Social Security Administration

1. Social Security Administration Windfall Elimination Provision & Government Pension Offset

2. Today’s Objectives Fifteen minutes from now you will know: • If I will be eligible for retirement benefits • How my benefits are figured • If I am eligible for Spouse or Survivor benefits • If I will be eligible for Medicare

3. And Those Pesky Offsets • One reduces your own benefit • The other reduces any benefits you might be due on your spouse’s Social Security record • You will learn why they were enacted.

4. Two Important Points • If you have 40 credits you will be eligible for a monthly retirement benefit • If you have paid Social Security taxes for fewer than 30 years, your benefit will be reduced

5. HowWe Figure Your Benefit Based on your highest 35 years of wages Not high 3 or last 5

6. Windfall Elimination Provision Social Security is not a pension plan but a Social Insurance plan. As such, it has “social” goals, among which is to: Raise the standard of living for lower income workers

7. How We Do This • A weighted benefit formula • Lower income workers receive a higher rate of return

8. How Social Security Determines Your Benefit Social Security benefits are based on earnings Step 1 Your wages are adjusted for changes in wage levels Step 2 Find the monthly average of your 35 highest earnings years Step 3 Result is “average indexed monthly earnings”

9. Retirement Benefit Computation Example If your average monthly earnings are = $5,200 Then your monthly benefit would be = $1,919 Average Monthly Earnings $5,200 90% of First $711 = $639 32% of Earnings over $711 through $4,288$3,577 = $1,144 ($4,288-$711=$3,577) 15% of Earnings over $4,288$912 = $136 ($5,200-$4,288=$912) $5,200 $1,919

10. Non Covered Earners Look Poor The addition of all those “zero” years give non covered earners an artificially low average wage

11. But you’re not “low wage earners” A non covered employee is not the kind of low-income worker the weighted benefit formula is trying to compensate

12. Modified Formula The Windfall Elimination Provision says we must refigure your benefit giving you the 40% (average) return rate instead of the 90% (low income) return rate

13. It is inaccurate if you are a non covered employee Social Security Statement

14. Exception to the Windfall Elimination Provision (WEP) WEP recognizes the more years a non covered wage earner has paid Social Security taxes, the closer you should be to the standard benefit formula • 30 years = standard formula with 90% as return rate • 21-30 years = modified formula with return rate between 40-85% • 20 years or less = full WEP formula w/40%

15. The Other Offset It’s called “Government Pension Offset” (GPO) GPO takes two-thirds of your non covered pension and deducts that from any spouse / survivor benefit you might be due

16. Key To Understanding GPO Dependent benefits Consider history of spouse’s benefits under Social Security

17. Social Security: Yesterday • One spouse worked • The other spouse did not work outside the home • One received a Social Security check • The other received a “dependent” spouse benefit

18. Social Security: Today Both spouses work and pay into Social Security. Since both work neither is “dependent”

19. Unless One Was a Non Covered Employee … Before “GPO” If one spouse was a non covered employee… They received their own non covered pension … AND a “dependent” Social Security benefit.

20. GPO Insures Fairness GPO treats covered and non covered workers the same way. The rule states you cannot get a dependent benefit unless you are dependent.

21. Medicare & Non Covered Pension • Even if you are not paying Social Security tax, most of you are paying Medicare tax. • Even if Social Security is reduced because of WEP, Medicare is unchanged. • For those who do not pay Medicare tax, you may be eligible on a spouse’s Social Security earnings record.

22. Hired After 07/13/1990: Covered under Social Security = No WEP Hired Before 07/13/1990: Employee decided to be Covered or Not Covered under Social Security = All or Partial WEP Alternate Retirement Program

23. Value of Account: Effective Day of Termination (regardless of when funds are actually disbursed) Based on Mandatory Contributions Only (donot include voluntary contributions) ARP Account Value

24. TIAA-CREF: 1-800-842-2776 ING: 1-800- 584-6001 ING took over State of Connecticut contract 01/01/06 Account Value Verification

25. Life Expectancy Tables Determine a Monthly Pension Amount For Covered and Non-Covered Employees = Pension is Prorated Monthly Pension Amount

26. First Month Entitled to Both Social Security and Pension Based on Non Covered Employment WEP Effective Date

27. Social Security Online • Quick • Easy • Secure www.socialsecurity.gov

28. How Apply For Benefits • www.socialsecurity.gov • 1-800-772-1213 • Local Social Security Office