Yes, You Can Work — With Limits
FERS disability retirement permits work, but work and earnings can affect continued entitlement. The earnings test and medical recovery are separate rules; remaining below the income threshold does not prevent a medical recovery finding.
The 80% Earnings Test
Under 5 CFR 844.402, if you are under age 60 on December 31 and your calendar-year wages and self-employment income equal at least 80% of the current basic-pay rate for your former position, OPM considers earning capacity restored. Exactly 80% triggers the rule; it is not a safe maximum.
The comparison uses the annual basic-pay rate in effect on December 31 for the applicable grade and step at retirement, with qualifying additional basic pay. It does not assume promotions or step increases you might have received had you remained employed. Ask OPM to confirm unusual pay systems.
When Payments End
The annuity terminates on June 30 following the earnings year, rather than at that year's end. For example, reaching the threshold in 2026 while under 60 on December 31, 2026 leads to termination on June 30, 2027. Federal reemployment can separately affect entitlement and payment.
What Counts
Count gross wages, bonuses, overtime, and relevant net profit from working in or actively managing a business. Income from a work product can count even when it is sold repeatedly. OPM's income rules are not necessarily identical to tax rules.
Retirement benefits, Social Security, VA benefits, ordinary interest and dividends, and similar nonwork income generally are excluded. Rents or royalties received in the course of a trade or business can count. Do not treat a business label or tax form as an automatic exclusion.
Calendar Years Are Not the First 12 Months
The earnings test uses calendar years and excludes income earned before the effective retirement date. Do not confuse this with the first 12 months used in the disability benefit formula, or assume a blanket 12-month earnings exemption. Track post-retirement work income from the start and follow OPM's reporting instructions.
Report and Keep Records
Respond to OPM's Disability Earnings Report even when earnings are zero. For the 2025 reporting cycle, OPM required most annuitants to use Retirement Services Online; follow the instructions for your reporting year. Earnings are counted when earned, even if payment is deferred. A loss in one business cannot reduce wages or profit from a different business for this test.
Reinstatement Can Be Possible
Termination for restored earning capacity is not necessarily permanent. Under 5 CFR 844.404, OPM can reinstate an eligible former annuitant who again earns below 80%, has not medically recovered, and is not reemployed in a FERS-covered position. Other restrictions apply. Reinstatement is not automatic; when approved under the earnings provision, it is payable from January 1 following the year earning capacity was lost.
SSDI Has Its Own Work Rules
If you also receive SSDI, report work to SSA and follow its separate work-incentive and earnings rules. The FERS percentage does not establish a safe SSDI earnings limit. Notify OPM of changes in SSDI entitlement so it can review any applicable offset.
Keep reading
- What Counts as “Earned Income” Under the 80% Rule
- How the 80% Earnings Ceiling Is Calculated
- The OPM Annual Earnings Report
See current TFDR services for available educational support.