Stephenson v. OPM: A Major Victory for the Federal Worker

Stephenson v. OPM, Case Number 2012-3074, is a U.S. Court of the Appeals for the Federal Circuit case, decided on January 18, 2013.  The undersigned writer had the privilege of appealing a decision issued by the U.S. Office of Personnel Management and the Merit Systems Protection Board, including submission of an extensive legal brief, and engaging in oral argument before a 3-Judge panel on December 5, 2012.  The questioning by the Judges were incisive, intelligent, and intense; the decision rendered in this opinion is not only the right one, but more importantly, will favorably impact thousands, if not tens of thousands, of Federal disability retirement annuitants, now and into the future.

Some background:  Federal Disability Retirement, whether under FERS or CSRS, is based upon a progressive paradigm, precisely because it recognizes that a disabled individual should not be penalized for his or her disability.  Thus, a Federal Disability Retirement annuitant is allowed to go out and earn income in another field or vocation, and make up to 80% of his or her former Federal salary, while still receiving the 40% disability retirement annuity.  This is a recognition that a disabled person is not necessarily totally disabled, but merely unable to perform one or more of the essential elements of one’s former job.

Under FERS, the Federal or Postal worker who files for Federal Disability Retirement benefits must file for SSDI (which stands for Social Security Disability Insurance – a Federal program which provides aid to those who are unable to achieve gainful employment due to a permanent disabling condition).  If the person qualifies for Social Security Disability benefits (SSDI), then there is an “offset” between FERS and SSDI (100% offset in the first year of concurrent receipt; 60% offset every year thereafter).  Thus, there is essentially a de facto “coordination of benefits” between FERS Disability Retirement annuity and SSDI, within the context of recognizing that a person who is receiving SSDI is totally disabled and unable to engage in “substantial gainful activity” (i.e., a full-time job in the private sector).  However, if the disabled person were to recover sufficiently in order to begin earning significant income which constitutes substantial gainful activity, such an individual will ultimately lose his or her SSDI benefits.

In the fact-scenario as described above – of the person who was receiving FERS Disability Retirement annuity and SSDI concurrently, but loses the SSDI because of earning income above the allowable SSDI amount – once the FERS Disability Retirement annuitant loses the SSDI, shouldn’t the offset which the U.S. Office of Personnel Management imposes under the law be made to disappear, inasmuch as there is no longer an SSDI amount to “offset”?

This is in fact the crux of the case which was argued in Stephenson v. OPM.  For years, if not decades, OPM has been refusing to recalculate upwards (to the obvious financial detriment of the FERS Disability Retirement annuitant) the former Federal or Postal Worker’s Federal Disability Retirement annuity, upon a loss of SSDI benefits.  OPM’s argument for such refusal has essentially been the following:  We (OPM) interpret the Social Security Administration’s statute governing such issues as stating that a person who loses his or her SSDI benefits for engaging in substantial gainful activity, as still being “entitled” to such benefits; and since a person is entitled, we therefore can continue to offset such an entitlement.  As the Court in Stephenson v. OPM  pointed out, OPM  “argues that decisions of this court and the Board make it clear that an individual can be ‘entitled’ to SSA disability benefits without actually receiving payment during the period in question.”  One may want to run through the corridors of life and scream out indelicate epithets in reading such reasoning, but indeed, that is precisely what OPM was arguing throughout all of these years.  To paraphrase what King Lear said to his daughter, Cordelia, when she refused to shower him with superfluous accolades of love and affection to a powerful man who had passed his pinnacle of intellectual prowess and was about to befall the evil of human nature – of his own family:   “Nothing begets nothing.”

Beyond the rational and sound basis of the opinion of the 3-Judge panel in Stephenson v. OPM (which obviously speaks well of the judicial system in general, and of the U.S. Court of Appeals for the Federal Circuit in particular), this case is a return to common-sense statutory interpretation.  For, if one merely reflectively pauses for a moment, how can you possibly offset something with nothing?  How can a person be “entitled” to something, yet not receive it?  Indeed, OPM argued such a position despite the fact that (as the U.S. Court of Appeals points out), “SSA explicitly told Mr. Stephenson in its August 7, 2009 letter that he was ‘not entitled’ to SSA disability benefits…”  Thus, despite losing one’s SSDI benefits; despite no longer actually receiving SSDI benefits; and despite being explicitly told by the Social Security Administration that you have lost your ‘entitlement’ to such benefits, the U.S. Office of Personnel Management continued to maintain a position of rational absurdity – that your non-receipt of SSDI benefits would continue to be offset against your FERS Disability Retirement annuity.

Further, the absurd state of OPM’s position would obviously be a disincentive to put much effort into filing for SSDI benefits.  For, if the FERS Disability Retirement annuitant can make up to 80% of what one’s former position currently pays, wouldn’t the FERS annuitant want to keep that option open, instead of becoming eligible for SSDI, losing it, then not having the FERS annuity recalculated?

This is a major win for those former Federal and Postal workers who are, were, or will be, receiving concurrent SSDI benefits and FERS Disability Retirement benefits, who have lost or may lose the SSDI benefits and therefore will need to have their FERS Disability Retirement annuity “restored” and recalculated to its original amount.   The case of Stephenson v. OPM shows that common sense can prevail; that the System of Justice is paramount in this country; and for the former Federal or Postal Worker who wants to continue to remain productive in the work-world, that the Federal government will not penalize the effort to engage in substantial gainful activity.  This is a precedent-setting case, and one which will reverberate to the financial advantage of the Federal Worker for years to come.

© 2016 Robert McGill. All rights reserved. This article may not be reproduced without express written consent from Robert McGill.

About the Author

Attorney Robert R. McGill specializes in federal disability retirement cases helping Federal and Postal workers secure their disability retirement benefits under both FERS and CSRS. For more information about his legal services, visit his OPM Disability Retirement blog.

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