CSRS Offset: Who Are You?

When we talk about federal benefits, we are usually talking about CSRS or FERS employees.

In most cases, employees who started government service before January 1, 1984 are CSRS employees, with a retirement benefit based almost solely on a pension.

Employees under CSRS don’t contribute to Social Security, so they don’t receive Social Security benefits unless they also worked outside the government, or have a spouse who paid into Social Security.

If that is the case, it brings up the Government Pension Offset (GPO) and Windfall Elimination Provision (WEP), which are subjects for another day.

CSRS Offset: Where Did It Come From?

Those who started working for the government after December 31, 1983 are FERS employees, with a retirement cocktail that usually consists of a pension (albeit a much smaller one than CSRS), Social Security benefits, and a TSP retirement savings account.

The FERS System was created in 1983, when an amendment to Social Security law dictated that all Federal Employees must contribute to Social Security.

Unfortunately, not every Federal Employee’s situation was quite so straightforward.

What would happen to those who were hired before 1984, took a break from government service for more than a year, and went back to work for the government after December 31, 1983?

Would they have to pay for Social Security and contribute to their CSRS annuity after returning to work? Would they get both Social Security benefits and that great CSRS annuity?

What about those who were hired before 1984 but didn’t qualify for CSRS coverage until after December 31, 1983? Were they now considered FERS employees?

Clearly, some exceptions had to be made, and the CSRS Offset system was created.

CSRS Offset = CSRS?

With CSRS Offset, Federal Employees had to pay into Social Security just like everyone else, but those who had earned five years of creditable service by December 31, 1986 would qualify for a CSRS-like pension in addition to their Social Security benefits.

The manner in which they paid for it and received it was different than typical CSRS employees, but, in the end, CSRS Offset employees wouldn’t be any worse or better off than their CSRS counterparts.

How Does it Work?

It’s actually quite simple. First, the government still withholds pension contributions from your pay, but not as much as it would from a typical CSRS employee. The difference is made up by your payments to Social Security.

CSRS Offset employees don’t pay any more to get the same benefits as their CSRS brethren, they simply receive their benefits from two different sources.

The word “Offset” comes from the balance of benefits you receive in retirement, as your government pension is offset by the amount you receive from Social Security.

A Buffet of Explanations

So there you have it. Are there a few more details and exceptions along the way? Of course!

Explaining a government program is a bit like eating at a buffet. Even when you think you’ve tasted everything, there’s always more to try.

That’s why it’s always best to speak with a federal employee retirement specialist to make sure the details of your unique situation are being addressed.

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For over 30 years, federal employee retirement planning has been a key focus of Medallion Financial Group. We recognize that FERS retirement benefits have extra layers of complexity, such as the Thrift Savings Plan (TSP), 401K, Pension plan, FEGLI and more. It’s easy to get lost in a sea of bad advice when so few people understand the basics. We help with the basics and beyond to enable our clients to get the education and advice they need to retire with confidence.

Our focus is twofold: first and foremost, we are fiduciary advisors. We stand against any violation of laws, values, and ethics. Second, we treat our clients as part of our family, not only those who call Maryland and Georgia home, but clients across the US who have benefited from our reputation of personal service, integrity, and expertise.

We strive to exceed client’s expectations – because we have high expectations of ourselves.