Supplemental Disability for Federal Employee

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I have read Link and Link but need some more guidance. I removed my original post in the thread at OP request and started my own. Plus I know there are quite a few federal employees on this forum so it could help them as well.

I'm actually looking to get a new supplemental policy for myself and would like some opinions. Some background: 24yr GS-12 federal employee 68809/yr. FERS disability coverage is 60% first year and 40% after. I currently live with my brother and just one of our income is enough to support the whole household. However even on my own I can live off 40% after some cuts (retirement, newish car, entertainment) although I would like the extra for quality of life plus actually put something towards retirement. I currently have AICPA plan (4000 month) which I know is not good and am looking to maybe replace it with something else.

I found two options:

First is this group plan for federal employees called FedAdvantage. Information can be found in the following links:

I'm considering the Premier Plan with 70% income replacement to 65 after 90 day waiting period. It has FERS and SSDI offsetting rules. Inflation protection is included under premier. Plan is also guaranteed issue (although I have no health issues).

Disability definition is:

You are unable to earn:

During the Elimination Period and the next 24 months of Sickness or accidental injury, morethan 80% of Your Predisability Earnings at Your Own Occupation for any employer in Your Local Economy; and

after such period, more than 60% of Your Predisability Earnings from any employer in Your Local Economy at any gainful occupation for which You are reasonably qualified taking into account Your training, education and experience.

Mental coverage limited to 24 months except for schizophrenia, dementia, and organic brain disease are not limited.

Residual Coverage. From what I understand 77% minus earned income for first 24 months and 77% minus 50% of earned income after(100% max).

Cost is based on income(I plan to retire at 57 or earlier). Under 35: .0038 35-45: .0057 45-55: .0106 55+: .129
So for me initial cost is $22 a month and as high as $74 (assuming they don't raise rates which I know they can) with an average of $40 over 32 year planned career.

The other option is two separate Guardian Provider Plus policies I got quoted for. It is to age 65 with residual disability and COLA.
It is a $1250/month (Approx 20%) 90 day wait at $34/month and a $900/month (Approx 15%) 365 day wait at $23/month for total of $57 month.
Plan is guaranteed and non cancellable unlike the previous and true own occupation with no offset rules or limit on mental disorders.
I don't think the residual disability is as good. First 12 months it's replacement of lost income but after benefit is proportionate to loss of income. So say if I'm 50% disabled then first 12 months I get the full 35%(amount I'm insured) but after I get only 17.5% from my understanding. So I will have 85% income first year and 67.5 after.

My understanding of the fedAdvantage plan is that I will have 77% of income first 2 years and and 100% after.

Guardian is more portable (don't plan to leave federal job though) but fedAdvantage will keep up to income increases (at increase costs).

Help me decide please.

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Snezz said:   However even on my own I can live off 40% after some cutsRemember, this is disability. Meaning to collect you will be disabled. What you may be able to live off as of now, may not remain realistic when accomodating your new disability.

You mentioned having coverage through the AICPA. Can you confirm that you are actually doing accounting work? Thanks.

Glitch, I also realize that 40% may not be enough to accommodate a disability and that is another reason why I want to supplement.

As far as accounting work goes sorta. I'm a government auditor but I audit controls and procedures. I have CPA license but rarely do anything financial related. CPA not required for job it's just there to fluff your resume when applying for promotions.

The AICPA plan although not very good now will improve somewhat in 2013. They stated in their newsletter that they will be adding partial disability coverage for those who lose 20% or more in earnings. Depending on the additional cost and effect on refunds it might be worthwhile option.

At a very quick glance, I would have two major concerns with the FedAdvantage plan.
1)After 2 years, it has an "any gainful occ" definition of disability.
2)The entire group can be dropped. If the entire group is getting dropped, you lose portability.

I truly believe that people should buy disability coverage because they may become disabled. If one becomes disabled, they need to be able to collect a benefit. This is why I would go with Guardian out of these choices if I was in your shoes. If you don't believe that a disability is possible, go with none or the cheapest.

another option is

Thanks for the link emkute I didn't know about them. However I don't think they are a good option. It's more expensive ($40) for less coverage (65%) plus it's only total disability coverage with "any gainful occ" after 2 years. The way I read it is if they think I can work at a minimum wage job then I'm no longer disabled. I do have a question for you BrodyInsurance is when they use the "any gainful occ" definition do they mean full-time or would part-time disqualify you. For example if they determine you can work 4 hours/day as a WalMart greeter would you be considered no longer disabled.

The one thing I liked about the FedAdvantage Plan was they put a percentage income to the disability definition. So after the 2 years the "any gainful occ" is meaningless to me. It's only the 60%. I will be making at least 75k in 3 years so 60% is 45k. Even working full-time with no disability there is no way I can make more than 45k in any field outside of accounting for which I'm qualified. With my level of experience(3 years) its hard to find an accounting job that pays that much in the private sector (Govt Employees are overpaid). With a disability I would be even more limited.

Your second point that the group can be dropped is a concern though. The plan is guaranteed issue with no medical underwriting(24 month exclusion on pre-existing). Who know what can happen to them in the future. If the same coverage was offered by the AICPA it would be different. I wouldn't be as worried about them dropping the entire group.

I compare this often to life insurance because life insurance is black and white, dead or alive.
Disability insurance is gray. The idea behind a good policy is to get rid of as much gray as possible.

At a quick read, "any gainful employment" would not have to be full time. It's tough to say whether your ability to be a WalMart greeter would qualify or not. I wouldn't want to have to be in a position of fighting what qualifies and what doesn't.

Let's assume that you make $75K. Let's assume you go with the 60% plan. For the first year, this won't pay anything. Starting in the second year, it could pay you $15K. (It pays 60%, less what you get from your work DI plan, SS, work, etc.)

There are waiters who earn $45K, so don't assume that you can't make $45K. It does not matter if you can get hired or not. It only matters if there is a job that you are qualified to do and you are capable of doing it. If your income is $75K and you are capable of making $45K, you are not disabled with that plan.

Ok, let's assume that you become disabled. If your work plan pays you $30K and nothing else pays you a dime and you can't do anything else, you will collect $15K. If social security or workman's comp or something else pays you on top of your group plan, this plan will take a direct hit. In other words, if SS pays you $15K, you won't collect anything.

If you are capable of making $45K, you collect nothing. If you can work some while you are disabled and can earn $10,000, you will only collect $5K.

What happens if you can work a little bit and don't? I'm not sure.

Here's where someone can really get screwed with one of these types of plans. Their work plan has some sort of own occupation definition, but it is modified own occupation. (They are disabled based upon their own occupation provided that they don't choose to do something else.) They supplement it with the plan that you are describing. The person is capable of doing another job and the other job will pay 60% of their pre-disability wages. The Fed Advantage plan won't pay because they are capable of making 60%. Their work plan won't pay because they are doing another job.

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