If you are collecting retirement benefits for work you performed as a federal employee under the Civil Service Retirement System (CSRS), any Social Security benefits you receive may be reduced. This includes both Social Security benefits earned from your own work as well as benefits earned as a spouse or survivor.
Reductions are based on the fact that the CSRS was set up as a stand-alone program before the start of the Social Security system. Federal employees paid a percentage of their salaries into the CSRS fund, and that payment was matched by their employers.
After the Social Security Act was signed in 1935, CSRS remained a separate system. Federal employees continued to pay into CSRS, but did not pay Social Security taxes.
In 1984, federal employees started to pay taxes into Social Security instead of making contributions to CSRS. The Federal Employees Retirement System, which does not affect Social Security benefits, replaced CSRS in 1987.
However, most federal employees who paid into CSRS also worked for an employer under Social Security at some point and also became eligible for Social Security retirement benefits. It turned out that receiving benefits from both retirement systems gave retirees larger total benefits than if they had worked all the time under Social Security.
The government's answer to the discrepancy was the Windfall Elimination Provision (WEP). It applies to employees who reached age 62 or became disabled after 1985 and become eligible for a federal pension after 1985.
WEP will not reduce Social Security benefits based on your own work if you were eligible to retire before 1986, were first employed by the government after 1983, or have 30 or more years of substantial earnings under Social Security. The WEP website provides a chart showing the substantial earnings amount for each year, rising gradually from $900 in 1937 to $22,050 for 2015.
Social Security provides an online calculator to help you find how much your benefits will be reduced by WEP.
Spousal, Survivor Benefits
The total of CSRS benefits and Social Security spousal or survivor benefits also is more than the recipient would collect if he or she had been exclusively under Social Security.
The government uses the Government Pension Offset program to cut the extra payment. The program reduces your Social Security spousal or survivor benefit by an amount equal to two-thirds of your CSRS benefit. The CSRS benefit stays the same.
For example, if you would otherwise receive $800 in Social Security spousal benefits and $600 a month from CSRS, Government Pension Offset would not cut your CSRS benefit. But the Offset would use the $600 figure to determine how much to reduce your Social Security spousal benefit, cutting it by two-thirds of $600, which is $400. That leaves you with $400 in monthly spousal benefits ($800 - $400) and $600 from CSRS.
There are a long list of exceptions to Government Pension Offset, many involving the date the federal employee began paying Social Security tax or when the employee retired.
CSRS offset employees
A final category encompasses federal employees who were hired or rehired after January 1, 1984, and are covered by both CSRS and Social Security -- so-called CSRS Offset Employees.
Their Social Security benefits will not be cut, and their CSRS offset employment time will count toward their Social Security annuities. However, their CSRS benefits will drop when they become eligible for Social Security benefits, usually when they turn 62.
The amount of the reduction will equal the lesser of two amounts:
- The difference in the Social Security benefits with and without CSRS offset service, or
- The product of the Social Security monthly benefit with Federal earnings multiplied by a fraction where the employee's total CSRS offset service and the denominator is 40. The service will be rounded to the nearest whole number of years.