Hi,
What does it mean to take a lump sum distribution? I'm 61, work for a quasi-state agency that does not contribute to Social Security, and have a non-covered defined contribution plan (403(B)). Someone at Social Security suggested my benefits would not be reduced unless and until I take the lump sum distribution. I plan to work a few more years. I don't have much in Social Security benefits on my own record, so one half of my husband's Social Security would be more. He is nearly 65 but is considering waiting until 70 to collect. Could I collect on his record (and get 1/2 of his benefit) when I stop working (say, at 66) by simply not touching the funds in the non-covered account (403(B))? What happens when I have to take mandatory distributions?
Thanks!

Hi,

With regard to the Social Security WEP (https://www.ssa.gov/pubs/EN-05-10045.pdf) and GPO (https://www.ssa.gov/pubs/EN-05-10007.pdf) provisions, taking a lump sum distribution generally refers to choosing a lump sum payout in lieu of a periodic pension.

Neither WEP nor GPO apply unless and until a person actually becomes entitled to a pension based on their work that was exempt from Social Security taxes, however, 'entitlement' can include receipt of a lump sum payout or another type of non-periodic disbursement from the plan. In the case of a lump sum payout, the countable monthly amount for WEP and GPO purposes is based on a proration method.

If your defined contributions are held in a fund from which you can determine when and how much you receive in disbursements, WEP and/or GPO would generally not apply to your Social Security benefit rate until you take or receive your first disbursement from the fund. However, this is a complicated issue and must be evaluated on a case by case basis. You may want to peruse this reference from Social Security's operations manual for more information on defined contribution plans and their effect on benefits: https://secure.ssa.gov/apps10/poms.nsf/lnx/0300605364.

By the way, the maximization software available on this website is designed to handle cases involving both WEP and GPO, so you may want to strongly consider using it to determine your best course of action.

Best, Jerry