I’ve commented before how surprised I am that a high percentage of emails I get come from the relatively small group of people in this country who don’t even pay into Social Security. Most of those questions come from retired or soon-to-be retired educators in those states where teachers have a separate retirement system other than Social Security.
And I have written maybe 100 columns over the years explaining the offsets that apply to those folks if they have worked on the side paying into Social Security or if they have a spouse who is covered by Social Security. And I’m not going to go over that topic again today. (If you want to become an expert on the issue, spend 10 bucks and get my book called “Social Security: Simple and Smart.” One of the chapters in that book explains those offsets as simply as I know how.)
I also am not dealing today with another employer group not covered by Social Security: railroad workers. For reasons a little too complicated to explain here, a separate pension system was set up for employees of our nation’s railroads at about the same time as Social Security was started.
In today’s column, I’m going to explain how Social Security rules affect another large group of public employees: those who work for the federal government. But before I do that, I have to give a bit of a history lesson.
When the Social Security laws were first passed in 1935, Congress figured that federal government employees did not need to be covered by the new program. Why? Because federal employees were already covered by the civil service retirement system. That retirement program has been around since 1920.
Congress also decided that they could not force a federal pension plan (Social Security) on state and local government employees, so they gave them the option to join Social Security or not. Most did.
And over the years, other state and local groups who did not originally join Social Security eventually signed on to the program. But to this day, there are still large blocks of state and local employees, like the aforementioned teachers in some states and firefighters and police officers in other states, who are not covered by the Social Security system. (They constitute about 20 percent of all state and local government workers.)
OK, now back to federal government employees and Social Security. To repeat, they were not included in the original Social Security Act because they already had their own pension plan that had been around for 15 years before Social Security got started.
But over the years, Congress felt an increasing amount of pressure to bring federal employees into the Social Security fold. There were two main reasons. First, you could make the case that all workers in the country should be covered by the same retirement system. (Although to be true to that philosophy, you would then have to make all state and local workers and all railroad workers part of the Social Security program, too.)
But reason No. 2 was the bigger factor: Federal government employees, members of Congress, and the judiciary and the president did not pay into Social Security. They were covered by the same civil service retirement system as all other federal employees. And it was politically embarrassing for politicians to be making laws about a retirement program (Social Security) that they were not a part of.
This led to all kinds of conspiracy theories that top members of government get fat and lucrative pensions while scattering crumbs to the peasants in the form of meager Social Security benefits. This was never true. But millions of Americans believed it then and many still do today.
Anyway, by the 1980s, the political pressure to bring federal employees into the Social Security tent was too great. So in 1983, a law was passed saying that all federal employees hired after Dec. 31, 1983, would be covered by the Social Security system. At the same time, the law decreed that effective Jan. 1, 1984, all members of Congress, the president, the vice president, and federal judges would also start paying into Social Security. (So let’s get rid of the myth that politicians are not covered by Social Security. Again, since 1984, they have been.)
The new retirement program that Congress set up was called the Federal Employees Retirement System, or FERS. And they gave all old government employees hired before 1984 the option of switching from the Civil Service Retirement System to FERS.
By the way, I was one of those people. I was hired in 1973. I remember that I struggled mightily with that decision. Should I stick with CSRS or switch to FERS? (There were some advantages—too complicated to explain here—to making the switch.) I finally decided to stay with CSRS. And frankly, to this day, I’m not sure I made the right move. I had several friends who switched to FERS, and now that we are all retired, it looks to me like they are a little better off than I am. But that’s my problem, not yours.
Anyway, FERS employees had Social Security taxes taken out of their paychecks, and they also had an extra deduction from their salary to fund a federal retirement benefit designed to supplement their Social Security checks. So old federal retirees like me get just one CSRS pension check each month. But those retirees who are covered by FERS get a Social Security check and a smaller FERS pension check. (Smaller than CSRS pension checks, that is. But the intent of the program was that a combination of Social Security and FERS benefits should roughly equal what CSRS retirees were getting.)
Earlier in this column, I mentioned some offsets that affect state and local government workers, like teachers in some states. They are called the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO). Both those offsets also affect federal CSRS retirees, but usually not FERS retirees. And as I also mentioned earlier, to understand how these offsets work, get my book, “Social Security: Simple and Smart,” and read the chapter dedicated to WEP and GPO.
