Founded 15 years before the Social Security program, the Civil Service Retirement System (CSRS) is a retirement plan that is available to federal employees. It was never meant to supplement Social Security benefits, rather it is a stand-alone government pension program, so federal employees can receive both the CSRS annuity and Social Security benefits.
The caveat? How much Social Security you will receive depends on the period that you worked for the government and there is something called the “Social Security Offset” which we will delve into deeper below.
CSRS 101
Founded in August 1920, the Civil Service Retirement System was instated as a contributory pension plan with pre-defined benefits. The contribution to the annuities comes from the federal employee as well as the federal agency that they worked for.
Federal workers who are subject to the CSRS contribute between 7% and 8% of their gross pay and don’t have to contribute Social Security and other taxes to the CSRS. Though they aren’t responsible for those taxes, they do have to pay 1.45% of Medicare taxes.
Employees can also contribute a portion of theory pay to the Thrift Savings Plan or TSP. With this program, employee contributions are tax-deferred, and there is no government contribution.
Eligibility for CSRS
To be eligible for CSRS, two criteria must be met—age and time served as a federal employee. Additionally, their final position held in the two years prior to retirement must be covered by the CSRS.
If you are eligible, you can receive immediate retirement benefits within 30 days of your retirement start date.
Employees may also qualify for CSRS benefits including:
- Early optional
- Deferred
- Special optional
- Disability
- Discontinued service annuities
Can a Federal Employee Receive Social Security and Get a Pension?
In 1987, the CSRS was replaced by the Federal Employees Retirement System or FERS. This program was designed to avoid duplication of benefits when federal employees wanted to receive both CSRS and Social Security without paying hefty taxes.
Now, with the FERS program, employees’ retirement is covered by Social Security. After 1983, any employees that chose to remain in the CSRS can’t receive Social Security, but they have access to Medicare due to the taxes taken out of their earnings.
What is the Social Security Offset?
If you are still confused about whether or not you can collect Social Security benefits if you have a government pension, the answer is yes. The conversion of the CSRS to FERS allows federal employees to receive both, but there is a catch.
Federal employees are still able to collect their full pension if they leave their jobs before becoming eligible for Social Security payments. But, on the day that they become eligible to receive Social Benefits, using the CSRS offset, their pension benefits will be reduced by the amount of Social Security that they have already received.
Social Security Windfall Elimination Provision
For federal retirees who were not eligible for Social Security, such as CSRS retirees, the Windfall Elimination Provision (WEP) is a formula that is used to reduce Social Security income. Its purpose is to stop government workers from receiving an unintended advantage by collecting Social Security benefits while enrolled in a non-covered pension.
If the WEP is used, it will reduce the Social Security benefits a federal employee receives by up to half the amount. The payments are reduced by a maximum of $447.50 using a revised formula, though this change is not applicable in the determination of survivor benefits.
Lean on the Federal Educators
If you need help keeping up with CSRS and Social Security benefits or are planning for federal retirement, lean on our professionals at Federal Educators. We are here to assist you in learning everything you need to position yourself successfully for retirement as a government employee.
Call us at (813) 755-7037 for more CSRS information or request a benefits analysis today!
