And still they come. The questions from CSRS Offset employees who are confused about how their annuities will be calculated when they retire, and just how that “offset” in CSRS Offset will be applied – and when. Despite their small number, these employees generate the more questions than any other category of federal employees. And it’s no wonder. Their retirement coverage is a cart that preceded a horse. Let me explain.
The problem began with a change in the Social Security law, which required that new employees entering the government after December 31, 1983, be covered by Social Security and CSRS. That same requirement applied to CSRS employees who were rehired after a break in CSRS coverage of over one year. In a word, this was the “cart.” The “horse” finally arrived in 1987, when the FERS retirement system went on line.
After January 1, 1987, everyone employed by the government for the first time was covered by FERS. The CSRS Offset category was created to take care of the hybrid employees who had been sitting in limbo. Those who were hired before January 1, 1984 and had at least five years of creditable civilian service by January 1, 1987, were put in CSRS Offset unless they elected to transfer to FERS.
Special rules were established for former CSRS employees who were returning to work. If they had a break in service that exceeded one year and ended after 1983 and had five years of creditable civilian service as of January 1, 1987, they were given a choice of becoming CSRS Offset employees or transferring to FERS.
With one exception, the retirement benefits of CSRS Offset employees are calculated the same as those of regular CSRS employees. Here’s the standard formula:
- 1.5 % x your high-3 years of average salary x creditable service up to 5 year; plus
- 1.75% x your high-3 x years of service over 5 and up to 10; plus
- 2.0% x your high-3 x all years of service over 10
Here’s the exception. If you are retired and become eligible for a Social Security benefit at age 62 (or later if you retire after that date), your CSRS annuity will be reduced by the amount you will be receiving from Social Security based solely on that CSRS Offset service. In other words, you’ll get the same dollars, but from two different sources. To estimate what your offset will be, use this formula: Social Security’s estimate of your monthly benefit at age 62 x your years of FERS service divided by 40.
Because you are mandatorily covered by Social Security, you are exempt from the effects of the Government Pension Offset. On the other hand, although you are not exempt from the Windfall Elimination Provision, it will have no effect on your combination CSRS Offset annuity. Instead, the WEP will apply to any Social Security benefit you may have earned from Social Security-covered employment outside the federal service, but only if your total years of substantial earnings under Social Security – federal and non-federal – are fewer than 30. For every year fewer than 30, the first multiplier in the Social Security formula will be reduced by 5 percent. This pattern stops at 20 or fewer years, where it hits a maximum level.