Your CalPERS retirement benefit can affect your Social Security benefit. And your Social Security potentially can affect both the amount of your monthly pension contributions before retirement and the amount of benefits you receive after retirement.
Did you know that 33% of our retirees do not receive Social Security?
Not All CalPERS Members Are in Social Security
If you make contributions to both CalPERS and Social Security for the same employment, you’re considered “coordinated” with Social Security. Members not covered by Social Security during CalPERS-covered employment are in what we call a “full formula” plan. And members who have worked in different membership classifications or for multiple employers may fall into both categories, with some coordinated service and some full-formula service.
Impact on Your CalPERS Retirement Benefit
If you are coordinated with Social Security, you will know because you will see a payroll deduction on your paychecks. Your employee contribution rate to CalPERS is also lower than your colleague in the full formula plan. For example, for state miscellaneous members in Social Security, the contribution rate is 8%, depending on the bargaining unit. Those not covered by Social Security pay 9%.
When your service retirement benefit is calculated, if you were coordinated with Social Security, the 12- or 36-month average compensation starting point will be reduced by $133.33, because you contributed less to CalPERS than the full-formula member. This $133.33 reduction to your final compensation average is a one-time reduction and is done before your monthly pension is calculated. The reduction is not applied as a monthly reduction to your pension.
Impact on Your Social Security Benefit
There is no reduction to your CalPERS retirement benefits because you’re receiving Social Security benefits, but the reverse is not always true.
If you work for a federal, state, or local government agency where you do not pay Social Security taxes, the pension you receive from that agency could reduce your Social Security benefits.
Two laws that may impact your Social Security benefits are the Windfall Elimination Provision and the Government Pension Offset. Visit the Social Security & Your CalPERS Pension page on our website to see the relationship between the two benefits. You can also contact the Social Security Administration at (800) 772-1213 or visit theSSA website.
Plan Ahead
If you anticipate receiving a benefit from Social Security, it’s a good idea to get an estimate. You’ll find a variety of calculators on their Benefits Planner: Calculators page designed to help you plan in different scenarios. The Retirement Estimator gives you an accurate estimate based on the date you stop working. If you’re affected by the Windfall Elimination Provision (WEP), use the WEP version.
Calculating your Social Security estimate prior to submitting your application for CalPERS retirement will help you determine which CalPERS retirement option will be best for you.
Make sure you understand in advance how the two systems are coordinated. Your CalPERS retirement benefits can work very well in tandem with Social Security to provide you the income you will need during retirement.
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The article you've provided touches upon the intricate relationship between CalPERS (California Public Employees' Retirement System) benefits and Social Security. As an enthusiast well-versed in retirement benefits, let's delve into the concepts it covers:
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CalPERS Retirement Benefits: This system provides retirement, health, and related financial benefits to California public employees. It operates through member contributions and employer contributions, influencing the retirement benefits a member receives.
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Social Security Impact: Social Security benefits can be influenced by CalPERS membership and vice versa. Notably, 33% of CalPERS retirees don't receive Social Security benefits. This interplay depends on whether a member is coordinated with Social Security.
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Coordinated and Full Formula Plans: Members contributing to both CalPERS and Social Security are termed "coordinated" and have a different contribution rate compared to those in a "full formula" plan. Coordinated members have a lower contribution rate to CalPERS.
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Impact on CalPERS Retirement Benefits: Coordinated members may see a reduction in their final compensation average used for retirement benefit calculation due to lower contributions. This reduction is a one-time adjustment and not a monthly deduction from the pension.
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Impact on Social Security Benefits: Retirement benefits from agencies not paying Social Security taxes can potentially reduce Social Security benefits due to laws like the Windfall Elimination Provision and the Government Pension Offset.
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Planning Ahead: It's crucial to plan for retirement by understanding the coordination between CalPERS and Social Security. Estimating Social Security benefits beforehand and understanding the implications of different retirement options can help optimize benefits.
Understanding these dynamics helps individuals make informed decisions regarding their retirement planning, ensuring they maximize benefits from both CalPERS and Social Security.
The article provides guidance on resources such as the Social Security Administration's calculators and encourages individuals to proactively assess their potential benefits to make informed decisions about their retirement options.
