Will I Get Both My Social Security and Federal Annuity COLAs?

By on November 26, 2013 in Current Events, Retirement with 29 Comments

Will you receive both a Social Security COLA and a COLA for your federal annuity?

If you are receiving both benefits, the answer is “yes,” the full COLA increase will be applied to each in accordance with the provisions of the regulations of the Office of Personnel Management (OPM).

Social Security and the various Federally administered pensions (or annuities) are independent of each other.  That is, there is no right of “offset” among them.

Here is an example: You are mistakenly overpaid in your Federal annuity.  Social Security cannot reduce your payments to remedy this.  There are, however, two noteworthy exceptions to this general rule: the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO).

Windfall Elimination Provision (WEP)

This was a money-saving measure enacted in 1983.  It provided that if a person receives a pension from both a non-Social Security source and Social Security, the Social Security is reduced.  The first tier percent in the formula for the old-age benefit becomes 40% instead of 90%.  Example: a low earning person has been receiving an annuity.  Then he starts receiving a Social Security old-age benefit that would be, say, $620, which is 90% of $688; the 90% is changed to 40%, thus dropping the dollar amount of his benefit to $275.  The reduction is permanent.

As severe as the above might seem, there are safeguards:

  • The WEP reduction cannot be more than one-half the other pension
  • For 2013, the dollar amount of the reduction cannot exceed $395.50
  • If the person has 30 years or more of “substantial earnings” he is exempted from WEP.  (This exemption is phased in, starting with 21years.)
  • FERS retirees are not affected by the Windfall Elimination Provision, nor are those receiving a disability pension.

You can read the full explanation for more and there is also a calculator available online.

Government Pension Offset (GPO)

Like WEP, GPO became law in 1983, to save money.

If you receive a pension from a federal, state, or local government based on work where you did not pay Social Security taxes, your Social Security spouse’s benefit may be reduced.

Your spousal benefit will be reduced by two-thirds of your government pension.  In other words, if you get a monthly civil service pension of $600, two-thirds of that, or $400, must be deducted.  In this case, if your spousal benefit would otherwise be $500, you will receive ($500 – $400), or $100.

As with WEP, FERS employees are not affected by GPO.

There is a bill under consideration in both houses of Congress to repeal both the WEP and GPO.  This happens in nearly every session of Congress.  Just as in the past, it is not expected this bill has a realistic chance of becoming law.

Reference |  Online calculator

© 2016 Robert F. Benson. All rights reserved. This article may not be reproduced without express written consent from Robert F. Benson.

About the Author

Robert Benson served 35 years in various Federal agencies, as both a management analyst and IT specialist. He is a graduate of Northwestern University.

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