Understanding What Earnings Factor into the Calculations
When you receive United States Office of Personnel (OPM) Disability benefits, you are permitted to make up to 80% of your previous government salary through alternate earnings, including through an unrelated job at a new place of employment. Keep in mind that in order to qualify for OPM Disability, you must incur a disabling injury or medical condition as a result of your government work.
Your supervisor will attempt to make reasonable accommodations for you to continue in your current position; if the disability prevents those from accommodations from being effective or possible, you become eligible for OPM Disability earnings.
Once you have successfully applied, OPM Disability entitles you to 60% of your annual income that you earned at your federal job for your first year. In subsequent years, you are entitled to 40%. Naturally, that number is not likely to keep up with your expenses, especially if you are also managing exorbitant medical bills stemming from your disabling injury or medical condition.
Luckily, those on OPM Disability are allowed to make up to 80% of their previous annual rate without losing their benefits. This is a significant advantage to OPM Disability, as you are able to effectively make up the difference – and more – of what you previously earned, assuming you can
However, a question we are often asked regarding OPM Disability is what contributes toward that 80% earnings threshold? When calculating to ensure you are below the limit, what types of earnings count, and what types do not? Many will naturally want to take full advantage of the generous 80% ceiling but want to be careful to not inadvertently exceed it. Doing so can imperil your continued receiving of OPM Disability benefits.
The answer to this question is not as always as simple as we may like. If you are only considering a salary from another job, calculations will likely be straightforward, but if you have multiple income streams, things can get trickier. Do you also include your private disability insurance policy payout? Today, I sold a house at a profit, and the client asked if the Capital Gains amount contributed to the 80% earnings limit.
The good news is that OPM offers fairly clear guidelines as to what qualifies as earnings and what does not. Items that do qualify should be carefully tabulated to ensure you do not breach the 80% threshold and lose access to OPM disability benefits.
The following types of earnings do contribute toward your 80% ceiling for OPM Disability eligibility:
- Wages from an employer. You are allowed to procure alternate employment while on OPM Disability, so long as you are in an unrelated field. This includes any overtime pay and vacation pay. Note that only the net amount you receive in your bank account, after taxes, counts toward your threshold.
- Deferred income.Any income you earned but did not yet receive in the calendar year for which you are tabulating earnings will count toward the 80% ceiling. This can include any December wages that pay out in January, for example, or income stemming from an invoice that has yet to be paid.
- Net profits from self-employment. If you choose to run your own business, only the net profits count toward your OPM Disability earnings threshold. Net profit is defined as the amount remaining after deducting business expenses and any exemptions or personal expenses permitted by the Internal Revenue Service (IRS). In other words, if your self-managed business brings in $10,000 in gross income, but you have $8,000 in business expenses and exemptions, only $2,000 counts toward your 80% ceiling.
Examples of things that do not contribute toward OPM Disability’s 80% threshold include:
- Gifts. If a friend or family member gives you a valuable item or cash gift, it is not considered income and is exempt from your OPM Disability tabulations.
- Pensions/annuities. Other pensions and annuities are exempt from earnings calculations.
- Social Security benefits. Similarly, any Social Security benefits to which you are entitled do not count toward the 80% ceiling.
- Insurance proceeds. This one is important: If you had a private disability insurance plan that pays out as a result of your injury, the proceeds are considered separate from what you receive from OPM Disability and do not count toward your 80% limit.
- Unemployment compensation. You may become at least temporarily unemployed as a result of your disability. Your state benefits do not contribute toward the OPM Disability earnings threshold.
- Rents/royalties under certain conditions. Rents and royalties will not count toward the earnings ceiling if they were not the result of any personal services you provided. Those resulting from personal services will factor into calculations involving profits from self-employment.
- Money earned before retirement. Any money
- Inheritances. If you are suddenly bequeathed lucrative assets or a large monetary amount, you may be worried your disability benefits will be impacted. Luckily, any funds or valuable items gained from an inheritance do not count toward your total.
- Capital gains. Going back to the house scenario above, the profits gained from the successful sale of the home will not count toward the 80% ceiling.
- Prizes/awards. If you win a contest whose prize includes a monetary award or item of significant value, the proceeds will not count against your earnings total.
- Fellowships/scholarships. Similarly, any monetary value derived from fellowships or scholarships do not count as earnings.
- Net business losses. If you run a business that fails to turn a profit, the losses will not be reflected in your threshold tabulations.
As you can see, there are quite a number of exemptions to what is considered “earnings” for purposes of maintaining OPM Disability benefits. Many clients are relieved to learn how much flexibility they have when financial planning and making these calculations.
Let Us Help Protect Your OPM Disability Benefits
No one wants to become disabled as a result of their government job, but should this unthinkable scenario occur, you owe it to yourself and your family to make the most of the benefits offered to you. OPM Disability confers generous benefits with the significant ability to earn well beyond your annuities. Understanding how to maximize your earnings limits will be essential to your future.
Our lawyers at Pines Federal are prepared to help you with every facet of your OPM Disability case. We can help determine your eligibility and assist with any complications in applying. Once you are receiving the OPM Disability benefits you are entitled to, our team can advise on what income qualifies as “earnings” for purposes of the 80% threshold and ensure you do not unintentionally imperil your payments. We are empathetic to the trials of those living with a disability and will do whatever we can to provide you with the effective legal services you need.
To learn more about how we can help you with OPM Disability, call (800) 801-0598 or contact us online.