Hi- I retired from the Federal Gov't in August 2017 at the age of 63 under CSRS Offset. OPM is taking almost $300 out of my annuity that they claim Social Security directed them to deduct due to the Offset. I had 15 years with the gov't and about 15 years working as a 1099 contractor. Nine of the 15 years was after I returned to the government as CSRS Offset status, paying into SS. So there were only 6 years of me not paying SS. I was also told that I will be further penalized when I do start collecting social security. Why are they taking the $300 out of my small $1400/mo annuity and where is that money going? And why will my SS benefits, which will also only be about $1400/mo be further reduced when I start collecting? Under CSRS we do not pay into SS but that was only a short period of time. I'm so confused. The OPM advisor said he has only seen this happen two other times in the 10 years he's been there. Any advice or assistance will be greatly appreciated!
My expertise is limited to Social Security benefits, so I'm not fully familiar with CSRS Offset rules. However, my understanding is that CSRS calculates benefit rates for CSRS Offset employees in the same manner as it does for other employees, but when a CSRS Offset employee reaches age 62 their benefits are reduced by the value of the Social Security benefits they earned while covered under CSRS Offset. The reduction in the person's CSRS pension applies even if the employee has not yet applied for their Social Security benefits. Such monetary reductions are not paid to Social Security, but instead simply remain in the CSRS trust fund. For more information on this provision, refer to page 7 of the following OPM publication: https://www.opm.gov/retirement-services/publications-forms/pamphlets/ri8....
If any portion of your CSRS pension is based on earnings on which you did not pay Social Security taxes, then when you file for your Social Security benefits your Social Security benefit rate could be subject to reduction due to the Windfall Elimination Provision (WEP). However, there is a WEP guarantee provision that would limit the amount of your reduction to a maximum of one-half of the portion of your CSRS pension that's based on your non-covered Social Security earnings, so if your earnings were only exempt from Social Security taxes for a short period of time the reduction in your Social Security rate caused by WEP will likely be relatively small (https://www.ssa.gov/pubs/EN-05-10045.pdf).