Generally, receiving a pension does not affect your Social Security retirement or disability benefits. There are exceptions if the pension comes from work on a job where you did not pay Social Security taxes, such as with government employment. Although not generally considered pensions, workers’ compensation and state disability benefits may also reduce your Social Security disability benefit.
Effects of a Pension on Disability Benefits
If you paid Social Security taxes when working at the job that your pension comes from, drawing the pension will not affect your Social Security disability payment. A benefit deduction will apply if your employer did not deduct from your wages or pay his portion of the Social Security tax. The reduced benefit is figured under the Windfall Elimination Provision of the Social Security Act.
Windfall Elimination Provision
The SSA turns to the Windfall Elimination Provision formula if you receive a pension from the work you did that did not involve deducting Social Security tax from your paycheck. The SSA formula figures your reduced Social Security benefits based on your average monthly earnings over the course of your employment, adjusted for inflation. The base formula changes as the Cost of Living Adjustment adjusts each year. As of the date of publication, the formula takes the first $761 in earnings, multiples that figure by 90 percent; then multiplies amounts between $762 and $4,586 by 32 percent; then any amount above $4,586 is then multiplied by 15 percent. The three solutions are added together to determine your reduced Social Security disability benefit. If you will receive a pension for work not covered by Social Security, any Social Security benefits you apply for that are based on your spouse’s record may be reduced as well. The SSA identifies this reduction as the Government Pension Offset.
Other Disability Benefits
If you receive workers' compensation and/or a public disability benefit, Social Security will figure the disability benefits you and your family receive differently. If your total family benefits plus your workers' compensation payment plus your public disability benefit amount exceeds 80 percent of your average pre-disability earnings, the excess amount is then deducted from your total family Social Security benefits.
Receiving benefits from private disability insurance will not alter your Social Security disability payment amount. Do not delay in filing a disability claim with Social Security, because the process can take considerable time to work its way through the system. Approval can take as long as three to five months.