It seems that everywhere a federal employee turns, he hears that one or more of his benefits is going to be “offset.” In the federal government, there are five major offsets that alone or in combination affect retirees: the Government Pension Offset, the Windfall Elimination Provision, CSRS Offset, “Catch 62” and something I call “Social Security vs. Social Security.”

The Government Pension Offset (GPO) reduces the Social Security spousal benefit of a retiree who is receiving an annuity from an employment system in which he didn’t pay Social Security taxes. In the federal government, that’s the Civil Service Retirement System (CSRS). The offset is $2 for every $3 of CSRS annuity. In most cases that wipes out the Social Security spousal benefit.

Of course, there are some exceptions to the GPO. It doesn’t apply to those who retire under CSRS Offset. That’s because they are covered by CSRS and Social Security. Also exempt are pure FERS employees and those who transferred to FERS, as long as the latter have served at least five years under that system before they retire.

The Windfall Elimination Provision (WEP) reduces the Social Security benefit of anyone who receives an annuity from an employment system in which he didn’t pay Social Security taxes. Once again, that’s CSRS. Although this offset is not as severe as the GPO, it can significantly reduce the amount of a retiree’s Social Security check. Fortunately, the reduction is on a sliding scale. Anyone covered by CSRS or CSRS Offset who has at least 30 years of significant earnings under Social Security is exempt from the WEP, as is anyone who is covered by FERS.

Here’s a simple illustration of the effect of the WEP of a Social Security benefit. Anyone who becomes eligible for a full Social Security benefit in 2004 would have the first $612 of his average indexed monthly earnings (AIME) multiplied by 90 percent. The result would be $550.80. If he had 20 or fewer years, it would be multiplied by 40 percent and produce $244.80; thus the reduction would be $306 a month. The remaining two multipliers in the Social Security benefit formula remain unchanged.

CSRS Offset employees are unique among federal employees because they will have their CSRS annuity offset by the amount of the Social Security benefit they earned while covered by CSRS Offset. CSRS Offset employees who retire before age 62 receive a pure CSRS annuity. When they reach age 62, that annuity is reduced by an amount equivalent to what they will be receiving from Social Security based on their CSRS Offset service. Those retiring after age 62 will have the offset calculation done when they retire.

Then there’s “Catch 62,” which affects those CSRS employees who served in the military after December 31, 1956 and were first employed by the federal government before October 1, 1982. If that military service is included in their civilian annuity computation and they become eligible for Social Security at age 62, those years will be eliminated and their annuity recalculated downward unless they have made a deposit to the Civil Service Disability and Retirement Fund.

However, if a pre-October 1, 1982 CSRS employee doesn’t expect to be eligible for Social Security at age 62, he can safely skip making a deposit. That’s because the Office of Personnel Management checks a retiree’s eligibility for Social Security only once – at age 62 (or later if that he after age 62). On the other hand, CSRS employees who were first hired after October 1, 1982 and FERS employees must make a deposit for that service or those years won’t be credited in their annuity calculation.

Bringing up the rear is “Social Security vs. Social Security.” That describes a situation where both marriage partners are eligible for Social Security benefits based on their own work record. Since the law prohibits a retiree from receiving both an earned and a spousal benefit, the smaller benefit will be offset against the larger one. That way each retiree will end up receiving only one Social Security benefit – the higher of the two. In most cases that will be the earned benefit.