FERS and SSDI back pay are calculated separately and paid by different agencies, so you may receive both at the same time

FERS disability (Federal Employees Retirement System disability) is a pension paid by the Office of Personnel Management (OPM) to federal employees who become unable to work. SSDI (Social Security Disability Insurance) is a separate federal program paid by the Social Security Administration. When you receive both, each program pays its own back pay independently — OPM pays FERS back pay, and Social Security pays SSDI back pay. The two do not offset each other, though FERS has a rule that can reduce your FERS payment once SSDI begins.

Back pay from each program runs from different dates. FERS back pay typically starts from the date OPM determines your disability began, which is often the date you stopped working or the date you filed your FERS disability claim, whichever is later. SSDI back pay runs from the date Social Security determines your disability began, which can be up to 12 months before you filed your SSDI claim. Because the two programs use different rules and timelines, your FERS back pay amount and your SSDI back pay amount will almost certainly differ.

Key Takeaways

  • FERS back pay and SSDI back pay are calculated and paid separately by two different federal agencies, so you receive both if you are approved for both programs.
  • FERS back pay runs from the date OPM determines your disability began, while SSDI back pay can reach back up to 12 months before you filed your SSDI claim.
  • Once you begin receiving SSDI, OPM will reduce your FERS payment by a portion of your SSDI amount under the Government Pension Offset rule, though this does not affect back pay already paid.
  • You must report SSDI income to OPM, and OPM will coordinate with Social Security to calculate the offset correctly.

How FERS back pay is calculated

OPM calculates FERS back pay based on your high-3 average salary — the average of your highest three years of federal pay — and the number of years of service credit you had when you became disabled. The formula is roughly 1 percent of your high-3 for each year of service, though the exact calculation depends on your age and length of service at the time of disability.

OPM pays back pay from the date your disability is determined to have begun through the month before your FERS disability annuity begins. This lump sum is usually paid within a few months of OPM's approval decision. The back pay does not include interest, and OPM does not adjust it for inflation even if several years passed between your disability date and your approval.

If you were working and receiving a salary while your FERS disability claim was pending, OPM will deduct that salary from your back pay. This is called an offset for earnings. If you received workers' compensation or other disability payments during the waiting period, OPM may also offset those amounts, depending on the type of payment and your state's law.

How SSDI back pay is calculated

Social Security calculates SSDI back pay based on your Primary Insurance Amount (PIA), which is derived from your lifetime earnings record. The back pay period runs from the date Social Security determines your disability began (which can be up to 12 months before you filed) through the month before your SSDI benefits begin.

Social Security pays 12 months of back pay automatically once you are approved. If your disability onset date is more than 12 months before your approval, you can request that Social Security pay the full amount owed, though this requires a separate request and may take additional time to process. Back pay is paid as a lump sum, usually within one to three months of approval.

Unlike FERS, Social Security does not offset SSDI back pay for wages you earned while your claim was pending. However, if you received Supplemental Security Income (SSI) while waiting for SSDI approval, Social Security will deduct those SSI payments from your SSDI back pay.

The Government Pension Offset and how it affects ongoing payments

Once you begin receiving SSDI, OPM will reduce your ongoing FERS payment under a rule called the Government Pension Offset (GPO). OPM reduces your FERS annuity by 2/3 of your SSDI benefit amount. For example, if your SSDI benefit is $1,500 per month, OPM will reduce your FERS payment by $1,000 per month (2/3 of $1,500).

This offset applies only to your ongoing monthly payment, not to back pay you have already received. Once OPM learns that you have been approved for SSDI, OPM will contact Social Security to confirm your SSDI amount and recalculate your FERS payment accordingly. You do not need to report this yourself, though you should notify OPM if your SSDI amount changes.

The offset can result in a significant reduction to your FERS payment. In some cases, the offset is so large that your FERS payment drops to zero. If that happens, you will receive only SSDI. OPM will send you a new payment notice explaining the reduction and the reason for it.

Reporting requirements and coordination between agencies

You must report your SSDI approval to OPM within 30 days. Send a copy of your Social Security approval letter to the OPM office that manages your FERS account. OPM will then request your SSDI benefit amount from Social Security and recalculate your FERS payment.

Social Security and OPM share information electronically, so OPM will eventually learn of your SSDI approval even if you do not report it. However, reporting it yourself speeds up the process and prevents overpayment. If OPM continues paying you the full FERS amount after you become may have access to to SSDI, you will eventually owe back the offset amount.

If your SSDI benefit amount changes — for example, because of a cost-of-living adjustment or because you return to work and your benefit is suspended — you should notify OPM so that your FERS offset can be recalculated. Keep copies of any notices from Social Security about changes to your benefit.

Tax treatment of FERS and SSDI back pay

FERS back pay is taxable income in the year you receive it. OPM will issue you a Form 1099-R showing the amount of back pay and any federal income tax withheld. You report this on your federal tax return as pension income.

SSDI back pay is also taxable, but the tax treatment is more complex. Up to 85 percent of your SSDI benefits (including back pay) may be taxable, depending on your combined income. Combined income is calculated as your adjusted gross income plus nontaxable interest plus half of your SSDI benefits. Social Security will issue you a Form SSA-1099 showing your SSDI back pay amount.

Because you may receive both FERS and SSDI back pay in the same year, your total taxable income could be substantial. Consider consulting a tax professional to understand how both payments will affect your tax liability and whether you should make estimated tax payments.

Timing: when you receive each back pay

FERS back pay is usually paid within two to four months of OPM's approval decision. SSDI back pay is typically paid within one to three months of Social Security's approval. Because the two agencies work independently, you may receive FERS back pay first, SSDI back pay first, or both in the same month.

The timing also depends on when you filed each claim. If you filed your FERS disability claim before your SSDI claim, you may receive FERS back pay sooner. If you filed SSDI first, Social Security may approve you first because SSDI processing times are often shorter than FERS processing times.

Once you receive back pay from either program, it is paid as a lump sum. You do not receive it in monthly installments. After back pay is exhausted, you receive only your ongoing monthly benefit from each program (adjusted for the FERS offset, if applicable).

What happens if one program denies you

It is possible to be approved for FERS disability but denied for SSDI, or vice versa. The two programs use different medical standards and different definitions of disability, so approval by one does not may provide approval by the other.

If you are approved for FERS but denied for SSDI, you will receive only your FERS payment with no offset. If you later appeal and win your SSDI case, OPM will recalculate your FERS payment at that time and may owe you a refund if you were overpaid during the period between your FERS approval and your SSDI approval.

If you are approved for SSDI but denied for FERS, you will receive only your SSDI benefit. You can appeal OPM's denial, and if you win on appeal, OPM will pay you back pay from your disability onset date, minus any offset for SSDI you received during the waiting period.

Frequently Asked Questions

Can I receive FERS back pay and SSDI back pay at the same time?

Yes. The two programs are separate, and each pays its own back pay independently. You will receive a lump sum from OPM and a separate lump sum from Social Security. The timing may differ, but there is no rule preventing you from receiving both in the same year.

Will my FERS back pay be reduced because I also receive SSDI?

No. The Government Pension Offset applies only to your ongoing monthly FERS payment, not to back pay you have already received. Once you receive your FERS back pay lump sum, it is final and will not be adjusted later.

What if OPM overpays me because I did not report my SSDI approval?

You will be required to repay the overpayment. OPM can recover it by reducing your future FERS payments or by requesting a lump-sum repayment. Report your SSDI approval to OPM within 30 days to avoid this situation.

How do I calculate how much FERS back pay I should receive?

OPM will calculate your back pay based on your high-3 salary, years of service, and the period between your disability onset date and your FERS approval. You can request an estimate from OPM before your claim is approved, though the final amount may differ based on OPM's information of your disability onset date.

Will I owe taxes on both my FERS and SSDI back pay?

Yes, both are taxable income. FERS back pay is fully taxable as pension income. SSDI back pay may be partially taxable depending on your combined income. You will receive tax forms from both agencies, and you should report both amounts on your federal tax return.