Recent articles in this space have looked at the criteria that must be met to be approved for disability retirement, and the process used to apply for a disability annuity. This week and next I’ll explain how your disability benefits are calculated under the two retirement systems. I’ll begin with CSRS.
The guaranteed minimum benefit
The guaranteed minimum CSRS disability annuity is the lesser of the following two numbers: 40 percent of your high-3 or the annuity you would have earned if you worked to age 60. As a rule, if you are receiving military retired pay (or compensation from the Department of Veterans Affairs in lieu of such pay), your disability annuity will be based on your earned benefit. However, if the total of that benefit plus your military benefit is less than the guaranteed minimum benefit, you’ll be paid whatever amount is necessary to bring you up to the minimum.
The earned annuity benefit
An earned CSRS disability annuity is based on the average of your highest three consecutive years of basic pay – your high-3 – and your total years of creditable service. It’s calculated using the following formula:
• 0.015 x your highest three years of average salary (your high-3) x your first five years of creditable service, plus
• 0.0175 x your high-3 x your next five years of creditable service, plus
• 0.02 x your high-3 x all remaining years and full months of creditable service
Note: Your disability benefit will be the same as your earned benefit if you have at least 22 years of creditable service or you are at least 60 years old.
CSRS Offset rule
If you are a CSRS Offset employee who retires on disability and are eligible for a Social Security benefit, your disability annuity will be offset by the amount of that benefit. The total amount you receive will be the same, but it will just come from two different places, OPM and the Social Security Administration.
Regardless of the age at which you retire on disability, you will be eligible for annual cost-of-living adjustments. These COLAs will be the same as those given to regular CSRS retirees.