FAQs about Texas educators and Social Security benefits

No. However, all employees eligible for a government pension—such as that provided by the Teacher Retirement System (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 may be 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; however this list documents the school districts that do participate in Social Security.)

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 $1,160 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 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. Individual benefits vary depending on a number of factors. Contact your local Social Security office for complete information on which benefits you are eligible to receive.

Texas educators eligible for both a spousal or widow/er Social Security benefit and their own TRS pension benefit are subject to the Government Pension Offset (GPO). The GPO reduces the amount they 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.

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 working spouse’s Social Security earnings.

However, if both spouses worked and are eligible for 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, including 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 dependent 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 anyone from receiving both their full Social Security or pension benefit AND their spouse’s Social Security benefit. Anyone filing for spousal benefits who is not eligible for a pension would have their spousal benefits reduced by the entire amount of their personal Social Security benefit, effectively providing them with the greater of the two benefits. Those affected by the GPO, such as Texas educators, have their spousal benefits reduced by two-thirds of their pension, instead of 100 percent of their personal Social Security benefit. Simply being eligible for a pension through TRS does not preclude you from receiving spousal benefits; however, since most people’s TRS pension is greater than a typical Social Security benefit, the two-thirds reduction effectively eliminates the spousal benefit.

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. 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). 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.

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.

You will be subject to the Windfall Elimination Provision (WEP).

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 dollar amounts in the formula vary yearly according to inflation. The dollar amounts that follow are one example of a calculation for someone turning 62 in the year 2014: The first $816 of the AME is multiplied by 90 percent. The next $4,917 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 $816 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 to 30. For example, a person who has paid Social Security taxes on substantial earnings for 20 or fewer years will have the first $816 of his AME multiplied by 40 percent, whereas a person with 26 years of substantial earnings will have the first $816 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.

Keep in mind that these are examples provided for illustration purposes only, and your benefit calculations may vary.

The Social Security system figures employee 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.

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 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 rarely be more than those you receive by being eligible for both a TRS pension and Social Security spousal benefits reduced by the GPO.

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 private-sector professionals with a significant number of years vested in the Social Security system into the education profession. ATPE believes repeal of 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. ATPE has also joined forces with like-minded groups in 11 other states in the Coalition to Preserve Retirement Security (CPRS). The CPRS is a nonprofit 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.

ETPSA stands for Equal Treatment of Public Servants Act, which is the name of a bill (H.R. 711) that is currently pending before Congress. Authored by U.S. Rep. Kevin Brady (R–TX), the bill is an attempt to address inequities of the WEP. The ETPSA would repeal the WEP and replace it with a new formula that would treat public-sector employees the same as private-sector employees by basing each employee’s benefits on his or her actual Social Security contributions and work history. The idea is to eliminate the arbitrary formula of the WEP and accurately reflect the earnings histories of public employees. If passed, the ETPSA would finally put public education employees on a level playing field with all other employees in calculating Social Security benefits.

ATPE supports the ETPSA as a step in the right direction, even though it does not fully eliminate the need for a separate calculation of benefits for workers who are eligible for a government pension. Attaining our goal of full repeal of the GPO and WEP offsets is a complicated matter requiring a well-planned strategy. The primary problem with attaining full repeal is the cost; the Government Accountability Office estimates that a repeal of both provisions would cost more than $90 billion over a 10-year period. ATPE's support of the ETPSA is part of our overall goal of maximizing employee benefits 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 U.S. House or Senate floor. Passage of the ETPSA would not only lend legitimacy to an issue 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.

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.