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Receiving
Social Security and a PERA Benefit
A PERA retiree who
receives a Social Security benefit in addition to a PERA benefit will be subject to a
reduction in his or her Social Security benefit—the PERA benefit will not be reduced.
There are two types of Social Security benefits:
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Earned benefit: |
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Paid to persons who worked enough Social Security-covered employment to
"earn" a benefit. |
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Spouse's or widow's benefit: |
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Paid to a person who is the spouse or surviving spouse of a Social
Security pensioner and who did not work enough time under Social Security to have an
earned benefit themselves or the earned benefit is less than the spouse's benefit. The
spouse's benefit is generally one-half of the benefit paid to the Social Security
pensioner. |
The type of Social Security benefit received by a person who is also
receiving a PERA benefit determines the formula used to calculate the reduction. An offset
formula is used on a spouse's benefit, and the windfall elimination formula is used on an
earned benefit.
Windfall Elimination Provision (WEP)
As explained on Social Security's Web site, before 1983,
Social Security computed benefits for those who worked in jobs not covered by
Social Security as long-term, low-wage workers. As a result, these people received a higher
percentage of a Social Security benefit in addition to their other retirement
benefit from a pension fund like PERA. To eliminate this advantage, Congress passed the
Windfall Elimination Provision (WEP).
The WEP formula reduces the Social Security benefit of a PERA retiree who is
also
receiving a PERA retirement benefit. In 2010, the maximum monthly
reduction is the lesser of $380.50 or one-half of your PERA monthly
benefit. For more information, view Social Security's
Windfall Elimination Provision
online fact sheet.
Government Pension Offset (GPO)
A Social Security benefit paid to a spouse or widow is
considered a "dependent's" benefit and was established in the
1930s to compensate spouses who stayed home to raise a family and who were
financially dependent on the working spouse. Today, it has become more
common for both spouses to work, each earning their own Social Security
or other retirement benefit from a pension fund like PERA. Under Social
Security, the law has always required that a spouse
or widow's benefit be offset dollar for dollar by the amount of each
spouse's
retirement benefit. For a PERA retiree who receives a spouse's or widow's
benefit from Social Security, the offset formula reduces the Social Security benefit by two-thirds of the dollar amount of the
PERA retirement benefit. In some cases, the offset
will entirely eliminate a Social Security benefit. For more information,
view Social Security's
Government Pension Offset online fact sheet.
If an account is withdrawn before
the member is eligible for a PERA benefit, the windfall and offset reductions
still
apply because the member is receiving some of the "employer contributions"
through the 50 percent or 100 percent matching amount on contributions and interest.
Members should always contact Social Security regarding their eligibility for benefits and
any provisions that may affect their benefit amount.
Detailed information about these provisions is available from the Social
Security Administration by calling 1-800-772-1213 and requesting pamphlets #05-10007,
"Government Pension Offset," and #05-10045, "Windfall
Elimination Provision."
View,
print, or order
a PERA & Social Security brochure.
Several Colorado PERA employers contribute to Colorado PERA and also pay the FICA tax that enables employees to qualify for a Social Security benefit. The best source of information about employers that pay the FICA tax is the
Colorado Department of Labor and Employment
Web site.
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