Should My Wife Withdraw From Her Teacher's Pension Plan?

Jan 16 2017 - 5:45am

My wife taught in Illinois from 1976 to 1986. We have NOT started to take her TRS pension. Do we have the option of exiting the TRS benefit program by requesting a refund of her contributions, with the goal of eliminating social security WEP and GPO reductions? And if so, does that make sense since her spousal benefits will be greater than her TRS benefits?
Thanks,
Ron

Hi Ron,

I'm not familiar with the Illinois TRS program, but I'm assuming from your question that your wife's earnings there were exempt from Social Security taxes. In that case, she may be able to avoid the effects of WEP (https://www.ssa.gov/pubs/EN-05-10045.pdf) and GPO (https://www.ssa.gov/pubs/EN-05-10007.pdf) by withdrawing her contributions and forfeiting her pension rights BEFORE becoming eligible for the pension. However, if she already meets all of the eligibility requirements for the non-covered pension, a withdrawal would be considered as a lump-sum in lieu of a pension, and could still result in WEP and GPO reductions.

Withdrawing contributions may not be the best choice in any case. There is a WEP guarantee provision that would limit the amount of reduction to your wife's own Social Security benefit rate to no more than roughly half of the amount of the non-covered pension, and the GPO offset to spousal and widow's benefits is 2/3rds of the amount of the non-covered government pension. Therefore, it may be more advantageous in terms of overall income for your wife to take the TRS pension rather than forfeiting her pension rights.

The maximization software available on this website is programmed to handle the effects of both WEP and GPO, so your wife may want to consider using the software to determine her best course of action.

Best, Jerry