Q & A
I am a CSRS Offset retiree. I attended more than one pre-retirement seminar and was given examples of my retirement situation, along with reassurances that my retirement would closely follow the examples and that I was very fortunate to be CSRS Offset, and would be very happy.
Continuation of question:
I was told to check with Social Security to find out about my offset. Neither the Office of Personnel Management nor Social Security could know the exact amounts until I retired.
Following my retirement, everything, except Social Security, was in disorder for six months. OPM explained that they had to check with SS about the calculation of my offset, and that took some time. When I contacted SS, they said there was no offset for me because of my lengthy employment history and more than 30 years of SS payments (and I paid both CSRS and SS amounts since 1983).
The bottom line is, at the pre-retirement seminar, I was shown and walked through one method for calculating the offset and told that there was also another and that the one with the lowest amount would be used to determine my offset. My eventual monthly OPM payments were about $1,000 a month less than those demonstrated in the example based on all that was known about my salary and SS payment history at the pre-retirement seminar. I realize that the pre-retirement amount could be off a little, but $1,000/month is a lot. Each time I tried to sort this out, I was told by SS that there was no offset, and I was told by OPM that they used the offset given to them by SS.
To this date, this matter has never been satisfactorily explained and resolved. SS even sent me a letter stating that I was not subject to any offset, and OPM continues to state that my pension offset was based on the information supplied to them by SS. Can you supply me with someone to walk me through the calculations that were apparently so far from real?
Answer:
While I’m not able to do case work, I may be able to explain how CSRS Offset works. You were put in CSRS Offset because you were a former CSRS employee who had a break in service of over a year and then returned to work for the government. Your retirement deductions were split in the following way: 0.8 percent to CSRS and 6.2 percent to Social Security. If you retired before age 62, at age 62, your CSRS annuity would be offset (reduced) by the amount of Social Security benefit you earned while covered by CSRS Offset. In general, the amount of money you received would be the same, it would just come from two different places: OPM and the Social Security Administration. If you retired at age 62 or later, the offset would occur on the day you retired.
The method used to determine the offset requires, among other things, the establishment of your average indexed monthly earnings (AIME), something that us mere mortals can’t do. As a result, most who are affected by the offset use the following formula to approximate what the offset will be:
Take the Social Security benefit estimate at age 62, multiply it by your high-3, and divide the product by 40.
However, because a portion of you annuity comes from your earlier period of pure CSRS service, you’d be subject to the windfall elimination provision. The WEP would reduce your Social Security benefit if you had fewer than 30 years of substantial earnings under Social Security.
Source: Reg Jones, FederalTimes.com – December 5, 2013
I am in CSRS Offset and I retired on 3/1/19 at the age of 64 and started collected my social security because my CSRS was offset. I accepted a part time job and made less than $17,000. However, Between Jan and March 1, before I retired I made $45,000. AM I SUBJECT TO THE THE SOCIAL SECURITY INCOME LIMITATION?
Marie,
No, since you started collecting benefits in March and 2019 was your first year collecting, your earnings before you started to collect your SS benefits do not count towards Social Security’s earnings limit. You were covered under Social Security’s “first year rule” for 2019, which means that only your earnings after you started collecting SS benefits were subject to a monthly earnings limit ($1470/month) for the remainder of the 2019 calendar year. Starting in 2020, you are subject to the annual earnings limit of $18,240 (the limit changes each year and will be somewhat more in 2021).
Russell Gloor
National Social Security Advisor
The AMAC Foundation
What can you do if you don’t agree with offset ? Where can I get help?
This is an issue you will need to discuss with your CSRS Offset pension administrator or the Federal Office of Personnel Management (OPM). Here is a link which will give you the contact information for OPM.
https://www.opm.gov/retirement-services/contact-retirement/
Since your CSRS Offset is a Federal pension managed entirely outside of Social Security, you will need to deal directly with OPM to resolve any issues with, or disagreement about, your Federal pension. One approach might be to explore your issue with OPM’s Office of the Inspector General, the contact information for which can be found at the above link.
Russ Gloor,
National Social Security Advisor
The AMAC Foundation
First, thank you for the comments. I sort of understand a little bit more and if my understanding is correct, I’m very concerned that I won’t be able to afford to stay in my home. Unfortunately, I made some bad financial decisions in my life and if my pension is going to be reduced nearly $1000 per month, it will be devastating. Guess I better starting looking for a bridge to live under because that’s all I’m going to be able to afford.
So, I read this article &, like many others, suggests that the WEP applies to both CSRS & CSRS Offset employees. The problem I see is, when I go on the SSA website, it says the WEP applies only to “non-covered” pensions where SS is not withheld but CSRS is a “covered” pension; SS is being withheld! So, is it affected by the WEP or not?
The original CSRS (Civil Service Retirement System) did not participate in the Social Security program and, for employees with regular CSRS pensions, those pensions are “non-covered” which causes a Social Security rule known as the Windfall Elimination Provision (WEP) to be invoked when Social Security benefits, earned from employment outside of CSRS, are claimed. WEP reduces one’s Social Security benefit payment using a special formula to compute benefits for those with a “non-covered” pension. The Federal CSRS pension system was replaced in the late 1980’s by a new Federal Employee Retirement System (FERS) which did participate in the Social Security program (employees paid into Social Security). There is also a special hybrid program known as “CSRS-Offset” which applies to those who left their Federal CSRS employment and subsequently returned after FERS was enacted. Those CSRS-Offset employees pay into both CSRS-offset and Social Security while employed by the Federal government, but their CSRS-Offset pension will be reduced by the value of their Social Security benefit, and their Social Security benefit will be reduced because the regular CSRS portion of their pension will cause WEP to be invoked (unless they have 30 or more years of SS-covered employment -including their years under CSRS-Offset – where their earnings were considered “significant” by Social Security). WEP does not apply to those with at least 30 years of significant SS-covered earnings. Those in the CSRS-Offset category have experienced much confusion when dealing with Social Security (nearly all of whom aren’t familiar with Federal CSRS-Offset rules) and even with OPM (Office of Personnel Management for the Federal Government), because the hybrid CSRS-Offset program is very complex and often misunderstood. And that has caused many CSRS-Offset retirees to struggle getting valid information from either the SSA or from OPM. Since CSRS-Offset is a Federal Employee program, Social Security will rely solely on information it receives from OPM to determine the extent to which WEP will apply to one’s Social Security benefit. The bottom line is, if you have 30 or more years of significant SS-covered earnings (including your contributions under the Federal CSRS-Offset pension program) then WEP will not apply to you.
Russell Gloor
National Social Security Advisor
The AMAC Foundation
Just got my statement from OPM after retiring June 2019. I have 48 “years” of substantial earnings paying into Social Security and OPM is offsetting my retirement a good chunk as I worked until age 71. I had 10 years in when I fIrst worked federal service and left in 1987. Worked in private sector until 2007 when I came back to federal. So I am still subject to Offset but not WEP due to paying into social security all that time. I was confused as I was thinking WEP and offset are the same, they are not. Should have retired earlier, I think. The 22 years and two weeks of federal service just didn’t pay out as I had planned, even though I had enough time into Social Security to draw at 67 from my private sector work. Just my thoughts…..but at least it helps pay for the health insurance!!
Mtnplanner, your explanation of CSRS Offset, WEP and the offset of one’s CSRS pension is one of the best I have seen. I am wondering if you can answer this question: If I retire at 62 from Fed Govt and do NOT file for SS (wait til I reach FRA at age 66) but choose to collect my reduced CSRS Offset Pension and choose to work and earn money in private sector, is there a penalty or earnings limit in my work? Again I would not yet collect Social Security. Thank you!
Etta Su,
If you do not apply for Social Security until you reach your full retirement age, you will not have any limitations on your earnings. Once you reach your full retirement age, Social Security’s earnings limit goes away and you can earn as much as you like without having any benefits withheld. Any WEP (windfall elimination provision) reduction to your SS benefit due to your CSRS pension will take affect when you apply for Social Security.
Russell Gloor
Certified Social Security Advisor
The AMAC Foundation
It took me quite a while to finally figure out from the retirement seminars that there are two separate systems mashed together in CSRS-Offset and each side has potential reductions. Social Security benefits can be reduced by the Windfall Elimination Provision rules. Reductions to SS benefits by WEP can be entirely eliminated if the person has 30 years or more of ‘substantive earnings’ in Social Security as defined by the WEP. rules. That’s the SS side of things.
On the CSRS side there is what is called the SS-Offset reduction to CSRS benefits. To calculate the amount of the Offset, OPM requests information from Social Security to make the reduction calculation for the Offset years.
In your illustration, a person with a long work history of paying into Social Security might not have any WEP reduction to SS benefits and SS staff would look at their records and see there was no reduction to SS. They would not be able to tell you about the CSRS reduction for your getting SS benefits because OPM ultimately makes the reduction based on the info that they get from SS. The information is supposed to be from OPM asking SS for two calculations – one calculation on the SS benefit with the Offset years and one calculation based on the SS benefit without the Offset years. It might be possible to use the SS downloadable software to make those calculations for yourself. It would be close, but not exact.
The second method of CSRS-Offset calculation is something anyone can do with minimal info: take the total Years of Offset Service, divided that by 40 then multiply that against the monthly Total Social Security benefit payable. That gives a pretty close dollar amount that OPM will subtract from the CSRS benefit. Example, 15 Offset years divided by 40 = 0.375 then multiply that against a SS benefit of $2,000 a month would cause a reduction of to CSRS of $750 a month.
At age 62 or at federal retirement – whichever is later, OPM will request specific information from SS to make the reduction calculation more exact, and then use the lesser amount of two methods of calculating the reduction. But the Offset reduction is to CSRS benefit only, not SS, despite the ‘name’ of the reduction. So the SS records for staff may not have a record of the information they sent to OPM since the information sent to OPM causes no change to the SS benefit.
Unlike WEP, there is actually no way to eliminate the SS-offset reduction to CSRS. But remember, this reduction to CSRS is calculated by OPM and applied only to the CSRS Benefit. The reduction is based only on the years worked as a CSRS-Offset employee where you paid into both systems. You can stop the clock by retiring, but you can’t eliminate the reduction.
The longer you work as a CSRS Offset employee the bigger the reduction of the CSRS benefit. But on the other side of the equation, the longer you pay into SS, the lower the WEP reduction and the higher the SS benefit. The net result is that most people in CSRS-Offset will end up with a retirement dollar amount close to what you would have gotten if you had worked entirely in the CSRS system.
If you continue working in the private sector after federal retirement and continue paying into SS, you could still eventually eliminate the WEP. or keep increasing your SS benefit. It’s not easy but it can be done.
I have 40 years service with csrs offset. At 62 my social security will be 1700 dollars. How much will many pension be reduced?
C Paul Moore
I would be very happy to assist you, but I am unable to properly respond to your question without more information pertaining to your Social Security situation. I will be sending you an email from [email protected] with the questions I need you to answer for me to be able to answer your question properly.
I look forward to assisting you.
Sharon L Kleczka RSSA
AMAC Foundation, Inc.
CONFIDENTIALITY NOTICE: The opinions and interpretations expressed in this message are the viewpoints of the message’s author, a trained advisor accredited under the National Social Security Advisors program of the National Social Security Association, LLC (NSSA). The author, the NSSA, and the AMAC Foundation are not affiliated with or endorsed by the United States Government, the Social Security Administration, or any other state government.