Along with the COLA increase of 1.6 percent in Social Security benefits for January that was announced last week—the same COLA that will apply to federal retirement benefits—several other key numbers associated with that program are increasing.
The 6.2 percent Social Security payroll tax will apply on up to $137,700 of earnings. For FERS employees, that tax cuts off at that threshold and from there on they pay only the civil service retirement contribution (which is either 0.8, 3.1 or 4.4 percent, depending on when they were hired). Above the cutoff CSRS Offset employees continue to pay their same 7 percent total (6.2 into Social Security and 0.8 into the federal retirement fund) but all the money after that point goes into the federal retirement fund instead. Employees under “pure” CSRS don’t pay the Social Security tax.
For those drawing Social Security benefits, the earnings test applying to beneficiaries aged 62 through “full retirement age,” currently 66, will rise to $18,240. Those beneficiaries lose $1 in Social Security benefits for every $2 in earnings through employment or self-employment above the limit.
A separate earnings test applies only to earnings for months in the year an individual reaches full retirement age but prior to the individual attaining that age. One dollar in benefits will be withheld for every $3 in earnings above $48,600. There is no limit on earnings beginning the month an individual attains full retirement age.
For purposes of determining the benefit offset under the windfall elimination provision—which can reduce Social Security benefits of CSRS retirees who worked long enough in each system to qualify for a benefit from each—the annual “substantial earnings” minimum will be $25,575.
Social Security coverage is a basic element of the retirement package for FERS employees and for CSRS Offset employees. Regular CSRS employees may be eligible for certain Social Security benefits through Social Security-covered work before or after (and potentially during, for part-time outside work) their CSRS employment years, or through spouses covered by the system.
Read more on Social Security Benefits in Federal Retirement at ask.FEDweek.com