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Here’s the question of the day.
Question: My client worked for years for a government employer where she did not pay Social Security taxes. Will her eligibility for Social Security retirement benefits—on her own record or her spouse’s—be affected?
Answer: Yes. Both types of benefits will likely be reduced.
According the Social Security Administration’s website:
The Windfall Elimination Provision affects how the amount of your retirement or disability benefit is calculated if you receive a pension from work where Social Security taxes were not taken out of your pay. A modified formula is used to calculate your benefit amount, resulting in a lower Social Security benefit than you otherwise would receive.
The amount of the reduction depends on a number of factors.
If a person collects a government pension from an employer where they did not pay Social Security taxes, any spousal retirement benefit to which they might be entitled will also be reduced under the Government Pension Offset rule. Here’s a description:
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….
Your Social Security benefits 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 from your Social Security benefits. For example, if you are eligible for a $500 spouse’s, widow’s or widower’s benefit from Social Security, you will receive $100 per month from Social Security ($500 – $400 = $100).
If you take your government pension annuity in a lump sum, Social Security still will calculate the reduction as if you chose to get monthly benefit payments from your government work.
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