Any federal employee newly hired on or after January 1, 1984, will pay a Social Security Tax and will be entitled to their benefits1. If an employee was hired prior to January 1, 1984, they may or may not be covered by Social Security depending on their prior or post federal government work experience. Those who are covered may be subject to the Windfall Elimination Provision for Civil Service Employees.
In order to qualify for Social Security, a beneficiary must accumulate a specific number of quarters of coverage. To be eligible for benefits, one must accumulate 40 quarters, which for most people, means working for at least a 10-year period of time to reach the necessary qualification.
The amount of Social Security benefits a recipient will receive depends on the age of the person and their earnings history. Social Security benefits are based off the highest 35 years of indexed earnings, or Average Indexed Monthly Earnings (AIME). A beneficiary may begin to receive benefits as early as age 62, but they will be assessed a permanent reduction on the amount they are able to collect2. There will also be an earnings cap on the amount that can be made over and above Social Security. If that cap is reached, for every $2.00 earned, $1.00 is taken back.
Windfall Elimination Provision (WEP)
The Windfall Elimination Provision is applicable to those federal employees who did not pay into the Social Security system and instead paid exclusively into the Civil Service Retirement System. WEP will effectively reduce some or most of your Social Security benefits to prevent you from “double dipping” in the federal retirement benefit systems. In simple terms, the government felt the CSRS pension was adequate enough to provide retirement income, and thus, paying into Social Security was not necessary. Because an employee has not paid into Social Security over the course of their career, they are not eligible to receive Social Security benefits. When an employee has enough credits to qualify for both a federal pension and Social Security, the Social Security payments will be reduced to a certain percentage. The percentages vary based on the amount of time spent working elsewhere, but as a general rule of thumb your reduction in social security benefits cannot exceed half of your federal pension amount. There are plenty of different avenues to explore with your pension and the WEP, so feel free to contact us with any questions. We can help you learn if and what you are eligible for, as well as if you will fall prey to a permanent percentage reduction.
The FERS Social Security supplement is meant to be a bridge payment for FERS employees who retire prior to the first available age to start collecting Social Security, 62. This payment, if you are eligible, will pay the employee over and above their federal pension. The FERS supplement is designed to be a bridge for federal employees until they are able to start receiving their Social Security. The FERS supplement is calculated using the employee’s years of civilian federal service and the amount of Social Security benefits they would receive at age 62. It is important to note with this special supplement that the proceeds are not paid from Social Security, rather they are paid directly from the Office of Personnel Management. Once a beneficiary of these payments reaches age 62, they will no longer be eligible to receive these payments and will then have to choose between receiving Social Security benefits with a reduction or deferring those benefits until their full social security age. The FERS supplement is a current benefit, but may not always be available. As it stands now, the benefits have been proposed to be cut from the current benefits package as a way to save tax dollars. That has not happened yet, but it could be something to look for in upcoming budget discussions.
Receive Your Federal Benefit Workbook
Please fill out the form to the right with your information to receive your personalized federal benefit workbook. This workbook will help you understand when you are eligible to retire, compute your monthly pension, show you how Social Security works and explain the options available to you with FEGLI and TSP.
By providing your information, a licensed insurance representative may contact you.