Social Security
ISD's 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 eligible for a government pension such as that
provided by TRS who are also eligible for 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 or
widow/er 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 only
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 received one
credit for every $1,050 of earnings on which they paid Social Security taxes
in 2008. Since 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 or widow/er benefit. Typically, spousal benefits are equal
to 37 percent to 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 percent to 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 a spousal or widow/er Social Security
benefit and their own TRS pension benefit are subject to the GPO. The GPO
reduces the amount such educators are eligible to receive as a spousal or
widow/er Social Security benefit by two-thirds of the amount of their TRS
pension benefit. In many cases, this results in a negative amount so these
educators do not receive spousal or widow/er benefits. (See PDF chart for
illustration.).
(See PDF chart for
illustration.)
Why does the GPO affect Texas
educators?
Social Security spousal and widow/er 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 or widow/er benefit even though he or she 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 or widow/er 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 or widow/er 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?
As of July 1, 2004, House Resolution (HR) 743 stipulates that employees
who work in a position covered by both Social Security and the government
pension system for the last five years before retiring are exempt from the
GPO. HR 743 also includes a transitional rule that would allow educators
with previous employment in an entity that paid into both Social Security
and TRS to count that time toward the five years required to gain
exemption from the GPO. For example, if an educator worked three years
during her career in a district that paid into both TRS and Social
Security, that educator would only have to work her last two years before
retirement in a district that paid into both systems in order to receive
the exemption. However, the transitional rule cannot reduce the amount of
time required to receive exemption from the GPO to less than one month and
will only be effective until April 1, 2009.
Anyone who applied for spousal or widow/er Social Security benefits before April 1,
2004, can gain exemption from the GPO by working their last day before retirement in a position covered by both
Social Security and their government pension system (TRS).
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 members 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 benefit.
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 $761 of the AME by 90 percent. The next $4,586 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
$761 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).
The percentage increases from 40 percent 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 $761 of
his AME multiplied by 40 percent, whereas a person with 26 years of
substantial earnings will have the first $761 of his AME multiplied by 70
percent, and so on up to 30 years. Once a person reaches 30 years of
substantial earnings he or she 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
amounts 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 to prevent providing employees, such as Texas
educators, who haven’t paid into Social Security with a higher percentage
of their pre-retirement earnings than that given to 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
or not 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
may 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.
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 may 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.
Click here for an indepth analysis of the
debate surrounding this issue.
What is the PSRPA?
PSRPA stands for Public Servant Retirement Protection Act. It is a bill authored by U.S. Rep. Kevin Brady (R-The
Woodlands) that attempts to address the inequities of the WEP. The PSRPA would repeal the WEP and replace it with
a new formula that attempts to treat public-sector employees the same as private-sector employees by including all
earnings in the calculation of Social Security benefits rather than only those covered by Social Security. The
idea is to eliminate the arbitrary formula of the WEP and accurately reflect the earnings histories of public
employees. This would eliminate the need for the WEP and provide modest benefit increases for most employees
affected by it. The bill also contains a hold harmless provision that would prevent any employee from receiving a
smaller benefit than they would have received under the WEP.
Although the PSRPA would not be as advantageous to educators as total repeal of the WEP, ATPE supports the bill as
a step in the right direction. Attaining our goal of full repeal of the GPO and WEP is a complicated matter that
requires a well-planned strategy. Our support of the PSRPA is part of that strategy and should not be misconstrued
as an alternative to full repeal. Dozens of bills seeking to address GPO and WEP issues have been filed in the
past, but none have ever made it out of committee to be considered on the House or Senate floor. Passage of the
PSRPA would not only lend legitimacy to an issue that is largely ignored by Congress, but it would also provide a
legislative vehicle that ATPE and our congressional supporters could use to pass amendments that address the GPO
and bring us closer to our goal of a full repeal of both offsets.
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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