Shocking Reality – Federal Employees Disability Benefit Creates Opportunity

Shocking Reality – Federal Employees Disability Benefit Creates Opportunity

Federal Employees receive income protection through their work, but most don’t have any idea what their long term disability plan would actually pay if they got sick or hurt. After reviewing the facts about what benefits are actually paid out, there could potentially be a big challenge for most of these employees if they had any kind of a long term illness or injury.

Federal Employees are covered under a plan called the Federal Employees Retirement System (FERS) – it pays the employee 60% of their taxable income for the first 12 months and after a 30-day waiting period. Beyond that, the benefit drops to 40% and benefits can be offset up to an additional 60% of what is received by Social Security.

There are currently over 2,697,000 civilian federal employees with Disability Income Protection under the FERS plan – and over 84% of those do not carry any supplemental coverage.

I recently spoke with a 43-year old client of mine that is an Investigator with the Department of Labor – she has been with the DOL for 8 years and would probably be there until she retires. We sat down and did the math together on what her benefits would be if she got sick or hurt and couldn’t work.

Her current taxable monthly income is $7,850. If she were to get sick or hurt for a period over 1-year, her FERS Disability Plan would pay her, $3,140 taxable income until she is 62 years old. After a modest combined tax rate of 25%, her net monthly income would be $2,355.

Her exact words were, “I had no idea. I could barely make my Mortgage Payment with that”. I then reminded her that if she qualified for social security, her FERS benefits could be reduced by up to and additional 60% of what she receives from Social Security. That’s the Shocking Reality.

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