Association of Texas Professional Educators
   

Social Security

ISDs participating in Social Security

Many educators in Texas have been misinformed or are unaware of Social Security laws that affect their retirement. The following question-and-answer document presents the facts about Texas educators and Social Security.

Will my eligibility for a TRS pension prevent me from collecting Social Security benefits?
No. However, all employees who are eligible for both a government pension, such as that provided by TRS, and Social Security benefits are subject to two offset rules that can reduce the amount of Social Security benefits they are eligible to receive.

  • The Government Pension Offset (GPO) will affect you if you are eligible for a spousal Social Security benefit.
  • The Windfall Elimination Provision (WEP) will affect you if you are eligible for a Social Security pension either from previous employment that paid into Social Security or from employment in a district that pays into both TRS and Social Security. (Most Texas school districts do not pay into Social Security.)

Which Social Security benefits am I eligible to receive?
To be eligible for a Social Security pension benefit, you must be at least 62 years old and have a minimum of 40 Social Security credits. A credit is equal to a designated amount of earnings that increases from year to year based on national earnings averages. For example, employees receive one credit for every $1,160 of earnings on which they paid Social Security taxes in 2013. Because an employee can earn a maximum of four credits per year, you must have worked in a job in which you paid Social Security taxes for at least 10 years or 40 quarters to meet Social Security eligibility requirements.

However, if your spouse is eligible for a Social Security pension, you might be eligible for a spousal benefit. Typically, spousal benefits are equal to 37?50 percent of the spouse?s Social Security benefit and are paid to the dependent spouse while the other spouse is still living. Widow/er benefits are usually equal to 71?100 percent of the spouse?s benefit and are paid to the dependent spouse after the other spouse?s death. Eligibility is based on age and the number of years married to a qualified spouse. Contact your local Social Security office for complete information on which benefits you are eligible to receive.

How will my spousal or widow/er Social Security benefit be affected by my eligibility for TRS benefits?
Texas educators eligible for both spousal Social Security benefits and their own TRS pension benefit are subject to the Government Pension Offset (GPO). The GPO reduces the amount such educators are eligible to receive in spousal Social Security benefits by two-thirds of the amount of their TRS pension benefit. In many cases, this results in a negative amount, which means that these educators do not receive spousal benefits. (See PDF chart for illustration.)

Why does the GPO affect Texas educators?
Social Security spousal benefits were created to provide security for people dependent on their spouses. They provide the spouse who does not work with some Social Security benefits based on the other spouse?s Social Security earnings.

However, if both spouses worked and are eligible for their own individual Social Security pensions, one spouse could still file for a spousal benefit even though he is not dependent on the other spouse. This is known as dual entitlement. To prevent dual entitlement, the government implemented rules that reduce the amount of spousal benefits a person can receive by the amount of his or her own Social Security pension benefit. These dual entitlement rules prevent double dipping, or receiving both a Social Security pension benefit and a spousal benefit.

However, some government employees, such as Texas educators, work in jobs that pay into government pension programs (such as TRS) rather than Social Security. Because these employees have little or no Social Security-covered employment, it appears that they are dependant on their spouses when in reality they are not. This situation allowed these employees to apply for spousal Social Security benefits without being subject to dual entitlement rules. The GPO was designed to mirror dual entitlement rules and prevent people eligible for a government pension (such as a TRS pension) from receiving a benefit created only for dependent spouses.

Is anyone exempt from the GPO?
Employees who work in a position covered by both Social Security and a government pension system for the last five years before retiring are exempt from the GPO.

Trying to receive exemption from the GPO is a complicated matter that carries a significant risk. It is possible for those seeking exemption to lose accrued benefits such as pay increases, back pay and other incentives by leaving their current jobs. ATPE encourages educators to schedule appointments with their local Social Security offices and meet with benefits counselors to investigate their options and situations thoroughly before making any decisions.

Can I return to work after retiring from a district that pays into both TRS and Social Security without losing my spousal Social Security benefits?
Yes. You will not lose your spousal Social Security benefits as long as you maintain your status as a retiree under TRS. You can retire and return to work in a TRS-covered position while still maintaining your status as a retiree by following the guidelines for employment after retirement outlined in the TRS Benefits Handbook.

I am eligible for both a TRS pension and a Social Security pension of my own. Which offset rule will affect me?
You will be subject to the Windfall Elimination Provision (WEP).

How does the WEP work?
The WEP affects Social Security benefits for people who are eligible for both Social Security and government pensions (such as TRS) by modifying the formula used to calculate their Social Security benefits.

The standard formula for figuring Social Security benefits averages a person?s pre-retirement earnings by dividing total pre-retirement earnings by 35 years, then dividing that amount by 12 to find the average monthly earnings (AME). The formula then multiplies the first $791 of the AME by 90 percent. The next $3,977 of the AME is multiplied by 32 percent, and the remaining amount of the AME is multiplied by 15 percent. The three amounts are then added together to determine a person?s monthly annuity.

The WEP modifies this formula for employees who are eligible for a government (TRS) pension by multiplying the first $791 of the AME by a smaller percentage that is based on the number of years the person paid Social Security taxes on substantial earnings (a designated amount adjusted yearly to reflect economic trends). For 2013, the substantial earnings threshold is $21,075.

The percentage increases from 40 to 90 percent as an individual?s years of substantial earnings increase from 20 years to 30. For example, a person who has paid Social Security taxes on substantial earnings for 20 or fewer years will have the first $791 of his AME multiplied by 40 percent, whereas a person with 26 years of substantial earnings will have the first $791 of his AME multiplied by 70 percent, and so on up to 30 years. Once a person reaches 30 years of substantial earnings, he is restored to the full 90 percent multiplier and is no longer affected by the WEP. (See PDF chart for illustration.)

Why does the WEP affect Texas educators?
The Social Security system figures employees? incomes based on the total amount of their Social Security contributions. When figuring incomes in this way, employees such as Texas educators, who work most, if not all, of their careers in jobs that do not pay into Social Security, appear to have low incomes. The formula used to figure Social Security benefits is designed to provide low-income workers with a larger percentage of their pre-retirement earnings than that provided to high-income workers. The WEP modifies the formula so that employees who haven?t paid into Social Security, such as Texas educators, aren?t provided with a higher percentage of their pre-retirement earnings than employees who have paid into Social Security for their entire careers.

Will working my last five years before retirement in a position covered by both TRS and Social Security exempt me from the WEP?
No. The exemption rule applies to the GPO only. The only way to be exempt from the WEP is to pay into Social Security for 30 or more years of substantial earnings.

If I rescind my TRS membership and withdraw my contributions from TRS so that I will not receive a TRS pension, will I still be subject to these offsets?
If you withdraw from TRS before meeting the minimum eligibility requirements for a TRS pension, you will not be subject to the WEP. If you withdraw after meeting the minimum eligibility requirements for a TRS pension, you will be subject to the WEP.

You will not be subject to the GPO if you withdraw from TRS, regardless of whether you meet the eligibility requirements for a TRS pension. However, you will only be able to withdraw your own contributions plus interest and not the contributions made by the state on your behalf. Furthermore, you might be subject to penalties and taxes on the contributions you withdraw, further reducing the value of the investment. It is possible to avoid these penalties and taxes by rolling your TRS contributions into a qualified investment. Contact a financial planner for details.

For those considering TRS withdrawal to avoid the GPO, it is important to remember that the overall benefits you would receive if you are eligible for full spousal Social Security benefits would not be more than those you receive by being eligible for both a TRS pension and Social Security spousal benefits reduced by the GPO. In other words, you will always come out ahead by collecting your TRS benefit.

What is ATPE's position on this issue?
ATPE has a long-standing position supporting the repeal of the GPO and WEP. ATPE believes these offsets have a negative impact on the shortage of certified teachers in Texas. These provisions are especially detrimental to efforts to attract into the education profession private sector professionals with a significant number of years vested in the Social Security system. ATPE believes that repealing these offsets would be an effective way to attract new teachers to the profession and retain experienced educators who might be considering leaving the profession.

However, ATPE opposes mandating Social Security coverage for all Texas public school employees due to the possible damage it would cause to the TRS system. Additional payroll taxes needed to support statewide Social Security would inevitably reduce state contributions to TRS, compromising the system?s stability and ultimately reducing benefits for retired educators.

The ATPE lobby team and state officers have regularly presented this position to the Texas congressional delegation in Washington D.C. ATPE has repeatedly submitted testimony to the House Ways and Means subcommittee on Social Security regarding legislation to repeal the GPO and WEP. Recently ATPE joined forces with like-minded groups in 11 other states in the Coalition to Preserve Retirement Security (CPRS). The CPRS is non-profit organization spearheading a grassroots effort to convince Congress to repeal the GPO and WEP. ATPE will continue to support a full repeal of these offsets and will actively monitor and lobby for any legislation related to this issue. Furthermore, ATPE encourages its members to contact their congressman and U.S. senators to reinforce ATPE’s goal of repealing the GPO and WEP.

I still have questions. Who should I contact?
For specific questions about your Social Security benefits, contact your local Social Security office. Click here for contact information for the office nearest you. Or visit the Social Security Administration’s website at www.ssa.gov for answers to many frequently asked questions.

You can also contact ATPE Governmental Relations at government@atpe.org or (800) 777-ATPE (2873).

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