Family Life Financial Services Inc. - Greater Lansing Financial Services

Social Security Offset Penalty
PDF Print E-mail

Social Security Offset Penalty - Family Life Financial Services

A law that affects spouses and widows or widowers

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 or widow’s or widower’s benefits may be reduced. This fact sheet provides answers to questions you may have about the reduction.

A Social Security law effective June 30, 1993 affects the spousal Social Security benefit when the spouse has earned a pension based on The Civil Service Retirement System.

A spouse who became eligible for a CSRS, CIA or Foreign Service Retirement annuity will have their spousal Social Security benefit reduced by 2/3 the amount they would have received from Social Security.

For example: If you were receiving a $1200 per month CSRS annuity your public pension offset would be $800.00. If the Social Security benefit were $800.00 or less, you would not receive anything from Social Security.

Offset Penalty

When won’t my Social Security benefits be reduced?

Generally, your Social Security benefits as a spouse, widow or widower will not be reduced if you:

  • Are receiving a government pension that is not based on your earning.
  • Are a state or local employee whose government pension is based on a job where you were paying Social Security taxes on the last day of employment and your last day was before July 1, 2004; during the last five years of employment and you last day of employment was July 1, 2004, or later (Under certain conditions, fewer than five years may be required for people whose last day of employment falls between July 1, 2004, and March 2, 2009.)
  • Are a federal employee, including Civil Service Offset employee, who pays Social Security taxes on your earnings (A Civil Service Offset employee is a federal employee who was rehired after December 31, 1983, following a break in service of more than 365 days and had five years of prior civil service retirement system coverage.); or
  • Are a federal employee who elected to switch from the Civil Service Retirement System to the Federal Employees’ Retirement System (FERS) on or before June 30, 1988. If you switched after that date, including during the open season from July 1, 1998, through December 31, 1998, you need five years under FERS to be exempt from the Government Pension Offset.