Q: I provide financial services to federal employees and have been posed with a question I have not had before. My client has recently retired under Federal Employees Retirement System and has been an Army reservist for 20-plus years. Will his reservist earnings count against his FERS supplement earnings test? If he is called to active duty, are there any other considerations? And lastly, am I correct in understanding that military or reservist retired pay does not count as earnings against the FERS supplement earnings test?
A: The Social Security earnings test applies to earnings from wages or self-employment. Having been on active duty in the armed forces and served in the reserves, I know that my pay was always treated as earned income when filing my federal and state taxes. I’m not aware of any exception that would exempt active duty or reserve pay from the Social Security earnings test.