Social Security Administration Windfall Elimination Provision & Government Pension Offset Windfall...
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Transcript of Social Security Administration Windfall Elimination Provision & Government Pension Offset Windfall...
Social Security AdministrationSocial Security Administration
Windfall Elimination Provision&
Government Pension Offset
Windfall Elimination Provision&
Government Pension Offset
Today’s Objectives
Fifteen minutes from now you will know:
• If I will be eligible for retirement benefits
• How my benefits are figured
• If I am eligible for Spouse or Survivor benefits
• If I will be eligible for Medicare
• If I will be eligible for retirement benefits
• How my benefits are figured
• If I am eligible for Spouse or Survivor benefits
• If I will be eligible for Medicare
And Those Pesky Offsets
• One reduces your own benefit
• The other reduces any benefits you might be due on your spouse’s Social Security record
• You will learn why they were enacted.
• One reduces your own benefit
• The other reduces any benefits you might be due on your spouse’s Social Security record
• You will learn why they were enacted.
Two Important Points
If you have 40 credits you will be eligible for a monthly retirement benefit
If you have paid Social Security taxes for fewer than 30 years, your benefit will be reduced
If you have 40 credits you will be eligible for a monthly retirement benefit
If you have paid Social Security taxes for fewer than 30 years, your benefit will be reduced
How We Figure Your Benefit
Based on your highest 35 years of wages
Not high 3 or last 5
Based on your highest 35 years of wages
Not high 3 or last 5
Windfall Elimination Provision
Social Security is not a pension plan but a Social Insurance plan. As such, it has “social” goals, among which is to:
Social Security is not a pension plan but a Social Insurance plan. As such, it has “social” goals, among which is to:
Raise the standard of living for lower income workers
Raise the standard of living for lower income workers
How We Do This
• A weighted
benefit formula
• Lower income workers receive a higher rate of return
• A weighted
benefit formula
• Lower income workers receive a higher rate of return
How Social Security Determines Your BenefitHow Social Security Determines Your Benefit
Social Security benefits are based on earnings
Step 1 Your wages are adjusted for changes in wage levels
Step 2 Find the monthly average of your 35 highest earnings years
Step 3 Result is “average indexed monthly earnings”
If your average monthly earnings are = $5,200Then your monthly benefit would be = $1,919
Average Monthly Earnings $5,200
90% of First $711 = $639
32% of Earnings over $711 through $4,288 $3,577 = $1,144($4,288-$711=$3,577)
15% of Earnings over $4,288 $912 = $136($5,200-$4,288=$912)
$5,200$1,919
If your average monthly earnings are = $5,200Then your monthly benefit would be = $1,919
Average Monthly Earnings $5,200
90% of First $711 = $639
32% of Earnings over $711 through $4,288 $3,577 = $1,144($4,288-$711=$3,577)
15% of Earnings over $4,288 $912 = $136($5,200-$4,288=$912)
$5,200$1,919
Retirement Benefit Computation ExampleRetirement Benefit Computation Example
Non Covered Earners Look Poor
The addition of all those “zero” years give non covered earners an artificially low average wage
But you’re not “low wage earners”
A non covered employee is not the kind of low-income worker the weighted benefit formula is trying to compensate
A non covered employee is not the kind of low-income worker the weighted benefit formula is trying to compensate
Modified Formula
The Windfall Elimination Provision says we must refigure your benefit giving you the 40% (average) return rate instead of the 90% (low income) return rate
The Windfall Elimination Provision says we must refigure your benefit giving you the 40% (average) return rate instead of the 90% (low income) return rate
Social Security Statement
It is inaccurate if you are a non covered employee
Exception to the Windfall Elimination Provision (WEP)
WEP recognizes the more years a non covered wage earner has paid Social Security taxes, the closer you should be to the standard benefit formula
WEP recognizes the more years a non covered wage earner has paid Social Security taxes, the closer you should be to the standard benefit formula
30 years = standard formula with 90% as return rate
21-30 years = modified formula with return rate between 40-85%
20 years or less = full WEP formula w/40%
30 years = standard formula with 90% as return rate
21-30 years = modified formula with return rate between 40-85%
20 years or less = full WEP formula w/40%
The Other Offset
It’s called “Government Pension Offset” (GPO)
GPO takes two-thirds of your non covered pension and deducts that from any spouse / survivor benefit you might be due
Key To Understanding GPO
Dependent benefits
Consider history of spouse’s benefits under Social Security
Dependent benefits
Consider history of spouse’s benefits under Social Security
Social Security: Yesterday
• One spouse worked
• The other spouse did not work outside the home
• One received a Social Security check
• The other received a “dependent” spouse benefit
• One spouse worked
• The other spouse did not work outside the home
• One received a Social Security check
• The other received a “dependent” spouse benefit
Social Security: Today
Both spouses work and pay into Social Security. Since both work neither is “dependent”
Both spouses work and pay into Social Security. Since both work neither is “dependent”
Unless One Was a Non Covered Employee … Before “GPO”
If one spouse was a non covered employee…They received their own non covered pension … ANDa “dependent” Social Security benefit.
If one spouse was a non covered employee…They received their own non covered pension … ANDa “dependent” Social Security benefit.
GPO Insures Fairness
GPO treats covered and non covered workers the same way.
The rule states you cannot get a dependent benefit unless you are dependent.
GPO treats covered and non covered workers the same way.
The rule states you cannot get a dependent benefit unless you are dependent.
Medicare & Non Covered Pension
• Even if you are not paying Social Security tax, most of you are paying Medicare tax.
• Even if Social Security is reduced because of WEP, Medicare is unchanged.
• For those who do not pay Medicare tax, you may be eligible on a spouse’s Social Security earnings record.
• Even if you are not paying Social Security tax, most of you are paying Medicare tax.
• Even if Social Security is reduced because of WEP, Medicare is unchanged.
• For those who do not pay Medicare tax, you may be eligible on a spouse’s Social Security earnings record.
Alternate Retirement Program
• Hired After 07/13/1990: Covered under Social Security = No WEP
• Hired Before 07/13/1990: Employee decided to be Covered or Not Covered under Social Security = All or Partial WEP
ARP Account Value
Value of Account:
• Effective Day of Termination (regardless of when funds are actually disbursed)
• Based on Mandatory Contributions Only (do not include voluntary contributions)
Account Value Verification
• TIAA-CREF: 1-800-842-2776
• ING: 1-800- 584-6001
• ING took over State of Connecticut contract 01/01/06
Monthly Pension Amount
• Life Expectancy Tables Determine a Monthly Pension Amount
• For Covered and Non-Covered Employees = Pension is Prorated
WEP Effective Date
• First Month Entitled to Both Social Security and Pension Based on Non Covered Employment
QuickEasySecure
QuickEasySecure
Social Security OnlineSocial Security Online
www.socialsecurity.govwww.socialsecurity.gov
How Apply For Benefits
www.socialsecurity.gov
1-800-772-1213
Local Social Security Office
www.socialsecurity.gov
1-800-772-1213
Local Social Security Office