Your income is one of your most valuable assets. But what happens if you can’t work because of illness or injury? Federal benefits help, but they may not be enough to cover everything. It’s important to know your options so you can protect your financial future. Federal Employee Disability insurance is the best way to ensure you have the income you need when you can’t work.
Understanding Leave Options: They May Not Be Enough
Federal employees can’t rely on Federal Leave Transfer Program when they use up their paid leave. This program lets co-workers donate leave time. But donations aren’t guaranteed. It depends on whether others are able to give leave when you need it.
Another option is the Federal Leave Bank Program. This program provides sick leave, but it often doesn’t have enough to cover long periods of illness.
Unpaid Leave Without Pay (LWOP) is also available, but as the name suggests, it doesn’t provide any income. Without money coming in, unpaid leave can cause financial stress, especially during long-term health issues.
FERS Disability Retirement: Limited Help
If you can’t work because of illness or injury not related to your job, FERS Disability Retirement may help. To qualify, you need at least 18 months of federal service, and your condition must last at least a year. Federal Employee Disability Insurance would cover the first 12 months.
Here’s how it works:
- Year 2: You get 60% of your “high-3” average income, minus any Social Security disability benefits.
- Year 3 and beyond: You get 40% of your “high-3” average, minus 60% of any Social Security disability payments (if you’re under 62).
FERS Disability Retirement offers some protection, but there are downsides:
- Taxable income: Your benefits are taxed, so you take home less.
- No COLA: There are no Cost of Living Adjustments (COLA), so your benefits won’t rise with inflation. Over time, this could make it harder to keep up with your cost of living.
Special Considerations for Women: Planning for Maternity
For many women, maternity leave creates unique financial challenges. You know you’ll miss income during pregnancy and recovery. Fortunately, the government has finalized a formal parental leave program. However, this does NOT include the United States Postal Service (USPS).
Some proposals suggest using FERS pension funds for parental leave, but this may lower retirement savings. Any complications during pregnancy can extend the time away from work and reduce income even more.
TSP Hardship Withdrawals: Not the Best Option
Many federal employees look to their Thrift Savings Plan (TSP) when facing financial hardship. While TSP withdrawals can provide quick cash, they come with serious consequences.
Using money from your TSP can hurt your future plans for retirement. Plus, early withdrawals may lead to tax penalties, leaving you with less money than you expected. In the long run, TSP hardship withdrawals can cause more harm than good.
The Best Option: Federal Employee Disability Insurance
Federal programs may not give you all the help you need. That’s why many federal employees turn to Short-Term Disability (STD) and Long-Term Disability (LTD) insurance.
Private disability insurance provides steady income during your recovery, unlike FERS Disability. Here’s why it makes sense:
- Affordable: Group disability insurance is often cheaper than individual policies.
- Easy to get: Group plans don’t usually need physical exams or complex paperwork.
- Wide coverage: STD and LTD insurance cover both short- and long-term income gaps, giving you peace of mind.
Why Federal Employee Disability Insurance Matters
Your income is your most important financial asset. Protecting it should be a priority. According to the Council for Disability Awareness, more than 1 in 4 of today’s 20-year-olds will become disabled before they retire.
Don’t wait. Invest in disability insurance now to protect your ability to earn a living.
Final Thoughts for Federal Employee Disability Insurance
Federal benefits like FERS Disability Retirement help, but they may not be enough for long-term financial security. By getting disability insurance, you fill the gaps and make sure your income is safe.
David Quiett, an expert in federal benefits since 1991, advises federal employees to review their options carefully. Contact Federal Employee Insurance Benefits for Federal Employee Disability Insurance and schedule a consultation about disability insurance today.