Q: I’m confused about my 35 years of CSRS Offset and Social Security [SS] pensions. Can you honestly estimate how much will I get in monthly pensions from both CSRS and Social Security? My current income is $103,623 per year. I was born in June 1950 and I still work in DoD.
A: First of all, let me reassure you that it is possible to get an accurate estimate of your annuity and exactly what the offset amount will be.
You first need to go to your HR office for an annuity estimate. They are tasked with the responsibility of providing an estimate for you. Keep in mind that what they will give you is an estimate; OPM has the final say in what your annuity will actually be, but agency estimates can be extremely accurate, providing they have all the information at hand.
Offset retirements are computed just like a full CSRS annuity is calculated. That figure is then reduced by the amount of the SS benefit that is based on the individual’s Offset service only.
The offset amount is the lesser of: the difference between the full SS benefit with offset service and the SS benefit without the offset service time included, or the full SS benefit amount multiplied by a factor that is determined by an employee’s total offset service divided by 40.
|The full SS benefit with offset earnings||$1,225|
|SS benefit w/o offset earnings||$102|
|Difference||$1,123 (potential offset amount)|
Offset service from 03-05-1984 to 10-31-2012 equals 28 years, 7 months and 26 days of service. SSA rounds on a 6 month basis, so in this example, the offset service would be 29 years…..divided by 40 gives a factor of .725.
|The full SS benefit with offset earnings||$1225|
|$888 (potential offset amount)|
Because the offset amount is the lesser of the two computations, it will be the full SS benefit multiplied by the factor or $888. It is almost always the calculation using the factor that results in the smaller offset amount.
Based on the information provided in the original question, I will tell you that a person whose average salary is $100,000 and who has 35 years (no months) of service would be entitled to a yearly unreduced annuity of $66,250. The factor that is applied to the annual salary changes with each month of service and includes credit for any unused sick leave. Only full years and months of service are used to calculate the annuity. Odd days are lost.
For an individual with 35 years of Offset service, the factor applied to the full SS benefit would be .875 (35 ÷40 = .875). You would apply the factor of .875 to your full Social Security benefit for the amount of reduction to your Offset annuity. You can get a very accurate Social Security figure from their web site by signing up for the annual statement.
The law states that if a person “is eligible” to receive SS benefits, their annuity will be reduced. It does not matter that they may not be drawing SS benefits at the time or that perhaps they are drawing on a spouse’s record.
The offset amount will be based on what the former employee is entitled to receive from SSA based on their own service record. As a result, an Offset retiree is almost “forced” to take their SS benefit at age 62 or at retirement if they retire after age 62.
There is the little SS loophole that says if you were born before 01-01-54, you can draw on your spouse’s record while letting yours grow, but this does not alter the fact that the CSRS Offset annuity will be reduced.
Bottom line, there is no way to avoid the reduction in the offset annuity. You have not indicated your marital status so I have simply included this for your information.
Debbie Vensel is a retired federal employee who worked as a Senior Adjudicator at OPM’s Retirement Operations Center. Debbie provides individual retirement consultations and is an retirement instructor for Federal Career Experts.