Understanding Social Security

By Tammy Flanagan

April 10, 2009

It's important for all of us to know how Social Security works, but not too many people find it fascinating enough to spend a Saturday afternoon studying it. Luckily for you, I'm one of those people. Let me see if I can capture your attention with some questions and answers on the subject. And if you have a few spare minutes, check out the Social Security Web site. You might be surprised that you find something worth reading. If nothing else, you can click on a video link on the home page and see what Patty Duke looks like today.

For now, though, let's get to the Q&A.

If I retire under the Civil Service Retirement System and my wife retires from her nongovernment job with Social Security, do I get anything from her Social Security if she dies first? Or do I get zero because I have my CSRS pension?

You will be affected by the government pension offset, under which any spousal benefits you are entitled to from your wife's Social Security record will be reduced by two-thirds of your CSRS retirement. Here's more detailed information on this subject: Offsetting Penalty (June 9, 2006).

I understand that if you are divorced, your ex-spouse may qualify for benefits on your Social Security record if you are 62 or older. Under CSRS, can I collect Social Security at 62 based on my ex-spouse's record? We were married for 18 years and I will not be eligible for benefits on my own Social Security record.

You are entitled to a benefit based on your former spouse's Social Security record, but as described above, it will be offset by two-thirds of your CSRS retirement. If you are still employed, you are subject to an earnings limit until you reach the full Social Security retirement age. The only time you would be able to receive spousal benefits and not be affected by the government pension offset is if you continue to work past your full Social Security retirement age.

Will I be entitled to the new one-time payment of $250 from Social Security under the 2009 American Recovery and Reinvestment Act?

Everyone who gets Supplemental Security Income or Social Security benefits is entitled to the payment. If you fall into that category, you should receive it by late May. You don't have to take any action. Social Security is still working out the details on exactly how the nearly 55 million payments will be issued.

CSRS retirees who are not entitled to Social Security benefits will be eligible for a $250 refundable tax credit. The National Association of Active and Retired Federal Employees, which lobbied Congress for the provision, says it will keep its members informed about tax guidance relative to the credit.

I heard that Congress was working on legislation that would allow CSRS retires to get Social Security after retirement, provided they qualify. Is there any truth to this? I'm getting full Social Security retirement, but it will be reduced when I retire under CSRS at the end of this year.

This question requires a brief explanation of the windfall elimination provision, which was designed to modify the Social Security benefits of people who qualify for pensions from work that was not covered by Social Security (such as federal service under CSRS). The idea was to prevent the Social Security benefit from being computed as if the worker was a low-wage earner based on the years of his or her career not covered by Social Security. More information is here: Gone With the Windfall (Sept. 1, 2006).

You will continue to be entitled to Social Security retirement after you retire from CSRS, but the benefit will be recomputed once you start receiving your CSRS retirement. Depending on the year you turned 62, your adjustment could result in as much as a $375 per month reduction to your Social Security benefit. If you have 30 years or more of substantial Social Security-covered employment, you will be exempt from the WEP.

Congress is considering legislation that would modify or eliminate the WEP. Of course, such legislation has been considered in the past, but was never enacted.

I'm in CSRS Offset. My spouse is a nongovernment executive paying full Social Security. Are survivor benefits affected in this situation? Should my spouse collect his own Social Security benefit?

CSRS Offset is a retirement system for certain federal employees under which their CSRS retirement contributions are offset by Social Security taxes while working. Then, after retirement, the CSRS benefit is offset by a portion of the individual's earned Social Security benefit. Here's more information: Best of Both Worlds (April 14, 2006).

If you die before your husband and you chose to provide the maximum CSRS survivor annuity, he will be entitled to 55 percent of your unreduced CSRS retirement, as well as his own Social Security benefit. If he is entitled to only your CSRS and Social Security survivor benefits and not his own Social Security benefit (for example, if he is under 62 when he becomes widowed), then his benefit would be offset in the same manner as your CSRS retirement.

Suppose I retire at 60 under the Federal Employees Retirement System and draw the FERS Retirement Supplement. Am I required to convert to Social Security at 62 when I am eligible, or can I defer that move until I turn 66 and draw full Social Security benefits?

The FERS Retirement Supplement ends when you turn 62, whether or not you apply for Social Security benefits.

Tammy Flanagan is the senior benefits director for the National Institute of Transition Planning Inc., which conducts federal retirement planning workshops and seminars. She has spent 25 years helping federal employees take charge of their retirement by understanding their benefits.

For more retirement planning help, tune in to "For Your Benefit," presented by the National Institute of Transition Planning Inc. live on Monday mornings at 10 a.m. ET on federalnewsradio.com or on WFED AM 1500 in the Washington metro area.

By Tammy Flanagan

April 10, 2009