VSIP and Social Security

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Q. I am a FERS employee with 23+ years of federal service and 62 years old. My agency is offering Voluntary Separation Incentive Pay to eligible employees, including those who are retirement-eligible. Would the incentive reduce the amount of Social Security I can draw this year?

A. VSIPs are considered earned income. To find out if accepting one would affect your Social Security benefit, go to www.socialsecurity.gov/retire2/rule.htm and see how the “first year rule” would apply to your situation.

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Reg Jones was head of retirement and insurance policy at the Office of Personnel Management. Email your retirement-related questions to fedexperts@federaltimes.com.

4 Comments

  1. Roger Williams on

    I’m a retired Air Force Civilian from Sept 2015. I received a VSIP and received monthly payments for 12 months from Oct 2015 through Sept 2016.

    I retired when I was 62 and 1/2 years old and am now 64 1/2.

    Social Security is now claiming I was overpaid SS to the tune of $3,000 during that period.

    What do I need to provide them to show I did not exceed my earnings threshold?

  2. Reg–by bringing up the 1st year rule, you seem to imply a Buyout would penalize ONGOING Social Security benefits if it exceeds the earnings cap. I asked Social Security recently if it would and was told they consider that a Special Payment because it comes after separating from service in the same way as accrued Annual leave is. I did mention it would go down on a W2 under wages, and has Social Security and Medicare taxes taken from it, and was told it still would not apply to the Earnings cap. Were they telling me wrong? Has the law changed? Or am I misunderstanding your position on this issue? Thanks.

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