[Code of Federal Regulations]
[Title 5, Volume 2]
[Revised as of January 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 5CFR844.402]

[Page 341-342]
 
                    TITLE 5--ADMINISTRATIVE PERSONNEL
 
          CHAPTER I--OFFICE OF PERSONNEL MANAGEMENT (CONTINUED)
 
PART 844_FEDERAL EMPLOYEES' RETIREMENT SYSTEM_DISABILITY RETIREMENT
--Table of Contents
 
      Subpart D_Termination and Reinstatement of Disability Annuity
 
Sec. 844.402  Restoration of earning capacity.

    (a) Earning capacity determinations. If a disability annuitant is 
under age 60 on December 31 of any calendar year and his or her income 
from wages or self-employment or both during that calendar year equals 
at least 80 percent of the current rate of basic pay of the

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position occupied immediately before retirement, the annuitant's earning 
capacity is considered to be restored. The disability annuity will 
terminate on the June 30 after the end of the calendar year in which 
earning capacity is restored.
    (b) Current rate of basic pay for the position occupied immediately 
before retirement. (1) A disability annuitant's income for a calendar 
year is compared to the gross annual rate of basic pay in effect on 
December 31 of that year for the position occupied immediately before 
retirement. The income limitation for most disability annuitants is 
based on the rate for the grade and step that reflects the total amount 
of basic pay (both the grade and step and any additional basic pay) in 
effect on the date of separation from the agency for disability 
retirement. Additional basic pay is included subject to the premium pay 
restrictions of 5 U.S.C. 5545 (c)(1) and (c)(2).
    (2) In the case of an annuitant whose basic pay rate on the date 
determined under paragraph (b)(1) of this section did not match a 
specific grade and step in the pay schedule:
    (i) For those retiring from a Senior Executive Service position, a 
merit pay position, a position for which a special pay rate is 
authorized (except as provided in paragraph (b)(2)(ii) of this section), 
or any other position in which the rate of basic pay is not equal to a 
grade and step in a pay schedule, the grade and step will be established 
for this purpose at the lowest step in the pay schedule grade that is 
equal to or greater than the actual rate of basic pay payable.
    (ii) For those retiring with a retained rate of basic pay or from a 
position for which a special pay rate is in effect but whose rate of 
basic pay exceeds the highest rate payable in the pay schedule grade 
applicable to the position held, the grade is established for this 
purpose at the highest grade in the schedule that is closest to the 
grade of the position held and within which the amount of the retained 
pay falls. The step is established for this purpose at the lowest step 
in that grade that equals or exceeds the actual rate of pay payable.
    (3) For annuitants retiring from the United States Postal Service, 
only cost-of-living allowances subject to FERS deductions are included 
in determining the current rate of basic pay of the position held at 
retirement.
    (c) Income. (1) Earning capacity for the purposes of this section is 
demonstrated by an annuitant's ability to earn post-retirement income in 
exchange for personal services or a work product, or as a profit from 
one or more businesses wholly or partly owned by the disability 
annuitant and in the management of which the annuitant has an active 
role. Income for the purposes of this section is not necessarily the 
same as income for the purposes of the Internal Revenue Code.
    (2) Income earned from one source is not offset by losses from 
another source. Income earned as wages is not reduced by a net loss from 
self-employment. The net income from each self-employment endeavor is 
calculated separately, and the income earned as net earnings from one 
self-employment endeavor is not reduced by a net loss from another self-
employment endeavor. Thus, a net loss from one endeavor is considered to 
be a net income of zero, and the net incomes from each separate self-
employment endeavor are added together to determine the total amount of 
income from self-employment for a calendar year.
    (3) Income is counted in the calendar year in which it is earned, 
even though receipt may be deferred.
    (d) Requirement to report income. All disability annuitants who, on 
December 31 of any calendar year, are under age 60 must report to OPM 
their income from wages or self-employment or both for that calendar 
year. Each year as early as possible, OPM will send a form to annuitants 
to use in reporting their income from the previous calendar year. The 
form specifies the date by which OPM must receive the report. OPM will 
determine entitlement to continued annuity on the basis of the report. 
If an annuitant fails to submit the report, OPM may stop annuity 
payments until it receives the report.

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