We have recently received several questions from government employees about their getting access to Social Security retirement and disability benefits. Most of them were not pleased with what they found out. In an effort to make the answers to these questions more available, we are addressing them here.
What do you get (or what don’t you get) from the government
If you’re a government employee, you may get nothing from Social Security. Funding for disability and retirement benefits comes out of the FICA tax withheld from your paycheck by your employer. A worker is entitled to Social Security disability or retirement benefits only after paying into Social Security for 10 years. That is a total of 40 quarters for which a worker has covered earnings (earnings from which FICA taxes were withheld). What many people don’t know is that the majority of non-covered positions (jobs where FICA is not withheld) are held by government employees. Many government employers do not withhold FICA taxes from their paychecks.
Are you covered?
A recent congressional publication shows that 73% of state and local government employees are covered by Social Security, but that coverage varies from state to state. In New York, 97% of local employees are covered by Social Security. But, in Ohio only 3% of state and local employees are covered. Don’t make the mistake of assuming you fall within the 73% of people covered. Depending on your state, you probably don’t.
The Impact of Working in Non-covered Employment
If you work for an employer who does not withhold FICA taxes from your salary, such as a government agency, and you have no other covered employment, you should expect nothing from Social Security in retirement or disability benefits. However, if you are eligible for some Social Security under your own record or your spouse’s record, there are some catches you should know about.
The government deals with non-covered private employer pensions and any Social Security benefits you may be eligible for through one of two programs: Windfall Elimination Provision or the Government Pension Offset.
Windfall Elimination Provision (WEP)
This provision affects you when you earn a pension from an employer who didn’t withhold FICA tax and you qualify for Social Security retirement or disability benefits from covered earnings in previous jobs where you paid FICA taxes. Typically Social Security benefits are calculated based on a formula that gives you a percentage of your average monthly earnings. When you qualify under the WEP, a separate calculation is used to decrease the percentage of your average monthly earnings you will receive as a retirement or disability benefit. “That’s OK, right?” you ask. “I can get benefits from my spouse’s record.”
Government Pension Offset (GPO)
The answer to your question is “Not necessarily.” The government thought of that too. If you receive a pension from a federal, state, or local government based on non-covered work and spouse’s, widow’s or widower’s benefits, they will be reduced. This reduction happens under a provision called a Government Pension Offset. When your situation qualifies under the GPO, your benefits are reduced by 2/3 of your private pension. If, for example, you were to receive a private pension of $600, two-thirds of that ($400) must be deducted from your Social Security benefits. So, if you are eligible for $500 in spouse’s, widow’s, or widower’s benefits from Social Security, you will receive $100 per month from Social Security.
If you have worked for a government employer at any level (federal, state, or local) you should find out whether FICA tax is being withheld from your paycheck. If it is not, you need to start seriously considering how you will handle a disability situation or your retirement, because there will not be monies from Social Security on which you will be able to rely.
If you have any questions about your specific situation, we would like to help. Call our office at 801.890.1030 to speak with one of our experienced Social Security attorneys or use the free consultation form on our home page to send us your questions and concerns.
Gary Sidor, Social Security: The Government Pension Offset (GPO), CONGRESSIONAL RESEARCH SERVICE
(April 23, 2014) https://www.fas.org/sgp/crs/misc/RL32453.pdf.
Social Security Administration, Windfall Elimination Provision, SSA PUBLICATION NO. 05-10045, (last
visited April 20, 2015), http://www.ssa.gov/pubs/EN-05-10045.pdf.
Social Security Administration, Government Pension Offset, SSA PUBLICATION NO. 05-10007 (last visited
April 20, 2015), http://www.ssa.gov/pubs/EN-05-10007.pdf.