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Federal Disability Retirement and MSPB: What is the "set-aside" rule?

Federal Disability Retirement and MSPB: What is the "set-aside" rule?

The “set-aside” rule most commonly becomes an issue in the following scenario. Federal employees applying for federal disability retirement through OPM are required to apply for Social Security disability at the same time they apply to OPM.

However, the Social Security Administration can take months or even years to issue a final ruling on entitlement to Social Security disability retirement. When OPM awards federal disability retirement to a postal worker or federal employee, and that federal employee or postal worker later learns that social security disability has been awarded, there is a strong likelihood that OPM has been overpaying the federal disability retirement annuity to the former federal employee or postal worker, and the “set-aside” rule comes into play.

The “set-aside” rule comes from an OPM regulation that individuals who are aware that they are receiving overpayments are obligated by the principles of equity and good conscience to set aside the amount overpaid pending recoupment by OPM. In other words, OPM is entitled to calculate certain offsets to your federal disability retirement annuity based on the amount of social security disability benefits you are receiving. OPM requires you to notify it that you are receiving social security benefits within sixty days of receipt of those benefits. The wise course of action is to “set-aside” the social security payments so that OPM may recover those payments after its bureaucracy recalculates yourfederal disability retirement annuity.

Make no mistake – OPM will find out that social security disability benefits are being paid. It can take them months, or even years, to discover this overpayment, and they can recover the overpayment from you. There are some provisions that allow you to challenge the amount of the overpayment, and some provisions that allow for waiver of the overpayment, but why go down that road?

If you receive social security disability benefits after receiving federal disability retirement benefits from OPM, promptly notify OPM of this (I recommend sending it Certified Mail, Return Receipt Requested), and then segregate the social security disability payments. Many attorneys, including this Firm, recommend placing these funds in a low risk, interest-bearing account that is separate from your actual checking and savings account, for hopefully obvious reasons, until the slow gears of the OPM bureaucracy recalculates your federal disability retirement annuity and the overpayment.

No post on this website is legal advice, is meant to be legal advice, and certainly does not serve as a substitute for legal advice. Information is power, and we are providing this information to give you, the federal employee, with some power. This information is not widely or easily accessible to Federal Employees.

The Law Office of Eric L. Pines represents Federal employees under FERS or CSRSin their applications for federal disability retirement to OPM. If an application for federal disability retirement is denied, the Firm represents Federal employees under both FERS and CSRS in their MSPB appeals of denials of federal disability retirement applications by OPM.

It is best to consult with a lawyer familiar with Merit Systems Protection Board (MSPB) and federal disability retirement appeals to discuss the facts and law of your particular case. If you have questions about federal disability retiremen tunder FERS or CSRS, or OPM‘s denial of your applications for federal disability retirement benefits under FERS or CSRS, contact an MSPB attorney or a Federal Disability Retirement Lawyer at the Law Office of Eric L. Pines to schedule a telephone consultation.