Ask Larry

If I Rollover The Money In My TRS Pension To An IRA, Would I Have Any Issues When Collecting Social Security?

Hi Larry,

I have been teaching for the past 20 years and I'm thinking about making a career change. I would like to roll the money in my TRS pension into an IRA. I would then begin another profession that would have me paying into social security. I already have some social security credits from previous jobs and I would plan on staying at this job for the next 15-20 years. Would I have any issues collecting social security when I retire at age 65 since I was paying into a pension as a teacher (even though the pension would have been rolled over)?

Hi,

You might. I'm assuming that you didn't pay Social Security taxes on your earnings as a teacher, in which case rolling over your TRS contributions to an IRA could potentially be counted as a lump sum distribution for purposes of the Windfall Elimination Provision (WEP). If you receive either a TRS pension or take a countable lump sum distribution from the pension plan, then assuming that your earnings were exempt from Social Security taxes it will probably cause you to receive a lower Social Security retirement benefit rate than you would otherwise get. When WEP applies, Social Security uses an alternate less generous calculation method to determine a person's benefit rate. Social Security treats countable rollovers as a distribution in lieu of a pension, and the lump sum amount is prorated into a monthly rate for WEP calculation purposes.

However, if you withdraw only your own contributions to the TRS plan plus interest and you do so before you meet the eligibility requirements for a TRS pension, then the withdrawal would likely not count for WEP purposes (https://secure.ssa.gov/apps10/poms.nsf/lnx/0300605364). For more information on WEP and its exceptions, refer to the following Social Security publication: https://www.ssa.gov/pubs/EN-05-10045.pdf.

Best, Jerry

Posted: 
Nov 11 2019 - 4:56pm
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