Q: Most questions about WEP have centered around federal employees retiring under CSRS. I am a federal employee with 11 years of service under FERS. As a result, I have paid Social Security on my previously earned income. If I leave federal service now, I should get an annuity of 1 percent of the high-three, times the number of years of service. Figure about $11,000 per year.
I am considering accepting a job with the United Nations in Europe. Based on the literature, the United Nations income is paid on a “net basis” with the “gross-net” differential going toward funding a pension program. No money is paid to U.S. Social Security. When I look at the information from the Social Security Administration, it looks like I am subject to the WEP unless I have at least 30 years of income that has been subject to FICA. However, there is a clause that says that you are not subject to the WEP if you are federal employee hired after 1983. So, I am confused. Does the clause assume 30 years of service? If I take the job, will my U.S. Social Security be reduced due to the WEP (assuming I work at the United Nations for 20 years)?
A: Because you were first hired after Dec. 31, 1983, under a retirement system where you paid Social Security taxes (FERS), you are exempt from the windfall elimination provision.
8 Comments
Your answer about first federal hire date and FERS retirement system as a basis for WEP exemption is correct, but there can be exception, for those with less than 30 years of substantial social security earnings. For example, I begin a medical residency (intermittent employment) 7/01/86 at a VA medical center where both FICA taxes and Retirement contributions were elected to NOT be taken out of my wages. (My retirement code at that time was FICA, 2.)
In 1990 and thereafter, I began full-time, VAMC employment earning 4.5 years of FERS civilian service, and prior to resigning in 2014, placed a FERS civilian service deposit for a portion of this non-deduction, intermittent residency time (1986-88). So technically my FERS Deferred Annuity received at age 62 years, was based on wages where FICA taxes were not paid by virtue of a service deposit. When I applied for social security benefits at age 62 years, I was advised by the (SSA) that I would be subject to WEP. Was this a mistake by SSA ?
According to the Social Security Administration, “If you work for an employer who doesn’t withhold Social Security taxes from you salary, any retirement or disability pension you get from that work can reduce your Social Security benefit. Such an employer may be a government agency or an employer in another country.” For more information about how this works, go to https://www.ssa.gov/pubs/EN-05-10045.pdf.
Reg, Thank you for your excellent and timely response. I am familiar with the Social Security Publication 05-10045 (Windfall Elimination Provision) that you referenced, and you are quite correct that the first paragraph of this publication reads precisely what you stated. “…..can reduce your social security benefits.”
However, within that same publication, on the same first page, there is a bold header titled “Some exceptions.”
“The Windfall Elimination Provision doesn’t apply if you are a federal worker first hired after December, 31, 1983.”
As I read this latter statement, it raises a legitimate reason why the WEP may not be applicable. However, no matter how one ultimately chooses to interpret this statement, it does read that the first federal hire date may provide an exception to the WEP.
Workers first hired after December 31, 1983 were covered by CSRS Interim (Social Security and a reduced CSRS contribution). On January 1, 1987, FERS became law. All those who were covered by CSRS Interim were converted to FERS and those hired on or after that date were also covered by FERS. However, any employee who returned to government service and had at least 5 years of CSRS coverage were placed in CSRS Offset. When they retire, they will receive a CSRS annuity that will be offset by Social Security when they reach age 62, whether or not they apply for that benefit.
The information about the first federal hire date is correct, but this topic can get unnecessarily more complicated, if the federal worker, first hired after 1983 and prior to 1987, does not elect to withhold retirement contributions from their federal salary. Such a worker could not be CSRS (interim), because no retirement contributions were being paid to that retirement system. In such a case, the worker could be assigned a retirement code classification, called FICA or (2), denoting a single system of deductions only for social security.
However, after 1986, this non-deduction service time would convert to FERS, provided the employee reactivated this service time (allowed prior to 1989), by a future civilian service deposit.
The possible significance of this minutiae, could provide a possible WEP exemption, based on first federal hire date, as the employee would originally be entirely covered by FERS with no CSRS or CSRS-interim coverage.
According to OPM:
“Creditable civilian service for making a coverage determination is any service that would be creditable under CSRS, even if this service was not covered by CSRS deductions or if deductions have been refunded. For the purpose of the 5-year test, it includes all potentially creditable service, such as service performed under another retirement system, which would be creditable if any necessary deposit were made.”
Of that there is no manner of doubt –
No probable, possible shadow of doubt –
No possible doubt whatever.
Sir William Schwenck Gilbert
If the first federal hire date is after 12/31/83 (CSRS interim) and then is automatically converted to FERS on (1/87), and the same employee subsequently returns to work a few more years later under FERS to qualify for a deferred annuity at age 62 years. The question is what retirement system is this employee and can the deferred annuity be subject to WEP?
I thought the answer should be FERS and No WEP correct ?.
That employee is in FERS and not subject to the windfall elimination provision.