Understanding the FERS Disability Retirement Rules

FERS Medical Retirement, learn about retiring from the federal government with a disability pension.

Ed Zurndorfer - For federal employees who are unable to work due to some type of disability, there is the option to retire under the disability retirement rules. It is in the best interest of both employees and the federal government for employees to remained employed at their current grade or pay level as long as they can provide useful and efficient service without endangering themselves, other employees, or government property. In short, disability retirement should be used only when attempts have been made to preserve an employee’s employment, and those attempts have failed.

This is the first of a series of FEDZONE columns presenting the disability retirement rules for federal employees who are covered by the Federal Employee Retirement System (FERS). The column will present two topics: (1) The general statutory work requirements that qualify a FERS employee for disability retirement and therefore to receive a FERS annuity; and (2) The criteria that must be documented in order to establish eligibility for a disability requirement.

General Eligibility Requirements for a FERS Disability Retirement

An employee will be eligible for a disability retirement (and therefore receive a FERS annuity) under the following conditions: (1) The employee is covered by FERS; and (2) The employee is disabled while serving in a position subject to FERS retirement deductions and must have completed at least 18 months of civilian service creditable under FERS. Positions subject to retirement deductions include civilian service in which full employee contributions were made (via payroll deduction) to the FERS Retirement and Disability Fund and not refunded. Also included in this service requirement is “non-deduction service” – temporary or intermittent – that was performed before January 1,1989 and in which a full deposit was made.

The following types of service may not qualify as fulfilling the creditable civilian service rules under FERS:

Service performed under FERS for which a refund of FERS employee contributions was taken and not redeposited.
Any period of non-deduction (temporary) service performed before January 1,1989 for which a full deposit was not made.
Non-deduction service performed after December 31, 1988. This includes temporary or intermittent service, unless the service was included in a CSRS annuity component.

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Disability Criteria

Once an agency determines that an employee meets the general eligibility requirements for disability criteria, the agency and employee must then document that the employee satisfies the disability criteria required by regulations. The disability criteria are as follows:

A deficiency in service with respect to performance, attendance, or conduct; or in the absence of any actual service deficiency, a showing that the medical condition is incompatible with either useful service or retention in the position.
A medical condition that is defined as a health impairment resulting from disease or injury, including psychiatric diseases.
The inability of the employing agency to reasonably accommodate the employee’s medical condition.
The agency has considered the employee for reassignment to any vacant position within the agency and commuting area at the same grade or pay level for which the employee is qualified.

The employee is responsible for furnishing sufficient medical evidence to support the application for disability retirement. The employee’s medical documentation will normally be information from a personal physician. If the employee’s agency conducts the examination, the result of the examination must be furnished with the application.

Whenever possible, the agency should have the medical documentation assessed by, or in coordination with, a physician to ensure that: (1) The diagnostic or clinical impressions are justified in accordance with established diagnostic criteria; and (2) The conclusion and recommendations are consistent with generally accepted medical principles and practice.

If this assessment concludes that the employee is suffering from a medical condition that has caused a service deficiency, then the agency’s next step is to identify possible alternatives to keep the employee in a productive capacity.

Affected employees should be aware that disability retirement will not be approved when persistence of the medical condition that has caused the employee’s service deficiency results from a failure or refusal to accept non-invasive treatment. The non-invasive treatment would ordinarily be expected to support activities of daily life. This is the case unless acceptance of treatment conflicts with the employee’s religious beliefs.

The Office of Personnel Management (OPM) will not approve an application for disability retirement when there is a reasonable expectation that recovery will occur within one year after the filing of application for disability retirement. A FERS disability annuity is appropriate only when all the criteria have been met. The agency has no further obligation under the disability retirement program to support an employee’s disability retirement if the agency’s review of the medical documentation does not support a conclusion that: (1) The service deficiency has been caused by the medical condition, and (2) The medical condition warrants restriction from critical tasks or duties of the position.

Agency Accommodations

An employee’s agency must exhaust all reasonable efforts to alleviate any service deficiencies through accommodations before it advises an employee to seek disability retirement or supports an employee’s request for disability retirement. “Reasonable accommodation” is any action that the agency would be obligated to take under the Rehabilitation Act of 1973.

“Reasonable accommodation” may include but is not limited to: (1) Modifying the work site; (2) Restricting the job; (3) Acquiring or modifying equipment or devices; (4) Providing interpreters, readers or personal assistants; and (5) Reassigning or retraining the employee.

A job analysis prepared by the agency for accommodation purposes should be submitted to OPM, together with the application and other supporting documents. Furthermore, if the agency is successful in accommodating the employee after the disability requirement application has been forwarded to OPM, then the agency must immediately notify OPM of the successful accommodation.

Reassignment

In addition to accommodations, federal policy dictates that agencies make every effort to regain the services of employees who apply for disability retirement through reassignment to other available positions. When an employee initiates an application for disability retirement, the employing agency must review all vacant positions under its jurisdiction that are at the same grade or pay level and tenure in the commuting area to determine if the employee meets the minimum qualification standards for any vacant position. It is important to note that an agency is not obligated to create a job position for a disabled employee.

For disability retirement purposes, an employee is deemed to “qualify for reassignment” when the minimum requirements are met for the grade and level of the vacant position in question. OPM prescribes no minimum time for which an employee must be given special consideration for placement in a vacant position since a reasonable attempt to place an employee depends on the facts in each individual case.

In the event the agency is successful in reassigning the employee, the application for disability retirement and supporting documents should be returned to the employee. If despite the agency’s decision that it has successfully accommodated the employee’s disability, the employee insists that the application be sent to OPM for a disability retirement determination, then the agency should submit the application and all supporting documents to OPM. The application should then also be accompanied with the agency ‘s opposition to the application stating the accommodation efforts provided.

If the agency locates one or more vacant positions at the same grade or pay level and in the same commuting area for which the employee is qualified for reassignment but the employee refuses reassignment, then the employee’s refusal terminates the agency’s obligation to identify any other vacant position as an alternative to disability retirement.

If an agency is unable to locate a vacant position at the same grade or pay level, it is encouraged to attempt to place the employee in a position at a lower grade or pay level in order to retain the employee in a productive capacity. Pay retention may be offered at an agency’s discretion when it would be of mutual benefit to the agency and employee.

Filing the Application for FERS Disability Retirement

The applicant for a FERS disability retirement must complete and submit to his or her Human Resources or Personnel Office Form SF 3107 (Application for FERS Retirement) and Form SF 3112 (Documentation in Support of Disability Retirement) when applying for disability retirement. Included with Form SF 3112 are the following: Standard Form 3112A (Applicant's Statement of Disability), Standard Form 3112B (Supervisor's Statement), Standard Form 3112C (Physician's Statement) Standard Form 3112D (Agency Certification of Reassignment and Accommodation Efforts) and Standard Form 3112E (Disability Retirement Application Checklist). The applicant must also apply with the Social Security Administration (SSA) for Social Security disability benefits. Receipt of approval or disapproval of disability benefits from the SSA should be submitted with the application for retirement, or as soon as possible thereafter.

Edward A. Zurndorfer is a CERTIFIED FINANCIAL PLANNER™ professional, Chartered Life Underwriter, Chartered Financial Consultant, Chartered Federal Employee Benefits Consultant, Certified Employees Benefits Specialist and IRS Enrolled Agent in Silver Spring, MD. Tax planning, Federal employee benefits, retirement and insurance consulting services offered through EZ Accounting and Financial Services, and EZ Federal Benefits Seminars, located at 833 Bromley Street - Suite A, Silver Spring, MD 20902-3019 and telephone number 301-681-1652. Raymond James is not affiliated with and does not endorse the opinions or services of Edward A. Zurndorfer or EZ Accounting and Financial Services. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.