How Will My Social Security Be Affected If I Work For 3 To 6 Years In Employment Not Covered By Social Security?

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Nov 16 2019 - 10:23am

I am 64 years old. I plan to work for another 2-4 years (6 years maximum). I have never worked in a government position before. I am interviewing for a position covered under OPERS and for which social security will not be taken. I will most likely retire before achieving 5 years of vesting in OPERS. Financially, how bad is that decision? will I be able to receive a refund of the 10% of earnings I contribute to OPERS (although I won't be there 5 years)? Other than reducing the amount of my Social Security benefit at full retirement age (because I am not contributing to SS for the last 3-6 years of my career) what will the impact be to my social security benefit?

Hi,

As long as you don't end up receiving a pension (or a lump sum distribution in lieu of a pension) based on your work that was exempt from Social Security taxes, your Social Security benefit rate will not be affected by the Windfall Elimination Provision (WEP). Even if you did receive a non-covered pension, though, you would be exempt from any WEP reduction if you have at least 30 years of Social Security covered earnings of substantial earnings as defined by the WEP provision. For a list of the annual substantial earnings amounts, refer to page 2 of the following Social Security publication: https://www.ssa.gov/pubs/EN-05-10045.pdf.

If you do end up receiving a pension based on your work that's exempt from Social Security taxes, it would cause your Social Security benefit rate to be reduced unless you meet an exception to WEP. WEP results in an alternate, less generous, benefit calculation method to be used in computing a person's Social Security retirement benefit rate. However, there is a WEP guarantee provision that limits any reduction to a person's benefit rate to basically no more than half of the person's non-covered pension amount.

Aside from WEP, as you mentioned your earnings from work where your wages are exempt from Social Security taxes can't be used in the calculation of your Social Security benefit rate. Any such earnings would count for earnings test purposes, though, so if you claim Social Security benefits prior to full retirement age (FRA) your earnings could result in some or all of your benefits being withheld until you reach FRA depending on how much you earn.

My expertise is limited to Social Security, so I can't answer your question about whether or not you could receive a refund of your contributions to OPERS. However, if you did receive such a refund it would not cause any WEP reduction to your Social Security benefit rate provided that a) only your own contributions plus interest are refunded, b) the refund is made before you become eligible to receive a pension, and c) you forfeit all rights to a pension.

You may want to strongly consider using our software (https://maximizemysocialsecurity.com/purchase) to do your Social Security planning. Our software can give you an accurate estimate of your Social Security benefit rate with and without WEP involvement, and it could also help you determine your best strategy for claiming your benefits.

Best, Jerry