Disability Pension Repayment due to Offset from Social Security

Situation:

An individual received a disability pension from their employer (federal government, FERS Disability Retirement).

Under FERS disability retirement rules, if approved for SSDI, the individual must repay 100% of the first year's disability benefits to FERS, and 60% for subsequent years.

The individual was approved for SSDI two years after filing, resulting in a lump sum payment.

FERS contacted the individual to return the money received from SSDI, which the individual is repaying.

However, the repayment is considered as income on the SSA 1099 form.

How is this repayment treated? It seems like someone is getting taxed for money which they will never actually own.