Yes, I know. The numbers of CSRS employees are diminishing. But there are still enough of you in the workforce that you need to be informed (or reminded) of two provisions of law that can affect your retirement benefits. While they won’t reduce your civil service annuity, they may reduce – and sometimes eliminate – any Social Security benefit which you might otherwise be entitled to. I’m talking about the Windfall Elimination Provision and the Government Pension Offset.
If you have fewer than 30 years of substantial earnings under Social Security, the WEP will reduce – but not eliminate – any Social Security benefit to which you’d be entitled. That’s because a modified formula will be used to compute your Social Security benefit.
To meet the substantial earnings criterion, you must have earned a great deal more per year than the amount needed to earn Social Security credits. For example, in 2016 you’d only have to earn $5,040 to get a full year’s credit (four quarters) under Social Security. However, for those earnings to be considered substantial, you’d have to make $22,050!
To see how you might be affected by the WEP, let’s look at the formula used to compute Social Security benefits. If you became eligible for a Social Security benefit in 2016:
• Your first $856 of average indexed monthly earnings (AIME) would be multiplied by 90 percent;
• Everything from $857 to $5,156 of the AIME would be multiplied by 32 percent;
• AIME above $5,157 would be multiplied by15 percent.
When adjusted by your total years of Social Security covered employment, the product of these three multiplications would be your monthly pension from Social Security.
However, if you are a CSRS employee, the WEP will reduce that 90 percent factor by 5 percent for each year of substantial earnings fewer than 30. The reduction stops at 40 percent for those who have 20 or fewer years of substantial earnings
The GPO only affects those retirees who will receive an annuity from CSRS and have a spouse who will receive one from Social Security. In most cases, the Social Security benefit to which they would otherwise be entitled will be reduced or eliminated. If you are a CSRS employee – not CSRS Offset – the GPO will reduce your Social Security spousal benefit by $2 for every $3 you receive in your CSRS annuity.
If you were eligible for a monthly CSRS annuity of $1,800, two-thirds of that – $1,200 – would be used to offset your monthly Social Security spousal benefit. If that spousal benefit was $1,300, you’d thus only receive $100 a month from Social Security.
The larger your CSRS annuity, the more likely this offset will affect you and the more likely it will eliminate that Social Security benefit.
For example, if you had a monthly CSRS annuity of $2,400 and a monthly spousal benefit of $1,200, you wouldn’t get anything from Social Security. Two-thirds of $2,400 is $1,600.