How Will My 401(a) Affect My Benefits?

Sep 25 2019 - 8:20am

I'm struggling with one question, and I can't believe my situation is that unusual, but I can't find a definitive answer.
I'm eligible to collect a benefit on my former spouse's earnings record. I, too, worked and paid into Social Security for 40 quarters but my former spouse always made much more than me. I was told by Social Security the amount of the benefit I would be eligible to collect when I quit my job soon.
However, for the past 17 years I've worked for a municipality and have a 401(a) not (k). I have no intention on drawing on that, at least for a few years when I'm required to take RMD. Will simply having that account--even though I do not take withdrawals or payments alter the benefit amount I'm entitled to. And will that adjustment be by one-half or two-thirds?
Thank so much for the awesome website and the books--

Hi,

I'm assuming that you didn't pay Social Security taxes on your earnings while you worked for the municipality. In that case your own Social Security benefits would likely be subject to the Windfall Elimination Provision (WEP) once you start taking distributions from your 401(a). And, if you file for divorced spousal benefits those benefits would likely be subject to at least a partial offset due to the Government Pension Offset (GPO) provision.

There are a number of technicalities involved when determining when WEP and GPO first apply in the case of a defined contribution plan, but usually no reduction or offset is applicable until you start taking distributions from your account (https://secure.ssa.gov/apps10/poms.nsf/lnx/0300605364#b).

WEP results in the use of a less generous benefit computation formula when calculating Social Security retirement benefits. However, the benefit reduction resulting from WEP is limited to no more than 50% of your non-covered pension. In order to calculate a monthly amount for your 401(a) Social Security would likely need to prorate the total value of your account (https://secure.ssa.gov/apps10/poms.nsf/lnx/0300605364).

Assuming that you're subject to GPO, any monthly divorced spousal benefits for which you would otherwise qualify for would be offset by 2/3rds of the prorated amount of your 401(a). Our software is fully programmed to handle benefit computations involving both the WEP and GPO provisions, so you may want to strongly consider using the software to determine your best option for claiming your benefits.

Best, Jerry