Do federal employees on retirement disability pay income tax?

Yes, However, you are tax free only on a portion of it. The amount you (personally not jointly with the government) put in, is deducted on a percentage basis. You need to contact IRS (or go to there web site) they have a computation for this. Keep good tax records you can do the deduction (of the base pay) for a few years until you have "used" up you portion then you pay tax on full amount of disability annuity.