This chapter provides a brief overview of Social Security for Federal Employees. For detailed, in-depth information you should contact your local Social Security office.

Social Security is Important to All Civil Servants -- Even those covered under CSRS!

Understanding your social security benefits should be an important part of your financial planning no matter what stage of your career you are in and regardless of which Federal retirement system you are covered by. Changes in your job, family health, marital status, or retirement plans may create the unforeseen need to take advantage of social security disability, survivor, or retirement benefits. Your family’s long term financial stability could be affected by how well you understand not only your available social security benefits but also the unique provisions that apply to Federal civil servants.

Important Note: If Congress were to approve another open season for transfers into the Federal Employee Retirement System (FERS) -- if you are under CSRS -- you will need to be knowledgeable about your social security benefits in order to make an informed decision. Experience has shown that in a number of situations, transferring to FERS, even late in a career, may have a significant positive impact on your retirement income.

An Important 2-Second Look at Social Security

If you earn 40 credits of social security coverage in your lifetime, from whatever employment source, you will receive a Social Security benefit (1) if you apply; (2) regardless of which retirement system you are under; and (3) regardless of the impact of "Windfall Provision" and "Government Pension Offset".

First Steps Toward Understanding Your Social Security Benefits…

Your first step toward understanding your individual social security benefits, should be to request an estimate from Social Security. A Request for Social Security Earnings and Benefit Estimate (SSA-7004) is available from AHZ/ Employee Services or Social Security or by accessing the Social Security HomePage on the Internet www.ssa.gov. If you wish to receive your personal estimate from the Social Security Administration, you should complete the simple one-page request form and return it to Social Security in the envelope that is provided. Approximately 4 to 6 weeks later, you will receive your estimate (SSA-7005) from the Social Security Administration. Upon receipt you should confirm your date of birth, social security number, and earnings. If any of these are incorrect, you should follow the directions on the form.

What will your Social Security Earnings and Benefit Estimate (SSA-7005) tell you?

• Your annual documented earnings for all work covered under social security from 1951-1998.
• Your accrued credits (used for determining your eligibility)
• An estimate of your disability benefits under social security.
• An estimate of your survivor benefits under social security.
• An estimate of your retirement benefits under social security.

Note: The SSA-7005 document is only an estimate and may be inaccurate depending upon (1) the accuracy of the information that you provided; (2) which retirement system you are under; or (3) your family situation. When completing your request for estimate, you should follow the instructions carefully. A common error is listing CSRS salary (which is not covered) in block 7.

If you are a Federal Employee Retirement System (FERS) Employee

The estimate is very important if you are a FERS employee. Your FERS retirement plan consists of (1) the FERS basic retirement benefit; (2) An annuity derived from your thrift savings plan (TSP) investments; and (3) your social security retirement benefit or -- if you are under the Social Security retirement age -- a supplemental FERS annuity approximately equal to the Social Security benefit earned under FERS. Due to the importance of social security in your FERS retirement plan, we recommend that you request your statement at least every 3 years to ensure accuracy.

If you are a Civil Service Retirement System (CSRS) Employee and do not believe that you will be eligible for social security

Note: Even if you are under CSRS and don’t believe that you are eligible for a Social Security benefit, you may wish to send in a request for an estimate anyway. You might have Social Security credits from previous employment in high school, college, active or reserve military service, or a second job. In some cases, these credits e may make a social security benefit an achievable option either through post retirement employment or through transfer to FERS -- if that option once again becomes available.

If you are a CSRS Employee and will be eligible for your own earned social security benefit

If you are eligible for both a CSRS annuity and social security based upon your own non-civil service employment, the estimates on the statement that you receive from Social Security will not be completely accurate. If you become eligible after 1985 for both social security and CSRS retirement, your estimated benefits on the statement will not take into account the "Windfall Elimination" provision of social security. The current impact of this provision is that your social security benefit listed in your estimate will be reduced by up to $238.

If you are a CSRS Employee and will be eligible for social security through your spouse

As a CSRS employee receiving a Federal annuity, eligible for an unearned benefit based on your spouse's earned benefit, you will be affected by the "Government Pension Offset" provision which provides that your unearned social security spouse benefit be offset by two-thirds of your Federal annuity. This provision in most cases eliminates your spousal benefit entirely.

Finally, if you are a CSRS or FERS Employee and will be eligible for both your own earned social security benefit and one or more unearned spouse benefits

As a rule of thumb, if you are a CSRS or FERS employee receiving a Federal retirement annuity and eligible for any combination of social security benefits, you will receive your Federal retirement annuity plus an amount equal to the highest of the social security benefits once that benefit has been reduced by applicable "government pension offset" or "windfall elimination" provisions.

Are you covered by Social Security?

You may be eligible for Social Security benefits if you have coverage under (1) the Federal Employees Retirement System (FERS), or (2) the CSRS Offset System, or (3) have coverage in other ways. All FERS and CSRS Offset employees are covered by Social Security.

Civil Service Retirement System (CSRS): employees may be covered by Social Security. If you are covered under CSRS, you may still qualify for Social Security if you:

Eligibility for Social Security Benefits

Eligibility for most benefits requires fully insured status. You must have credit for a certain amount of work under Social Security.

From the onset of the Social Security program through 1977, a "quarter of coverage" was earned based on the calendar quarter concept. The worker earned a credit for each quarter in which they received $50 in covered wages. However, beginning in 1978, a "credit" is earned anytime a worker receives a certain dollar amount in covered wages.

In 1997, you will earn a credit for each $670 in covered wages that you earn…up to 4 credits a year. All four credits are earned any time during the year when $2,680 in covered wages have been received. The amount of earnings needed for a credit increases annually as average wages increase.

Insured Status Needed for Different Benefits

Fully insured means that you or your dependents are eligible for most Social Security benefits. You need 40 credits of coverage -- the equivalent of 10 years -- for you and your family to have fully insured status. This status will insure you for life.

Currently insured means that widowed mothers and fathers and their children can get benefits if you should die before becoming fully insured. You must have at least 6 credits of coverage during the 13-quarter period immediately before your death.

Disability insured means you have Social Security credit for 5 of the 10 years before you became disabled. In addition, you must have fully insured status. Fully insured means that you have one credit for each year after age 21 to the onset of disability.

Kinds of Social Security Payments

There are three basic kinds of Social Security payments:

The following table shows the Social Security benefits and the insured status needed.

Amounts of Social Security Benefits

Social Security Benefits range upwards to $1326 per month based upon your adjusted earning of your career. If you reach age 62, become disabled, or die, your actual earnings for past years adjust for changes in average wages since 1951. These adjusted earnings are averaged together with an applied formula that determines the benefit amount. This method insures that benefits will reflect changes in wage levels over a working lifetime and will have a relatively constant relationship to pre-retirement earnings.

Payment of Retirement Benefits

Currently, eligibility for full Social Security retirement benefits is based on retirement at age 65. You can retire as early as 62, but your Social Security check will be reduced permanently. A wife, husband, widow, or widower who starts getting payments before age 65 also receives reduced benefits.

The amount of reduction depends on the number of months you get checks before you reach 65. If you start your checks early, you'll get about the same value in total benefits over the years, but in smaller amounts to take account of the longer period you'll get them.

Starting in the year 2000, the age at which full benefits are payable increases in gradual steps until 67. This affects you if you were born in 1938 or later. You may still receive reduced benefits, but the reduction will be larger than it is now. Now if you retire at 62 you receive 80 percent of the amount payable at 65. When the increased retirement age becomes fully effective, you may still retire at age 62 but you will get a benefit equal to 70 percent of the age 67 benefit.

Social Security offers an incentive to work past the age of 65. If you delay your Social Security retirement past age 65, you can get more for each month you work, or at present 5 percent each year. If you work until age 70, you can increase your benefit by 25 percent.

Remember that the Social Security Office determines your benefit amount when you apply and it includes all adjustments added since you turned 62. By the year 2008, the 5 percent a year delayed retirement credit will gradually increase to 8 percent for each year you do not receive a benefit after age 65. You can earn these increases only if you have fully insured status and are not receiving and have not received any benefits. You cannot earn any increases after the age of 70, though you can work as much as you want after that age and not lose any benefits.

Taxes on Your Social Security Benefit

If your total income exceeds certain base amounts, 50 to 85 percent of your Social Security benefits are taxable income. Your total income means your adjusted gross income, tax free interest, and one-half of your Social Security benefits. The amount taxable is:

If you file a return as single:
50% if your total income is between $25,000 and $34,000
Up to 85% if total income exceeds $34,000

If you file a joint return:
50% if your total income is between $32,000 and $44,000
Up to 85% if total income exceeds $44,000

If you are eligible for more than one social security benefit…

If you are eligible for both your own earned benefit and a spouse's benefit, you will receive the larger of the two benefits -- you may not receive both benefits. When you and two family members are eligible, you receive the maximum amount payable to a family.

Contacting Social Security

Before you or your family can receive any Social Security checks, you must apply for them. Contact any Social Security Office if:

You should call, visit, or write Social Security before you reach 65. Call about retirement checks and also about Medicare which is available at 65 even if you continue to work. You may find it easier to conduct your business with Social Security by telephone. The toll free number for the Social Security Administration is 800-772-1213. If you want to visit the nearest Social Security office, the address may be obtained by calling the toll free number also.

Reductions to Social Security for Federal Employees Who Retire under CSRS or CSRS Offset. Government Pension Offset & Windfall Elimination Provisions

Neither the Government Pension Offset or Windfall Provisions apply to FERS employees. Also, the Government Pension Offset doesn’t apply to previous CSRS employees who switched to FERS and who have 5 years of service under FERS; however, the Windfall Provision may apply.

Government Pension Offset

If you are a CSRS or CSRS Offset employee, NOT FERS, the Government Pension Offset (GPO) reduces your Social Security benefit that you receive as a spouse or surviving spouse.

The government pension offset does not affect any Social Security benefit payable to you on your own record. It affects only a Social Security benefit that may be available through your spouse.

This provision will affect you only if:

If you transferred to FERS from the CSRS system (after 12-31-87), you need five years of FERS coverage to be exempt from the government pension offset.

Example of Government Pension Offset on CSRS retirees

If Jane has herself earned 40 Social Security credits from other covered employment, she will still be eligible for her own earned Social Security Benefit -- which even if reduced by the "Windfall Provision" (see below) -- may be more than $200 per month. Remember, "Government Pension Offset" only applies to social security benefits earned through your spouse.

Elimination of Windfall Benefits

A different Social Security benefit formula applies if you are first eligible after 1985 for both a Civil Service Retirement (not FERS) Annuity and a Social Security retirement or Social Security disability benefit.

Why is there a "Windfall Provision"?

The Elimination of Windfall Benefits provision ends the windfall that gave an advantage to Civil Service retirees.

CSRS retirees typically spent many years under CSRS retirement and only part of their careers working under Social Security. Typically they contributed very little to Social Security while receiving a disproportionately larger Social Security benefit -- in addition to their CSRS annuity. As a CSRS employee, average Social Security earnings are typically low and therefore, benefits would be low. The heavy weighting at the lower end of the Social Security benefit formula was intended to help long-term, low-wage workers….not to benefit CSRS retirees who had little coverage under Social Security, but who still received much larger CSRS retirement benefits.

What is the impact?

If you have less than 21 years of substantial earnings under Social Security, a 40% factor replaces the 90% factor in the first band of the formula used to calculate your Social Security benefit. The 40% factor will increase 5% for each year of substantial Social Security earnings between 21 and 30 years. This formula reduction affects your Social Security benefit if you are receiving a CSRS annuity and a Social Security benefit.

For example, in 1996, if you have less than 21 years of substantial earnings, potentially you could lose $2,622 per year in Social Security benefits.

The following table summarizes this provision.