Expert's View

If you are a CSRS employee who has, or will have, enough Social Security credits to be eligible for an earned Social Security benefit (through Social Security-covered earnings before, after or–on the side–during your federal career), you need to know what affect being covered by CSRS will have on that benefit.

If you are a CSRS employee, you don’t have Social Security taxes taken out of your pay. Because of that, you’ll be subject to the windfall elimination provision. The WEP reduces the Social Security benefit of anyone who receives an annuity from a retirement system where he didn’t pay Social Security taxes and has fewer than 30 years of substantial earnings under Social Security. It does that by changing the percentage used to calculate the first benefit amount in the Social Security formula.

In 2014 the formula calls for the first $803 of average indexed monthly earnings to be multiplied by 90 percent. That would produce a benefit of $722.70. However, for every year in which you have fewer than 30 years of substantial earnings, the multiplier is reduced by 5 percentage points. The maximum reduction is reached if you have 20 or fewer years of substantial earnings under Social Security. If that were the case, the multiplier would now be 40 percent, which would reduce the benefit to $321.20. The remaining multipliers remain the same: 32 percent of your average indexed earnings from $803 to $4,840, and 15 percent of all earnings above $4,840. Thus, the maximum reduction is about $400 a month. While your Social Security benefit can be reduced by the WEP, it can never be eliminated.

If you are married and your spouse has earned his or her own Social Security benefit, being a CSRS employee affects your right to a Social Security spousal benefit. Under the government pension offset, any Social Security spousal benefit to which you would be entitled would be reduced by $2 for every $3 you receive in your CSRS annuity. In most cases, the GPO eliminates the Social Security spousal benefit.

Up to this point, I’ve been focusing on pure CSRS employees and retirees. Now I want to focus on CSRS Offset employees and retirees, who have a different set of rules applied to them. For example, if you are covered by CSRS Offset, the GPO doesn’t apply to you. You may receive a spousal Social Security benefit. However, because you are contributing to Social Security and will be entitled to a Social Security benefit on your own work record, you’ll be treated like all other Social Security-covered married couples. You’ll be entitled to the larger of the two Social Security benefits, your own earned benefit or the spousal benefit, but not both.

On the other hand, you will be affected by the WEP unless you were first hired by the federal government after December 31, 1983. However, if you were first hired before that date, left the government, and later returned and were covered by CSRS Offset, you will be subject to the WEP. If that’s the case, you will have substantial earnings for all those Offset years (plus earnings outside the federal government) that may reduce or eliminate the impact of the WEP.

Note: Substantial earnings are greater than those required to earn Social Security credits. While you would only have to earn $4,710 in 2014 to get four Social Security credits, you’d have to earn $21,391 for it to be considered substantial.