Reality Trumps Eligibility in Disability Benefits Appeal

Workers aren't allowed to double-dip between Federal Employees Retirement System (FERS) disability retirement annuities and Social Security Administration (SSA) disability benefits. The Office of Personnel Management (OPM) must reduce a FERS disability annuity for any month in which the recipient is also "entitled" to SSA disability benefits.

Until this week, however, there was a grey area of statutory interpretation: What happens when an employee is eligible for Social Security benefits, but doesn't receive those benefits? Will he receive his full FERS annuity?

Kelly Stephenson received a FERS disability retirement annuity, properly adjusted to account for the SSA benefits that he concurrently received. The Social Security Act allows a person receiving SSA disability benefits to test his or her ability to work during a nine month trial period without losing his or her benefits. Stephenson completed a nine-month trial work period in which he demonstrated his ability to work, so SSA notified him that his disability had ended, and that he was “not entitled to Social Security disability payments beginning September 2009.”

Because Stephenson stopped receiving SSA disability benefits, he requested that OPM terminate the offset in his FERS annuity. OPM denied the request, explaining that “The law requires that the reduction be based on eligibility for Social Security benefits, not the actual receipt of Social Security benefits.”

The Federal Circuit Court of Appeals found that conclusion just a little bit ridiculous.

The appellate court noted that there was no dispute that — from July 2005 through August 2009 — Stephenson was entitled to SSA disability benefits under section 223 of the Social Security Act. The parties also agree that Stephenson was not entitled to SSA disability benefits after the completion of his 36-month period of eligibility, but he could have received SSA disability benefits during his “extended period of eligibility,” for any month in which he was unable to engage in “substantial gainful activity.”

The only dispute is whether Stephenson was “entitled” to SSA disability benefits during his extended period of eligibility for any month in which he did not receive SSA disability benefits because he was working.

According to OPM, Stephenson continued to be “entitled” to SSA benefits even for those months in which he could not receive them. Thus, an offset in his FERS annuity for his SSA benefits was appropriate. Stephenson, on the other hand, argued that he wasn’t “entitled” to SSA disability benefits during the period in question under the plain language of the Social Security Act. Therefore, no offset should have been made for benefits he did not receive. The appellate court agreed with Stephenson.

This is big news for federal employees who fall within the statutorily undefined territory between SSA and FERS benefits. Barring further appeal, the OPM can’t offset FERS annuities for SSA benefits that an employee did not receive.

Related Resources:

• Stephenson v. OPM (FindLaw’s CaseLaw)
• Affirmed: Postal Worker Fired for Using Gift Card (FindLaw’s Federal Circuit Blog)
• Will Your Post-PIP Dismissal Survive Judicial Review? (FindLaw’s Federal Circuit Blog)