QDRO Corner: FERS Disability Retirement

Last month we discussed the military pension disability retirement – this month we will focus on the FERS disability retirement, for all the federal government employees we represent.

Unlike with the military pension, there is some negotiating that can happen with respect to FERS disability pensions. First though, how FERS disability works. The employee receives the greater of their regular FERS annuity or a percentage of their high-3 average salary less a percentage of their social security disability benefits (see OPM publication for more information regarding the calculation). 

At age 62, the employee’s annuity is automatically recalculated to be as if the employee continued working until the day before their 62nd birthday, including an extension of their service time and cost of living adjustments applied to their salary computation during the time that the employee was received disability benefits.

The FERS disability benefits received prior to age 62 are divisible by Court Order and there are points to negotiate on this. Specifically, how the former spouse’s share of the pension should be calculated during the period that the employee is receiving disability benefits. If the Court Order states the award to the former spouse as a portion of the employee’s annuity without any specific distinction for disability benefits then the former spouse will receive a share of the payments actually made by OPM to the employee.

Alternatively, the Court Order could state that the former spouse’s share can be defined that if disability payments are made, the former spouse’s share shall be calculated as if the employee is paid their full FERS benefit.

Since the employee’s benefit could be reduced based on the amount of social security benefits while receiving FERS disability, this could be a financially important distinction for the former spouse. While such a division would likely result in a larger reduction to the funds received by the employee while on disability, the employee will receive social security benefits, which are non-divisible.