Offset, not windfall

In his June 22 column, Bureaucratus stated that the windfall elimination provision (WEP) would go away if you transfer to the Federal Employees Retirement System (FERS) and stay in for five years. That provision applies to the government pension offset, not the WEP.

If you retire from the Civil Service Retirement System (CSRS) and also are eligible for Social Security benefits as a spouse, former spouse or survivor, your Social Security benefits will be reduced. They are reduced because you are receiving a pension from the federal government based on earnings not covered by Social Security.

For every $3 you get from your CSRS annuity, your Social Security spousal benefit is reduced by $2. Employees who transfer and work at least five years under FERS before retiring are exempt from the government pension offset.

The Social Security law includes a provision that reduces Social Security benefits for those who have less than 30 years of "substantial coverage" under Social Security and who have earned a retirement benefit from employment not covered by Social Security, i.e. CSRS. (In 1997 it was $12,150.) The WEP is designed to eliminate the "windfall" that could result if you were to receive a CSRS annuity based on many years of CSRS service and also receive a full Social Security benefit because you did have a few years of covered employment. (You have to have at least 40 quarters, or 10 years.) If you're subject to the WEP, your earned Social Security benefit is figured using a modified formula.

It's a long, detailed calculation, but essentially there are three levels of Social Security earnings. Each level is multiplied by a different percentage. The first level is multiplied by 90 percent, the second by 32 percent and the third by 15 percent. These amounts are added together to get the basic benefit rate. Using the WEP formula, the first level is not multiplied by 90 percent but by a smaller percentage depending on the number of years of substantial Social Security coverage. The key is that the WEP formula reduces your Social Security benefit by the maximum if you have less than 21 years of substantial Social Security coverage. In that case, the multiplier is 40 percent. That's a big whack. For each year of coverage over 20 years, the percentage increases by 5 percent, i.e. 45 percent for 21 years, 50 percent for 22 years, etc. However, the maximum reduction will not exceed 50 percent. Thus, most transfers into FERS with little prior Social Security coverage (maybe college part-time jobs, etc.) will not be able to escape the WEP because they won't be able to get 30 years of "substantial coverage."

The youngest CSRS employee joined Uncle Sam in 1983, just when CSRS ended, and if he or she was 22 then, they're 37 now. For lots of other reasons they almost assuredly should not transfer into FERS.

The guy (like me) who is 59 and figures to work only four or five more years transfers for the 5 percent government match into the Thrift Savings Plan. There's no hope in escaping the WEP.

It's the offset that runs out after five years, not the WEP.

Art SmithPay and Position Management UnitOffice of PersonnelDrug Enforcement Administration


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