equal to the percentage
change in the CPI. If the CPI has increased by more than 2.0% but less than 3.0%, the
FERS COLA is 2.0%. If the CPI has increased by 3.0% or more, the FERS COLA is one
percentage point less than the increase in the CPI.
FERS Annuity Adjustment for Periods of Workers' Compensation. FERS
retirement benefits consist of the FERS annuity, Social Security, and the Thrift Savings
Plan. P.L. 108-92 (October 3, 2003) changed the computation of the FERS annuity for
federal employees who are injured on the job. An injured employee cannot contribute to
Social Security or to the Thrift Savings Plan while receiving workers' compensation.
Social Security taxes and TSP contributions must be paid from earnings, and workers'
compensation payments are not classified as earnings under either the Social Security Act
or the Internal Revenue Code. As a result, the employee's future retirement income from
Social Security and the TSP may be reduced. P.L. 108-92 increased the FERS basic
annuity from 1.0% percent of the individual's high-three average pay to 2.0% of high-
three average pay for the duration of the period when the individual received workers'
compensation. This is intended to replace income that may have been lost from lower
Social Security benefits and reduced income from the TSP.
Federal Employees' Compensation Act (FECA)13
Eligibility. The Federal Employees' Compensation Act (FECA) provides benefits
to federal employees who suffer a partial or total disability as the result of an injury
incurred at work. In the event of the worker's death as the result of an on-the-job injury,
13
5 USC, chapter 81.
CRS-6
FECA pays benefits to the worker's surviving dependents. FECA pays benefits only in
the case of an illness, injury, or disability that is determined by the OPM to be work-
related. Federal workers are covered by FECA immediately upon employment.
Benefits. FECA benefits consist of cash compensation, payment of medical
expenses related to the illness or injury, vocational rehabilitation assistance, and payment
for attendant care services. The cash payment is calculated as a percentage of average
annual earnings prior to the individual's injury or death. FECA benefits are indexed
annually to the rate of growth of the CPI. FECA benefits are not subject to income taxes.
FECA cash compensation equals two-thirds of lost earning capacity if the worker has
no dependents or three-fourths of lost earning capacity if the worker has dependents.
FECA payments may not exceed 75% of the maximum rate of pay for grade GS-15 of the
general schedule, and in case of total disability, may not be less than the minimum pay
for the GS-2 pay grade. FECA cash benefits continue as long as the disability lasts.
Compensation does not end when the individual reaches retirement age. An injured
employee may elect to receive a disability retirement annuity instead of FECA benefits,
but may not receive both simultaneously. If an employee covered by FERS elects to
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receive FECA compensation, it will be reduced by the amount of any Social Security
benefits that are based on the period of his or her federal employment. An election
between FECA and a disability retirement annuity may be changed at any time. For
certain listed injuries, minimum cash benefits are provided, regardless of how long the
disability lasts. In case of injuries resulting from a specific incident, the employee's full
pay continues for the term of the disability up to a maximum of 45 days, after which
regular FECA compensation payments begin if the disability continues.
FECA Death Benefits. If a federal employee dies from a work-related injury,
FECA pays cash compensation to the worker's surviving dependents. A surviving spouse
receives annual compensation equal to 50% of the worker's last annual rate of pay.
Benefits terminate if the surviving spouse remarries before age 60, although in the event
of remarriage before age 60, the surviving spouse is paid a lump sum equal to two years
of benefits. If the worker had both a spouse and dependent children, the spouse's benefit
is equal to 45% of the worker's last annual rate of pay, and each dependent child receives
a benefit equal to 15% of pay, up to a maximum family benefit equal to 75% of pay. If the
worker had dependent children but no spouse, the compensation is equal to 40% of pay
for one child and an additional 15% for each additional child up to a maximum of 75%
of pay. A dependent child's benefit ends at age 19, unless he or she is incapable of self-
support due to disability. In some cases, other surviving dependent relatives, including
parents, siblings, grandparents, and grandchildren may be eligible for compensation,
according to the extent of their financial dependence on the deceased worker.
Death Gratuity Payment. Section 651 of P.L. 104-208, the Omnibus
Consolidated Appropriations Act for FY1997, authorizes the heads of federal agencies
to pay a gratuity payment of up to $10,000 to the executor of the estate of a federal
employee who dies as the result of injury sustained in the performance of official duties
after August 1, 1990.14
14
Also see CRS Report RS21029, Survivor Benefits for Families of Civilian Federal Employees
and Retirees, by Patrick Purcell.