The President’s 2007 budget includes a proposal to force federal employees receiving workers’ compensation to switch to disability retirement when they reach retirement age. The administration thinks this would save the government nearly $600 million over 10 years. Of course, that $600 million would come out of the pockets of the disabled. With that in mind, I thought it would be a good idea to see what the differences are between workers’ compensation and a CSRS or FERS annuity.

Workers’ Compensation

Workers’ compensation benefits are paid if you become disabled due to an employment-related disease of injury sustained in the performance of their duties. The Federal Employees Compensation Act provides for both scheduled and nonscheduled benefits. A scheduled award is paid for a specific period of time when you have suffered a permanent impairment, such as the loss of use of an eye or arm or for permanent disfigurement.

A nonscheduled award provides compensation for loss of wage-earning capacity. It is paid during the period of time that you are unable to resume regular work because of total or partial disability. The amount is determined by the difference between your capacity to earn wages and the wages of the job you held when disabled. Usually, that results in a monthly payment that is two-thirds of your salary, if there aren’t any dependents, or three-quarters if there are.

Disability Annuities

If you are determined to be unable to perform your job (or in a vacant position at the same grade of pay level) due to a disabling condition, you would be eligible for a disability annuity. Unlike the requirement for workers’ compensation, your disabling disease or injury doesn’t have to be job related.

The annuities of CSRS and FERS employees are calculated using different formulas, in part because FERS employees are also covered by Social Security and may be eligible for disability benefits under that program if the impairment is so severe that they can’t be gainfully employed.

Dual Compensation

Under law, if you are approved for workers’ compensation and an annuity, you can’t receive both. You have to elect one or the other. By and large, those who are eligible for both benefits choose workers’ compensation. That’s because the dollar amounts provided under FECA are more generous than those in a CSRS or FERS disability annuity. Note: There is no bar to an employee who elects to receive a CSRS of FERS annuity also receiving a scheduled award from FECA.

Switching Benefits

If you have been approved for both an annuity and workers’ compensation and elect workers’ compensation, the disability annuity is suspended. Therefore, if your workers’ compensation benefits cease, your disability annuity can be reactivated as long as you haven’t recovered from the disabling condition. But you don’t have to wait for workers’ compensation benefits to stop. You can make the switch to an annuity whenever you want to. Just be aware that if you go back to work, you’ll be subject to the rules governing reemployed annuitants. In most cases that means having your salary offset by the amount of your annuity.