Retirement and Benefits 

Quality Benefits for the Federal Family

United States 

Office of 

Personnel Management 

The Federal Government’s Human Resources Agency

Benefits Administration Letter

Number 14 - 104 Date: February 04, 2014

Subject: Dual Entitlement to Disability and Immediate Optional Retirement 

Purpose 

The purpose of this Benefits Administration Letter is to notify Agency Benefits Officers 

and Human Resource Specialists of the established guidelines for handling Dual 

entitlement to disability and Immediate Optional Retirement. 

Background 

Occasionally, OPM receives a retirement case where the person who has applied for a 

disability retirement is also eligible for an immediate optional retirement. A recent 

retiree retired under the FERS disability provisions. Although she met the age and 

service requirements for eligibility to an immediate retirement, OPM processed her 

retirement as a FERS disability case and computed her annuity at the “earned annuity” 

using the optional retirement formula set out at 5 U.S.C. 8452(c)(2). Subsequently, OPM 

determined that she had been overpaid. The retiree went through several appeal 

processes and it was determined by the Board that she had been counseled incorrectly 

regarding her options regarding her retirement. The Board determined that for reasons of 

judicial efficiency and economy, it would be appropriate to resolve the appeal in a 

manner similar to Lessard vs. Office of Personnel Management, 43 M.S.P.R. 371 (1990), 

by ordering OPM to convert her disability annuity to an immediate optional retirement 

and then recompute the overpayment. 

Disability retirement versus Immediate Optional retirement 

Most retiring employees assume their annuity, when processed under the disability 

benefit rule, will result in a higher annuity than the immediate optional annuity. 

However, retiring under the disability provision when age and service requirements are 

met will result in an earned rate annuity, which produces the same basic annuity as the 

immediate optional annuity, if refunded service is not involved. 

Note: MRA + 10 retirements do not apply as this annuity is reduced for age. 

There are disadvantages of retiring under the disability provision instead of the 

immediate optional provision. Under FERS disability rules, the annuity supplement is 

not payable. Also, for a FERS disability retirement with a CSRS component, the 

actuarial reduction provision for pre 3-1-1991 refunds of CSRS contributions is not 

available. Since the retired provisions provide different benefits, the annuitant must be 
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given the right to choose the annuity that is more advantageous. However, each retiree is 

unique and there may be a good reason for the individual to choose a disability retirement 

over the immediate optional retirement (i.e., state benefits or taxes). 

The agency must inform employees in this situation at retirement of their dual eligibility 

and provide them with estimates outlining both types of retirement. Adjudication of the 

retirement benefit, OPM will notify the retiree of his/her retirement options before final 

adjudication by sending an election letter. 

OPM procedures for handling cases in which it is discovered during initial adjudication 

that the annuitant is entitled to both a disability and immediate unreduced optional 

retirement are as follows:

 Compute the benefit under both the disability and optional provisions. 

 Send the election letter shown in Attachment A, along with applicable 

information sheet (Attachment B - CSRS or Attachment C - FERS).

 If deposit/redeposit is involved, send appropriate deposit/redeposit 

election letter along with this election letter to annuitant. 

 Hold the case file for 30 days for a reply. 

 If no reply from the annuitant after 30 days, continue to process the 

case under disability provisions.

 

 Kenneth J. Zawodny Jr. 

Associate Director, 

Retirement Services 

Office of Personnel Management 
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ATTACHMENT A

Date

 Enter Claim Number

Enter Annuitant’s Name

Enter Annuitant’s Address

Enter Annuitant’s City, State and Zip

Dear <enter Annuitant’s name>:

This concerns benefits that are to be paid to you as an annuitant under the Federal 

Employees Retirement System (FERS)/Civil Service Retirement System (CSRS).

The Office of Personnel Management is currently in receipt of your application for 

disability retirement. However, we have determined that you are also eligible for a 

regular unreduced retirement under <state applicable other type of retirement such as 

voluntary, MRA + 30, ATC, LEO, etc.> provisions. We have suspended processing your 

retirement application pending clarification of the type of retirement benefit you want. To 

assist you in making your decision, below are the annuities you would receive under both 

a disability and an immediate optional retirement. After reviewing our information, 

please complete the enclosed sheet, sign and date your election, and return this form 

within 30 days of the date of this letter.

DISABILITY RETIREMENT:

CSRS: Your annuity will be $________/month effective ______. This rate is based on:

______ 40% of your Hi-3 average salary

______ Rate as projected to age 60

______ Your earned rate

______ Your election of a maximum survivor benefit

______ Your election of a partial survivor benefit

______ Your election of the life rate (no survivor benefit)

______ This takes into account your reduction for a court order we have on file

FERS: Your annuity will be $________/month effective _______. This rate is based on:

______ 60% of your Hi-3 average salary (minus 100% of SSA benefit if eligible)

______ 40% of your Hi-3 average salary (minus 60% of SSA benefit if eligible)

______ Your earned rate

______ Your election of a maximum survivor benefit

______ Your election of a partial survivor benefit

______ Your election of the life rate (no survivor benefit)

______ This takes into account your reduction for a court order we have on file

FERS annuitants, please be advised that if you are eligible for social security benefits, 

your annuity will be offset by 100% of the SSA benefit for the first year and 60% of your 
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annuity thereafter until age 62. In addition, your benefit will change to 40% of your Hi-3 

average salary beginning the second year from your annuity commencing date. At age 62, 

your benefit will be recomputed. The benefit will essentially represent the annuity 

payable to you if you had continued to work until the day before your 62nd birthday and 

retired under the FERS non-disability provisions. (The total service used in the 

computation includes the time you received disability. The average salary is increased by 

FERS cost-of-living allowances granted during the same period. The basic annuity 

formula is then applied, using this adjusted time base and average salary.) 

You may be subject to having your medical condition reviewed every few years to 

determine your status with medical recovery. If you are determined to be recovered from 

your medical condition before age 60, your disability benefit will terminate. 

Until age 60, you will also be subject to an earnings test whereby you may have your 

disability benefit terminated due to earning over 80% of the salary amount you had upon 

separation from your agency. 

OPTIONAL RETIREMENT: 

CSRS: Your annuity will be $________/month effective _________. This rate is based 

on the CSRS general formula. 

FERS: Your annuity will be $________/month. This rate is based on the FERS general 

formula. 

FERS w/a CSRS Component: Your annuity will be $_________/month. This rate is 

based on the FERS general formula, as well as the CSRS general formula for the portion 

of your service that you performed under CSRS provisions. 

Optional text for FERS if applicable: If you elect this option, you will also be eligible to 

receive an annuity supplement in the amount of $________/month until you reach age 62. 

Optional text for both CSRS and FERS if deposit/redeposit is involved: Please refer to 

the enclosed deposit/redeposit letter which provides further details regarding your 

annuity. 

Please complete the enclosed sheet, sign and date it, and return it within 30 days from the 

date of this letter. If we do not receive your election within the 30 day time period, we 

will continue to process your case as a disability retirement. 
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Name: ______________<Enter Annuitant’s Name>__________

CSA #: ______________<Enter Claim Number>_____________ 

I direct that processing of my retirement application proceed under the immediate 

optional retirement provisions. I understand that this election is irrevocable. 

________________________________________________ _____________

 (Signature) (Date) 

I direct that processing of my disability retirement application proceed. I understand that, 

as a disability retiree, if under 60, I will be subject to an earnings cap and may be subject 

to a medical recovery until age 60. I understand that this election is irrevocable. 

_________________________________________________ ________________ 

 (Signature) (Date) 
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ATTACHMENT B

CSRS

Optional Retirement vs. Disability Retirement

There are concerns important to disability annuitants both before and after retirement of 

which the employee should be aware.

• Even if eligible for optional retirement, an applicant for disability retirement must 

prove eligibility through medical and other evidence.

• A disability annuitant under age 60 must provide annual earnings reports, and the 

annuity is subject to termination if the annuitant is restored to earning capacity.

• A disability annuitant under age 60 must provide medical evidence at his or her 

own expense, and the annuity is subject to termination if the annuitant is found to be 

recovered.

• A disability annuitant who was also eligible for optional retirement would 

generally be entitled to an immediate annuity if found recovered or restored to earning 

capacity; however, the new annuity would be computed based upon the same average 

salary used in computing the disability annuity with no adjustments for increases in the 

cost of living for the period after the individual originally retired on disability.

• Unless an individual is permanently and totally disabled for all work, Federal 

income tax provisions no longer offer preferential treatment for disability retirement over 

optional retirement. Any employee having questions related to Federal tax treatment of 

retirement benefits should be directed to consult with the Internal Revenue Service.

• Disability retirees are not eligible to elect the alternative annuity.

• Disability retirees may not elect an insurable interest annuity.

• A disability annuitant must make a redeposit of refunded contributions plus 

interest to receive credit in a CSRS annuity computation for the service covered by the 

refund. In contrast, an optional retiree who fails to redeposit a refund for a period of 

service ending before March 1, 1991, will receive credit for the service (subject to a 

reduction in the annuity based upon the amount of the redeposit due).

 
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ATTACHMENT C

FERS

Optional Retirement vs. Disability Retirement

There are concerns important to disability annuitants both before and after retirement of 

which the employee should be aware.

• Even if eligible for optional retirement, an applicant for disability retirement must 

prove eligibility through medical and other evidence.

• A disability annuitant under age 60 must provide annual earnings reports, and the 

annuity is subject to termination if the annuitant is restored to earning capacity.

• A disability annuitant under age 60 must provide medical evidence at his or her 

own expense, and the annuity is subject to termination if the annuitant is found to be 

recovered.

• A disability annuitant who was also eligible for optional retirement would 

generally be entitled to an immediate annuity if found recovered or restored to earning 

capacity; however, the new annuity would be computed based upon the same average 

salary used in computing the disability annuity with no adjustments for increases in the 

cost of living for the period after the individual originally retired on disability.

• Unless an individual is permanently and totally disabled for all work, Federal 

income tax provisions no longer offer preferential treatment for disability retirement over 

optional retirement. Any employee having questions related to Federal tax treatment of 

retirement benefits should be directed to consult with the Internal Revenue Service.

• Disability retirees are not eligible to elect the alternative annuity.

• Disability retirees are not eligible for the retiree annuity supplement.

• Disability retirees may not elect an insurable interest annuity.

• A FERS disability annuitant who has a CSRS component must make a redeposit 

of refunded contributions plus interest to receive credit in a CSRS annuity computation 

for the service covered by the refund. In contrast, an optional retiree who fails to 

redeposit a refund for a period of service ending before March 1, 1991, will receive credit 

for the service (subject to a reduction in the annuity based upon the amount of the 

redeposit due).
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• A deposit for creditable non-deduction service or redeposit for refunded service 

must be paid before final adjudication of the disability annuity. 

• If for any reason the application for SSA disability benefits is withdrawn, OPM 

will dismiss the FERS disability retirement application upon notification by SSA. 

 

 
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