Social Security: Reductions for CSRS Retirees Planning to Retire

It is essential for employees to get credit for all their periods of employment and active duty in order to be able to enjoy their federal employee benefits when they retire.

There are two provisions of law that have a significant impact on your retirement. They are the windfall elimination provision (WEP) and the government pension offset (GPO). These provisions apply to members who are covered by the Civil Service Retirement System (or those with a CSRS component in their FERS annuity).

The Windfall Elimination Provision

This provision is of interest to current FERS employees and retirees.

The Windfall Elimination Provision moderates Social Security benefits for those members who are already receiving an annuity from a retirement system not including Social Security taxes and has less than 30 years of substantial earnings under Social Security.

For one to qualify for a year’s worth of Social Security credits this year, they are supposed to earn $5,240. Those earnings are considered substantial if you earn $23,850.

Since the Social Security Administration does not know that you are covered by CSRS, the estimates given to you regarding your future benefits are generally on the higher side. Upon retirement, you will only receive the funds after the SSA benefits roll is matched with OPM’s annuity roll.

For those who retire before they turn 62, the WEP is only after they reach 62. If you are already retired, eligibility for Social Security starts as soon as hit 62. This does not apply to those who are not yet retired by 62; the WEP will be applied after they retire

Keep in mind that the reduction is much greater if you have fewer years of coverage under Social Security.

The Government Pension Offset

Those who are covered by CSRS should expect yet another surprise that is designed to reduce any spousal Social Security benefit. The Government Pension Offset reduces the spousal benefits by $2 for every $3 you receive in your CSRS annuity.

The Social Security benefits can be eliminated completely depending on the relative size of your CSRS. This is especially likely to happen now because those members under CSRS who are not yet retired have, virtually by definition, quite a large number of years under CSRS. They are, therefore, entitled to an annuity reflecting a high percentage of their high-3 salary rate.

In many cases, The Windfall Elimination Provision and the Government Pension Offset can hit you hard and affect the Social Security benefits that you get after you retire. It’s advisable that you enroll for a pre-retirement seminar and learn all that you need to before your time comes.