How To Retire On Ill Health Grounds In A Db Scheme
Some final salary pension schemes will allow early pension payment due to permanent ill health. Its important to get all the facts off your employer, however, as some schemes will reduce the pension you get, as you wont have as long to grow your pot.
Others wont make this reduction, and may even increase your pension if, for example, your condition is terminal. Its best to speak to your employer to get confirmation.
Applying For Federal Disability Retirement
You must apply for disability retirement while still employed by the federal government or within one year of separation from federal employment. Note that “separation” from employment is not necessarily the date you became disabled or even the date you stopped working.
You apply by filing forms with your federal agency. But if you’ve been separated from federal service for more than 31 days, you should submit your disability application directly to the Office of Personnel Management rather than to your federal agency.
Once OPM receives your application, it will make an initial determination based on your medical records, your doctors’ opinions, and your application itself.
Three Military Retirement Categories
The three basic retirement categories for military members include:
- Active component military retirement
- Reserve component military retirement
- Disability retirement
For this article, we focus exclusively on medical disability retirement but there are some common issues for retirees in general. For exampleretirement eligibility. All military retirees must meet the DoD-specified criteria that is applicable in their retirement category:
Active component retirementavailable to those who have completed 20 years of military service. Retirement pay in this case begins after the military members final out processing.
Reserve component retirementthis pay is offered after 20 years of military service, but is based on a points system which can include points for the following:
- 1 point for each day of active service
- 1 point for each attendance at a drill period
- 1 point for each day of performing funeral honors duty
- 15 points for each year of membership in a reserve component
There are other ways of calculating retirement points for reserve members, the above is not the only method. In any case, Reserve retirement pay does not become effective until the veteran is 60 years old.
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A Very Important Caveat
Military retirees may be technically eligible to draw both regular DoD retirement pay AND VA disability payments. There are rules that dictate which kind of pay you can draw.
Did you know federal law requires a retired service member to waive part of their DoD retirement pay by the amount of their VA disability compensation? This dollar-for-dollar reduction is known as the VA offset, also called a VA Waiver.
There are two programs that can help certain eligible military retirees get back some of these waived funds. One is known as Concurrent Retirement and Disability Pay. Described as a payment meant to restore retired pay for those with service-connected disabilities who waive retired pay for VA disability pay.
This program does not require the veteran to apply those who are eligible will have their case processed and the Concurrent Retirement and Disability Pay is added to the monthly compensation amount.
The other program is known as Combat-Related Special Compensation and is offered to those with combat-related disabilities. This program does require the veteran to apply via their branch of military service. Learn more about eligibility for this program at the Defense Finance And Accounting official site.
Joe Wallace is a 13-year veteran of the United States Air Force and a former reporter for Air Force Television News
Is Your Condition Found In The List Of Disabling Conditions
For each of the major body systems, we maintain a list of medical conditions we consider severe enough to prevent a person from doing SGA. If your condition is not on the list, we must decide if it is as severe as a medical condition that is on the list. If it is, we will find that you have a qualifying disability. If it is not, we then go to Step 4.
We have two initiatives designed to expedite our processing of new disability claims:
- Compassionate Allowances: Certain cases that usually qualify for disability can be allowed as soon as the diagnosis is confirmed. Examples include acute leukemia, Lou Gehrigs disease , and pancreatic cancer.
- Quick Disability Determinations: We use sophisticated computer screening to identify cases with a high probability of allowance.
For more information about our disability claims process, visit our Benefits for People with Disabilities website.
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What Benefits Can I Claim If I Retire Due To Ill Health
Depending on your pension scheme, a health condition may entitle you to access your pension early, or even get higher payments and tax credits.
If you have a personal or workplace pension, you can often claim the full lump sum of your pension tax-free if you meet the necessary criteria . With a state pension, youll need to wait until you reach state pension age before receiving any benefits.
If you have little or no pension savings, you can explore other state benefits such as Employment and Support Allowance or Council Tax Reduction, which can help with living costs.
Ill Health And Defined Benefit Schemes
Some defined benefit schemes can begin paying your pension early in the event of permanent ill health.
Usually, this type of pension is reduced if its paid early. But many schemes wont make this reduction if you take your pension early due to ill health.
The maximum amount payable is what you would have got if you continued working to your normal retirement date.
Where your life expectancy is expected to be less than one year, the schemes rules might allow you to take the whole value of your pension as a tax-free cash lump sum.
A serious ill-health lump sum paid before you reach the age of 75 will be paid tax-free, provided you have available lifetime allowance and have not previously taken any money from your pension.
If youre over the age of 75, the lump sum will be taxed as earnings.
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Meeting The Physical Evaluation Board
The evaluation board is charged with deciding whether a service members condition allows them to remain on active duty, be medically retired, or separated. The following conditions may apply depending on circumstances:
- Those with less than 20 years of active service and who have been awarded a disability rating of 30 percent technically qualify for medical retirement.
- Those with a disability rating below 30 percent may experience medical separation instead of retirement.
- Those with 20 or more years of active service will be recommended for retirement regardless of the disability rating.
- Those who have a disability which existed before entering military service are recommended for military discharge without benefits.
Who Is Eligible For Federal Disability Retirement
In order to be eligible, you must be enrolled in the Civil Service Retirement System for a minimum of 5 years or the Federal Employees Retirement System for a minimum of 18 months as a full-time career employee.
Your qualification for Federal Disability Retirement is based on medical evidence from a doctor supporting your claim that you are unable to do even one of your job duties due to a disability, for a period of at least 12 months. This means that even if you are on a light-duty work assignment, that you will still be eligible for disability retirement. In some cases, this change in work can benefit you when building a case.
Keep in mind that this doesnt have to be a work-related injury. For example, you could have hurt your back while lifting weights at the gym which led to an injury that stops you from lifting over 20 pounds at your job. If this injury is expected to last at least 12 months and lifting over 20 pounds is one of your job requirements, then this is an injury that could qualify for Federal Disability Retirement.
Additionally, your condition could have existed before you began working in your position but worsened during your employment with the federal government.
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How The Meb/peb Is Conducted
Physical or mental health problems that are incompatible with military duty or that result in disqualification from worldwide deployment for more than 12 months precipitate a Medical Evaluation Board . Medical boards are initiated by the Medical Treatment Facility , not the individual or the command.
The medical board consists of active duty physicians who review the clinical case file and decide whether the individual should be returned to duty, or should be separated, using the published medical standards for continued military service.
If the MEB determines that the member has a medical condition that is incompatible with continued military service, they refer the case to a Physical Evaluation Board . The PEB is a formal fitness-for-duty and disability determination that may recommend one of the following:
- Return the member to duty
- Place the member on the temporary disabled/retired list
- Separate the member from active duty, or
- Medically retire the member
The standard used by the PEB for determining fitness is whether the medical condition precludes the member from reasonably performing the duties of his or her office, grade, rank, or rating.
Per DoD Instruction 1332.38, the inability to perform the duties of office, grade, rank or rating in every geographic location and under every conceivable circumstance will not be the sole basis for a finding of unfitness. Deployability, however, may be used as a consideration in determining fitness.
Defined Contribution Pension Pots
If you need to give up work due to ill health, you may be able to access your pension pot early, regardless of your age.
The amount you could get depends on the terms and conditions of the policy. If youre unwell, check your options with your pension provider.
You should have the same options for taking your money as you would normally have at the age of 55.
If you decide to use some or all your pension pot to purchase an annuity to provide a guaranteed income, an impaired life or enhanced annuity could give you higher levels of income.
The annuity rate youre offered is based on an estimate of your personal life expectancy. This is calculated using the medical information supplied.
Find out more in our guide Guaranteed retirement income explained
If your life expectancy is reduced to less than one year due to illness, you might be able to take your whole pension pot as a cash lump sum. A serious ill-health lump sum paid before you reach 75 will be paid tax-free. This is provided you have available lifetime allowance. If youre over 75, the lump sum will be taxed as income.
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What Can I Do If Ive Been Refused Ill Health Retirement
If you have been refused ill health retirement, your pension provider must provide you with the reason why. Youll then be able to submit an appeal.
As part of your appeal, you might need to provide more information or evidence. Ensure that you send off your appeal form with all of the additional requirements before the deadline date set by your provider.
Can I Afford To Retire Early Due To Ill Health
If your health condition is severe enough that it is preventing you from doing your job, then realistically you may not have a choice about whether or not to retire. However, you can still ask the question, Can I afford to retire early? by looking at other areas of your life, to see what economies and savings you would need to make in order to stop work.
Remember, if you draw your pension early, it may have to last longer than it otherwise would. A health condition or disability that stops you from working may not necessarily shorten your lifespan, so you would need to calculate how to make your pension last long enough. The Unbiased Pension Calculator can help you do this. You may also want to look at other sources of income such as remortgaging, equity release and downsizing.
Once you know how much income you can generate from your pensions and other assets, you should have a better idea of the adjustments in your spending that you may need to make.
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What Are The Basic Eligibility Requirements
The current retirement system for federal workers and postal employees is called FERS, the Federal Employees Retirement System. This system replaced the Civil Service Retirement System in 1987, but some federal workers who started before 1987 will still be covered by CSRS.
To be eligible for disability benefits under FERS, you must have worked as a federal civilian or postal employee for at least 18 months.
To medically qualify, you must become unable, due to a physical or mental disease or injury, to perform “useful and efficient service” in your current position, which means you must be unable to carry out an essential element of your job. Your disability must be expected to last at least twelve months from the date you file the application.
In addition, your federal agency must state that it has tried and failed to accommodate your medical condition in your current job, and that it was unable to reassign you to another nearby position in the same agency at your grade or pay level.
It is not necessary that your disability resulted from an on-the-job injury, work-related condition like stress, or occupational disease, as in a workers’ compensation case. And unlike Social Security disability, you’re not required to show that you’re “totally disabled,” only that you’re incapable of performing the duties of your current job.
Adults With A Disability That Began Before Age 22
An adult who has a disability that began before age 22 may be eligible for benefits if their parent is deceased or starts receiving retirement or disability benefits. We consider this a “child’s” benefit because it is paid on a parent’s Social Security earnings record.
The Disabled Adult Child who may be an adopted child, or, in some cases, a stepchild, grandchild, or step grandchild must be unmarried, age 18 or older, have a qualified disability that started before age 22, and meet the definition of disability for adults.
It is not necessary that the DAC ever worked. Benefits are paid based on the parent’s earnings record.
- A DAC must not have substantial earnings. The amount of earnings we consider substantial increases each year. In 2022, this means working and earning more than $1,350 a month.
Who Qualifies For A Medical Disability Retirement
There is an important difference between being medically retired and being involuntarily separated from the military because of a medical condition. Retirement involves retirement pay, the separation option does NOT. You may or may not be entitled to separation pay if you are separated but not retired due to a medical conditionseach situation is handled case-by-case.
Keep that in mind when reading how to qualify for a medical retirement belowservice members who go before the Physical Evaluation Board are not guaranteed a retirement classificationdepending on the nature of your condition you may be separated without the same benefits as a medically retired service member.
Voluntary Redundancy Versus Early Retirement
Maybe your employer has offered you redundancy as an alternative to early retirement?
Dont be pushed into making a quick decision. Anti-discrimination laws mean youre protected if youre disabled or have certain health conditions.
For example, your employer must keep your job open for you and cant put pressure on you to resign because youve become disabled.
If youre happy to consider redundancy, make sure you weigh up all the pros and cons.
One advantage of taking redundancy might be the redundancy pay. Find out exactly how much you would get and whether youd need to pay tax on it.
If youre planning to use your redundancy pay as income, make sure you draw up an accurate budget to calculate how long it will last.
Use the statutory redundancy pay calculator on the GOV.UK website
Find out more in our guide Redundancy pay
If you work in the public sector, you might prefer to take redundancy in the hope that your condition improves and youre able to return to work at some point. This might not be possible if you opt for early retirement.
Speak to your union representative to find out exactly what your options are, or get advice from your workplace occupational health department.
Is Flexible Or Part
If youre disabled or have a health condition, your employer has to make reasonable adjustments so youre not disadvantaged at work.
If you think you could continue at work if your employer made changes to your job, your hours or your workplace, you can ask them to do so.
They have to act on your request as long as its reasonable.
What Do I Get If I’m Found Eligible For Disability Retirement
When you are placed on either the TDRL or PDRL you will get a monthly retirement check, just like as if you had served 20 years. The rate is figured like this:
- x x = Disability Retired Pay
- x = Disability Retired Pay
Upon retirement you will be given the option to choose either computation method. Your retired base pay is determined by when you entered the service and which retirement pay you are eligible for, or have chosen.
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