Disability vs. Optional Retirement

Many FERS employees who become disabled when they already have met age and service requirements for regular optional retirement apply for disability retirement on the assumption that a disability benefit will result in a higher annuity than an optional annuity. However, a disability retirement benefit in this situation will be based on the “earned rate,” which produces the same basic annuity as the immediate optional annuity. (Note: This does not apply to a retirement under age 62 under the “MRA + 10” because an age-based reduction is imposed.)

There are disadvantages of retiring under the disability provision instead of the immediate optional provision. Under FERS disability rules, the annuity supplement is not payable. Also, for a FERS disability retirement with a CSRS component, the actuarial reduction provision for refunds of CSRS contributions taken before March 1, 1991 is not available. However, there may be a good reason for the individual to choose a disability retirement over the immediate optional retirement—for example, state benefits or taxes.

An agency must inform employees in this situation at retirement of their dual eligibility and provide them with estimates outlining both types of retirement. OPM will notify the retiree of his or her retirement options before final adjudication by sending an election letter. If no reply is received from the annuitant after 30 days, OPM will continue to process the case under disability provisions.