Workers' comp and disability retirement, explained

Changes may be coming in the way employees are compensated if they are injured on the job. The Senate approved a provision as part of a postal reform bill it passed April 26 that, if it becomes law, would lower the income of many on workers’ compensation when they become eligible for regular retirement.

I’ll fill you in on the proposal in my next column. This time, I want to explain how the system works now. You’ll see that workers’ comp is a financially more beneficial option for most employees who were disabled while performing the duties of their jobs than disability retirement.

Workers’ comp is administered by the Office of Workers’ Compensation Programs (OWCP) in the Labor Department; the disability retirement program is administered by the Office of Personnel Management.

The Federal Employees Compensation Act, which covers workers’ compensation, provides for the payment of lump-sum benefits based on permanent, total or partial disabilities sustained in the performance of duties. Non-scheduled awards are compensation for loss of wage-earning capacity. They are paid for the period during which you are unable to resume regular work because of injury or disease-related disability. Scheduled awards are paid for a permanent impairment incurred on the job, such as the loss of an eye.

The amount of compensation is based on the difference between your capacity to earn wages and the wages of the job you held when you were injured. If you have no dependents, you’d receive two-thirds of your monthly pay. If you were married or had one or more dependents, you’d receive three-quarters of your monthly pay.

The disability retirement program is designed to provide an annuity that partially replaces the salary lost as a result of an employee’s inability to perform on the job because of a disabling condition. Unlike workers’ comp, disability annuities are payable whether or not the disease or injury was incurred on the job.

If you are a Civil Service Retirement System employee, you’d receive the greater of:

• The guaranteed minimum benefit, which is the lesser of 40 percent of your high-three salary or the amount you’d get using the standard CSRS retirement formula, increased by the time remaining until your 60th birthday.

• Your earned annuity based on your length of service and high-three, calculated using the CSRS formula.

If you are a Federal Employees Retirement System employee, for the first 12 months, you’d receive 60 percent of your high-three, minus 100 percent of any Social Security disability benefit. After the first 12 months, you’d receive 40 percent of your high-three, minus 60 percent of any Social Security disability benefit. At age 62, your disability benefit would be converted to a regular annuity, calculated as if you had worked to age 62. The computation would be based on the standard FERS formula, increased by any intervening cost-of-living adjustments.

If you have applied for workers’ comp, you should apply for disability retirement benefits to preserve your rights and those of your survivors. If you are a FERS employee, you must file for Social Security disability benefits; otherwise, OPM won’t process your application.

If benefits are approved under both workers’ comp and the disability retirement program, you have to choose between the two. You cannot receive both benefits concurrently. This same rule applies if you are a FERS employee who is also found eligible for a Social Security benefit.

In most cases, employees elect the workers’ comp benefits because they are usually higher, and sometimes much higher.

If OPM completes the review of your case before OWCP does, it will begin making annuity payments. If OWCP later awards benefits and you decide to accept them, the annuity you already received will have to be paid back to OPM. In most cases, OWCP handles this by withholding the required amount from your initial payment. That payment is retroactive to the date when you left government.

While on workers’ comp, your disability annuity payments are suspended. However, if your compensation benefits end for any reason, including personal choice, OPM will reinstate your annuity, as long as you haven’t recovered from the disability or been restored to earning capacity.