Recently articles have looked at the importance of getting credit for all your periods of federal employment, attending a pre-retirement seminar, making sure that you get credit for active duty service in the armed forces, and being able to carry your Federal Employee’s Health Benefits (FEHB) program coverage into retirement.
Now let’s turn our attention to two provisions of law that could have an impact on your retirement: the windfall elimination provision and the government pension offset. Since both of these only apply to those covered by CSRS (or who have a CSRS component in their FERS annuity), this is only of academic interest to pure FERS employees and retirees.
The Windfall Elimination Provision
The WEP reduces the Social Security benefit of anyone who is receiving an annuity from a retirement system that didn’t include Social Security taxes and has fewer than 30 years of “substantial” earnings under Social Security. Note: To get credit for a year’s worth of Social Security credits in 2018, you’d only have to earn $5,240; however, for those earnings to be considered “substantial,” you’d have to earn $23,850.
Because the Social Security Administration has no idea that you are covered by CSRS, any estimates they give you about your future benefits will usually be too high. You’ll only get the right number when SSA’s benefits roll is matched with OPM’s annuity roll. If you retire before age 62, the WEP will be applied when you reach that age and begin eligibility for Social Security. If you aren’t retired before age 62, it will be applied when you retire. Just be aware. The fewer years of coverage you have under Social Security, the greater the reduction will be.
More on the Windfall Elimination Provision at ask.FEDweek.com
The Government Pension Offset
There’s another surprise coming if you are covered by CSRS: the GPO. It reduces any spousal Social Security benefit you may be entitled to by $2 for every $3 you receive in your CSRS annuity. Depending on the relative size of your CSRS and Social Security benefits, this can eliminate the latter altogether. That’s especially true now because anyone not yet retired under CSRS has, virtually by definition, a large number of years under that system and thus is entitled to an annuity reflecting a high percentage of their final high-3 salary rate.
More on the Government Pension Offset at ask.FEDweek.com
The WEP and the GPO can hit you in your pocketbook or purse. That’s why I once again advise you to sign up for a pre-retirement seminar, paying for it out of your own pocket if you have to. What you learn there can help you avoid pitfalls that would otherwise ruin your retirement.