Earned Income and the OPM 80% Earnings Limit

We get to retirement in different ways.

Some workers step away because of age or financial security, and some workers have to step away from work because of disabilities.

If you work for a federal agency, you may be eligible to receive Federal Employees Retirement System (FERS) retirement disability benefits through the Office of Personnel Management (OPM).

OPM disability retirement benefits can last for the rest of your life or until an event occurs that makes you ineligible.

However, reinstatement of benefits that end early is possible. 

Events that can stop your benefits include medical recovery, reemployment, or restoration to earning capacity.

Here, we want to give you a brief walkthrough of what counts as earned income for OPM disability retirement limits. Our experienced federal disability retirement attorneys at Pines Federal can address concerns about earning money while on OPM disability retirement and put you in the best position to receive benefits. 

For assistance, please call (800) 801-0598 or fill out our online form today.

Post-Retirement Income Can Affect Your Benefits 

An OPM disability retiree under 60 cannot receive benefits if their post-retirement annual income equals at least 80% of the current salary for the position they held. However, not all types of income are equal when determining whether an employee has been restored to an earning capacity that will stop their benefits. 

Reporting Your Income

To establish whether former federal employees under 60 can continue to receive disability retirement payments, the OPM sends benefit recipients a Disability Earnings Survey (DES). This survey may come by mail or email. Those who already have active Services Online Accounts will receive emails.      

What Is Earned Income for OPM Disability Retirement?

The OPM looks at your earned income to determine whether you have hit the 80 percent earnings limit. 

Earned income includes:

• General employment wages,
• Income already earned but not yet received (deferred income),
• Your gross income if you are re-employed by your federal employer, and
• Your net earnings from self-employment. 

Earned income is any income reported on a W-2. Income reported on a 1099 could be considered earned income as well.

What Is Not Considered Earned Income for OPM Disability Retirement Limits? 

Some types of income do not exclude you from receiving federal disability retirement benefits. OPM eligibility calculations exclude the following forms of income.

1099 Income from Some Benefit Plans

If you receive a 1099 for the following types of income, that income does not count toward your earned income limits for disability retirement:

• Civil Service Retirement benefits,
• Veteran’s benefits,
• Annuity income,
• Military retired pay,
• Pensions, and 
• Social Security benefits. 

While Social Security benefits might not count for your earned income, those benefits can reduce the amount of your disability retirement payments. The federal government reduces disability retirement benefits by 100% of the social security benefits for individuals under 62 during the first year of their eligibility. 

Withdrawals from Certain Benefits or Savings Plans

The money you or your employer has already stashed away for future use may not affect your eligibility. But this exclusion depends on the type of plan you have. If you withdraw from a 401(k) or Thrift Savings Plan (TSP), they do not count toward your earned income.

Support Income from Family Law Cases

In a divorce or family law matter, you may receive a share of the marital estate, business proceeds, and various support payments. You can exclude income from your retirement disability earnings limit court-awarded child support or alimony.

Money from a Court Action

Support income from a family law case is not the only court-awarded money excluded from your earned income limit. If you receive a monetary award in a non-family lawsuit, the award likely won’t count toward your earned income.

Unemployment and Workers’ Compensation

Unemployment and workers’ compensation benefits replace part of your wages when you cannot work or lose your job because of a job-related health condition. These benefits are not part of your earned income when claiming OPM disability retirement. However, retirees generally cannot receive benefits from the U.S. Department of Labor’s Office of Workers’ Compensation Programs and OPM retirement disability payments simultaneously. 

Insurance Proceeds

Receipt of any of the following types of insurance benefits to cover a loss may not affect your entitlement to retirement disability payments:

• Rental,
• Auto,
• Homeowners,
• Medical,
• Malpractice,
• Liability, or
• Life.

The above list is not exhaustive. We can review your policies and circumstances to determine whether you should include the insurance benefits you receive in the 80% limit.

Jury Duty Pay

Many jurors in federal and state cases receive some money for their services. However, the federal employee’s payment for their time on a jury is excluded from their earned income.

Prizes, Winnings, and Awards

If you hit it big in Las Vegas or with a scratcher from your local station, the federal government might not consider your moment of luck part of your earned income. The government might also exclude any awards you receive. 

In general, the following do not count toward your 80% limit:

• Gambling winnings,
• Prizes, 
• Lottery winnings, and 
• Awards.

We can itemize your finances to ensure your reporting to the OPM is accurate and that you take advantage of all benefits to which you may be entitled.

Rents and Royalties

You might receive checks to pay you for using your intellectual property or leases of your real or personal property. Rent and royalty payments are only earned income if you receive them as part of your trade or business.

Gifts and Inheritance

If money has been bequeathed to you or passed down by a third party, you can likely exclude it from your earned income. 

OPM disability retirement limits do not include:

• Endowments,
• Inheritances,
• Trust funds,
• Estate assets, or
• Gifts.

If a family member, friend, or other benefactor plans to give you money, you can consult us about how the income might affect your disability retirement eligibility.

Scholarships and Fellowships

Other types of giving you receive might not count toward your OPM limit. Among these types of excluded giving are scholarships and fellowships.

Some Dividend and Interest Income

If you receive interest income or dividends from the following types of financial holdings, they are not part of your earned income:

• Savings accounts,
• Personal loans,
• Home mortgages, and 
• Stocks.

Interest and dividends can be significant sources of financial support that may not affect your ability to receive retirement disability benefits.

Certain Capital Gains

If you sell a capital asset, such as stock or a home, and you make more money in the sale than you spent to acquire the asset, that increase is a capital gain. Capital gains are part of your 80% disability retirement income, but not capital gains from selling personal property.  

Contact Us Today

At Pines Federal, we focus exclusively on federal employment law and can tackle any issues arising from your federal agency job. We are award-winning attorneys who know how to protect your interests and are ready to help.

Please call us at (800) 801-0598 or send an online message today to schedule a consultation.