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Opportunities Working with Federal Employees

Ask a Federal Employee about their income protection plan and you’ll likely hear, “I have disability insurance through my work – I am a Federal Employee and, you know, we have great benefits.”

Many would think the conversation ends there, but the reality is that most Federal Employees don’t have any idea what their long-term disability plan would even pay – and it’s less than you think.

Don’t get me wrong, it’s great that the Federal Government has a plan in place at no cost to the staff – but that workforce is carrying around a false sense of security when it comes to their Disability Income Policy.

After reviewing the facts about what benefits are actually paid out, there’s a potentially big problem for most of Federal Employees if they have any kind of a long-term illness or injury.

Federal Employees are covered under a plan called the Federal Employees Retirement System (FERS). It pays the employee 60% of their taxable income for the first 12 months, following a 30-day wait. After that, it drops to 40% – AND benefits can be offset up to an additional 60% of what is received by Social Security.

A 43-year old client of mine, an Investigator with the Department of Labor, has been with the DOL for 8-years and would likely remain until she retires. We sat down together and did the math on what her benefits would be. Her current taxable monthly income is $7,850 – if she were to get sick or hurt, for a period over 1-year her FERS Disability Plan would pay her $3,140 of taxable income until she is 62-years old. After a modest combined tax rate of 25%, her net monthly income would be $2,355. Her exact words were, “I had no idea. I could barely make my mortgage payment with that.” Then reminded her that if she qualified for Social Security, her FERS benefits could be reduced by up to an additional 60%. That’s the shocking reality.

There are currently over 2.6 million civilian Federal Employees with Disability Income Protection under the FERS plan – over 84% who do not carry any supplemental coverage.

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