Federal managers and employees enrolled in the Civil Service Retirement System need to be familiar with two important Social Security rules: The Windfall Elimination Provision and the Government Pension Offset.
First, a little background: Federal employees enrolled in CSRS do not pay Social Security taxes, and therefore do not qualify for Social Security benefits. But often, someone will work for the government for say, 30 years, retire, and then get a job in the private sector for say, 10 years. Those 10 years in the private sector qualify the former fed for Social Security benefits. Because of the way Social Security payments are calculated, former feds in this situation used to qualify for Social Security checks that were comparable to the benefits received by people who had been contributing to the Social Security fund their entire working lives.
In 1983, Congress passed the Windfall Elimination Provision to reduce Social Security benefits for CSRS retirees who also worked in jobs that qualified them for Social Security benefits. A modified formula is used to calculate CSRS retirees' Social Security benefits. The Social Security Administration has published on its Web site a document explaining how the Windfall Elimination Provision works in detail at www.ssa.gov/pubs/10045.html
The Government Pension Offset, which Congress passed in 1977, affects CSRS retirees' Social Security spousal benefits. Spousal benefits are intended for people who are financially dependent on their husbands or wives. But the way Social Security law was previously written, people who received CSRS pensions also qualified for full spousal benefits.
The offset reduces the amount of Social Security spousal benefits CSRS retirees receive by two-thirds of the amount of their government pension. For example, if a CSRS retiree receives a monthly pension of $600, their Social Security spousal benefits are reduced by $400 a month. If the retiree would otherwise be eligible for a $500 Social Security spousal benefit, the retiree would instead receive $100 a month.
The Social Security Administration has also published a document explaining the Government Pension Offset in more detail at www.ssa.gov/pubs/10007.html.
The National Association of Retired Federal Employees (NARFE) has been trying for years to get Congress to repeal or reduce the Windfall Elimination Provision and the Government Pension Offset. The association contends that the two measures are particularly harmful to lower-income retirees.
The association has found sympathetic lawmakers.
Rep. Barney Frank, D-Mass., has introduced a bill (H.R. 860) that would get rid of the Windfall Elimination Provision for retirees whose pensions and Social Security benefits total less than $2,000 a month. The bill would phase in the provision for higher-income retirees.
Rep. Max Sandlin, D-Texas, has introduced a bill (H.R. 742) that would completely eliminate the Windfall Elimination Provision.
The association has not found a Senate sponsor for a bill affecting the Windfall Elimination Provision. But Sen. Barbara Mikulski, D-Md., introduced a bill in the last congressional session to relieve lower income spouses and survivors from the Government Pension Offset. Rep. William Jefferson, D-La., sponsored a similar bill in the House.
Both lawmakers have pledged to reintroduce those bills this session, said Bob Normandie, a legislative researcher for NARFE.
But one House staffer said the chances that Congress would pass bills eliminating or modifying either the Windfall Elimination Provision or the Government Pension Offset are "slim to none." No budget offsets have been proposed to make up for the extra money Uncle Sam would dish out if the measures were changed, the staffer said.
Federal employees enrolled in the Federal Employees Retirement System are not affected by the provisions because they pay Social Security taxes.