Social Security

Pensions and Social Security Benefits

Many people have questions about how their pension plans or their 401K plan interface with Social Security. With many private pension and 401k plans, the contributors paid Social Security taxes on the funds that went into the plan. When Social Security taxes were paid up front, there is no impact on Social Security retirement benefits.

The situation is different for those with government pensions or for those who spent some or all of their careers working in a foreign country. The key is whether your government job deducts Social Security taxes (FICA) from your wages. In the past, many state and municipal governments did not participate in FICA. When those employees retired, they were eligible for their state or municipal pension but not for Social Security Retirement benefits. Today, most states have 218 agreements with the Social Security Administration that subject employees to FICA withholding. That means employees will be eligible for Social Security benefits as well as their state pension. More information for government employees can be found here.  

With federal civil service workers, the key is when they began working for the federal government. Prior to 1987, federal civil service employees were covered by the CSRS (Civil Service Retirement System). Social Security taxes were not deducted from their wages. That meant, the years they were employed by the civil service did not count toward Social Security Retirement. In 1987, the system changed. All federal employees hired after the effective 1987 date are covered by the Federal Employees Retirement System (FERS). FERS deducts Social Security taxes from pension contributions, so the employee does not lose Social Security Retirement benefits. Retired employees with years under the CSRS system may have their benefits reduced because of the years covered by the CSRS did not deduct FICA. Military pensions and military pay are subject to FICA, so retired military personnel will be able to receive both their military pension and their Social Security Retirement.

 

Tags:

This website has been prepared for general information purposes only. The information on this website is not legal advice. Legal advice is dependent upon the specific circumstances of each situation. Also, the law may vary from state-to-state or county-to-county, so that some information in this website may not be correct for your situation. Finally, the information contained on this website is not guaranteed to be up to date. Therefore, the information contained in this website cannot replace the advice of competent legal counsel licensed in your jurisdiction.

Search