Will Social Security Affect your Federal Pension?
Last month we discussed when federal pensions may reduce Social Security benefits. This month we will discuss the reverse: when Social Security might reduce your federal pension.
Federal Employees Retirement System
Pensions under FERS are not reduced when a FERS retiree begins to collect Social Security. In a future article, we will discuss FERS Annuity Supplements, benefits some FERS retirees receive in addition to their FERS pension.
Although the FERS Annuity Supplement is no longer payable once the FERS retiree reaches the age of 62, the pension based on service creditable under FERS will be unaffected by any Social Security benefit that might be received. But a retiree under FERS should know that the FERS Annuity Supplement stops at the age of 62, regardless of whether the retiree chooses to draw Social Security at that time or not.
Civil Service Retirement System
If you have always been under CSRS, future entitlement to Social Security benefits typically does not affect your CSRS pension. However, there are several exceptions to this.
- Under CSRS (which includes CSRS Offset and FERS Transferees with a CSRS component in their retirement benefit), any unpaid military deposit service creditable under CSRS might be removed from the computation of your pension once you become eligible for Social Security.
- If you will eventually retire under the CSRS Offset provisions, your CSRS pension would be reduced (offset) if you later become eligible for Social Security benefits based on your own work record. This offset to your CSRS pension will either occur at the later of the age of 62, date of retirement, or once you obtain 40 credits under Social Security.
We will cover the first exception in this article and the second exception in next month’s article.
Military Service Used in the Computation of Your CSRS Pension
For the purpose of this article, “creditable military service” is federal active military service that is not currently being used in the computation of one’s military retirement from active duty (unless the military retirement pay was awarded on account of a service-connected disability incurred in combat, or caused by an instrumentality of war, or under the provisions of Title-10 (Reserve Retirement)).
If you were first covered under CSRS after September 30, 1982, you would need to pay your military deposit for any creditable military service you want to include for retirement purposes under CSRS. In this situation, if you pay your military deposit, the military service can be used for both retirement eligibility and computation purposes under CSRS. If you don’t pay the military deposit, the military service would not be used at all toward your Retirement SCD (for eligibility or computation purposes), but it might be included in your Service Computation Date (SCD) for leave accrual purposes.
If you intend to pay your military deposit, you must do so before separating from federal service. With few exceptions, military deposits must be paid to your employing agency and cannot be paid after separation.
But many folks were employed by the federal government and obtained their initial CSRS appointments prior to October 1, 1982. For these individuals, once they were vested under CSRS, any creditable military service they may have could be used for retirement purposes under CSRS without making the military deposit. For these individuals, their creditable military service will always be part of their Retirement SCD to determine eligibility for retirement.
For CSRS retirees with unpaid military deposit service, OPM only contacts Social Security once. This happens at the age of 62 or date of retirement, whichever is later. For unpaid military deposit service, OPM does not continue to check with Social Security after this initial contact. This is sometimes called the CSRS “Catch-62” rule.
If you plan to retire after the age of 62 and you don’t expect to have your 40 credits under Social Security by then, you would not need to pay your military deposit to receive service credit in the computation of your CSRS pension. Remember, under the CSRS “Catch-62” rule, it’s a “one-time look” by OPM… at age 62 or date of retirement, whichever is later.
Until next month, I wish everyone the very best as you continue to plan your future retirement.
James Marshall is a federal retirement benefits specialist and the owner of Federal Retirement Planning LLC. For more information, please visit the Federal Retirement Planning LLC website.