United States
Office of Personnel Management
Retirement and Insurance Service
Benefits Administration Letter
Number: 98-110
Date: May 15, 1998
Subject: Social Security Administration Mailing of the Personal Earnings and Benefits Estimate Statement (PEBES)
Background: Congress mandated that the Social Security Administration (SSA) send all workers an annual Personal Earnings and Benefit Estimate Statement (PEBES) by fiscal year 2000. SSA has been phasing in the mailing since April 1995. By the end of this calendar year, all workers aged 47 and older should receive a PEBES. Beginning in October 1999, the mailings will become an annual process and will expand to include all workers age 25 and older. It is important to note, however, that the statements are not adjusted for the Windfall Elimination Provision or the Government Pension Offset, which may mislead some employees about future benefits.
Purpose: The purpose of this Benefits Administration Letter (BAL) is to alert you to this mailing and assist you to inform employees who are eligible to transfer to the Federal Employees Retirement System (FERS) in the upcoming open season about it by providing you with a sample employee letter. We believe the information will help eligible employees make their decisions about transferring to FERS. All employees who are eligible to transfer to FERS should be made aware that the statement he or she receives is not adjusted for the Windfall Elimination Provision nor does it take into account the impact of the Government Pension Offset Provision. The attached sample employee letter has been developed in coordination with SSA. At a later date, we will provide you another sample letter that can be given to all your employees, including those already covered by FERS.
Employees who need a PEBES in connection with making a FERS transfer decision can visit SSA's web site at www.ssa.gov to request one. This will provide them with a quick turnaround, usually 2-4 weeks. As an alternative for employees who want to request an earnings statement by mail, attached to this BAL is the "Request for Earnings and Benefits Estimate Statement", SSA-7004, that employees may use to request a PEBES. We encourage you to reproduce this form for use by employees who choose not to use the web site to request a PEBES by mail but make them aware that SSA's response will take longer than a response to an Internet request. The employee letter also refers to attachment of SSA's information sheets A Pension From Work Not Covered By Social Security and Government Pension Offset. Copies of the information sheets are attached.
Mary M. Sugar, Chief
Agency Services Division
Retirement and Insurance Service
Attachments
Sample Employee Letter
Do you expect to receive a Social Security benefit some day? If you do, this letter has information for you.
Have you received a Personal Earnings and Benefit Estimate Statement (PEBES) from the Social Security Administration (SSA) recently, even though you don't remember asking for this information? If you received a PEBES that you didn't ask for, it is because SSA began sending them to workers in 1995. If you were born in 1944 or earlier, you should already have received a PEBES.
If you were born in the years 1945-1951, you should receive a PEBES in 1998 in the quarter of the month of your birth. For example, if you were born in September 1945 and have never requested a PEBES, you should automatically receive a statement during the July - September 1998 quarter. People born in 1952 thru 1959 will receive PEBES during fiscal year 1999. SSA plans to speed up issuing those statement, so you will receive a PEBES during the October 1998-March 1999 time period. Beginning in fiscal year 2000, the mailings will become an annual process and will expand to include all workers age 25 and older.
If you have enough credits under Social Security to be eligible for a retirement benefit (40 or more credits), your PEBES will show an estimated benefit amount. If you are currently covered by the Civil Service Retirement System (CSRS) or have CSRS Offset coverage (which is a combination of CSRS and Social Security) the benefit amount shown on your PEBES may not be correct. This is because you may be affected by a part of the Social Security law known as the Windfall Elimination Provision, or WEP, which is not accounted for in the amount shown on a PEBES. (Note: This also applies to employees who don't currently have CSRS coverage, but who expect an annuity in the future that is based totally or in part on past CSRS coverage. However, the WEP does not apply to employees who have only had coverage under the Federal Employees Retirement System (FERS)).
During the period July 1 to December 31, 1998, there will be an open season in which employees who are covered by CSRS and CSRS Offset, as well as certain employees who currently have only Social Security coverage, will have the opportunity to transfer to FERS. Since Social Security is a part of FERS, transferring to FERS to avoid or minimize the impact of the WEP will be a consideration for some CSRS-covered employees. You will be receiving more information about the FERS open season by June 15. And of course, any substantial earnings you have after you leave Federal employment will reduce the impact of the WEP.
The Windfall Elimination Provision
This provision of law reduces Social Security benefits for workers who have less than 30 years of "substantial coverage" under Social Security and who have earned a retirement benefit from employment not covered by Social Security; for example, CSRS service. (In 1998, the amount needed for substantial coverage is $12,675. In contrast, the amount needed to earn four credits of coverage in 1998 is $2,800.) If you are subject to the WEP, your Social Security benefit will be figured using a modified benefit formula that will result in your benefit being lower than the amount that is shown on your PEBES.
Example: Suppose that your average indexed monthly earnings for Social Security are $1000. The regular formula for computing Social Security benefits produces a benefit of $567 per month. However, when the full windfall reduction is applied, the monthly benefit becomes $354.
The attached information sheet, A Pension From Work Not Covered By Social Security, provides more information about the WEP. It has been provided by the Social Security Administration.
You can easily approximate the impact of the WEP on your Social Security benefit by using the following table. It shows how the PEBES for a person reaching age 62 in 1998 or later can be adjusted to reflect the WEP in most cases by subtracting a specified amount from the age-62 or age-65 benefit estimate. The amount to be subtracted depends on the number of years of substantial Social Security earnings you will have acquired by the time you begin to receive Social Security benefits. Even though you may not be close to age 62, this method will give you an idea of the potential impact of the WEP on your benefit.
| Years of Substantial Earnings | Retirement at Age 62 | Retirement at Age 65 |
|---|---|---|
| 30 or more | $ 0 | $ 0 |
| 29 | 19 | 24 |
| 28 | 38 | 48 |
| 27 | 58 | 72 |
| 26 | 77 | 96 |
| 25 | 96 | 120 |
| 24 | 115 | 144 |
| 23 | 134 | 168 |
| 22 | 154 | 192 |
| 21 | 173 | 216 |
| 20 or less | 192 | 240 |
Example: If you have 23 years of substantial earnings and expect to begin receiving your Social Security Benefit at age 62, you should subtract $134 from the amount shown on your PEBES.
Can I Avoid the WEP Reduction? Maybe. The primary way to avoid the WEP reduction is by accumulating 30 years of substantial earnings that are covered by Social Security. If you have CSRS Offset coverage, you already have Social Security coverage.
The Government Pension Offset
The Government Pension Offset, or GPO, is a second provision of the Social Security law that affects many Federal employees. It affects workers who are entitled to a pension based on work in a Federal, State, or local government that was not covered by Social Security, such as CSRS. It also affects employees who transfer to FERS, but do not work for 5 years under FERS. The GPO does not affect employees who were required by law to have Social Security coverage -- such as employees who were automatically covered by FERS without electing it, and people with CSRS Offset coverage.
The GPO affects the Social Security benefits you may be entitled to as a spouse, former spouse, or surviving spouse of someone who is eligible for a full Social Security benefit. Under the GPO, your Social Security spousal benefit will be reduced by $2 for every $3 you receive from your CSRS annuity. Your own PEBES will not give you information about the impact of the GPO. You need to review your spouse's PEBES, which will give you information about your spousal benefit and adjust that amount.
Example: Suppose you are eligible for a $600 Social Security spousal benefit, and that you receive a CSRS annuity of $1,200 a month. The GPO would be two thirds of your monthly $1,200 CSRS benefit, or $800. Since the offset amount is larger than your $600 Social Security benefit, your Social Security benefit would be eliminated.
Can I Avoid the Government Pension Offset? Maybe. If you leave Federal service and return to a CSRS-covered appointment after more than 365 days, you would be required by law to have Social Security coverage, so you would have CSRS Offset coverage. In this case, you would be exempt from the GPO. In addition, employees who transfer to FERS and work for 5 or more years under FERS are exempt from the GPO. The FERS open season information you will receive by June 15 will have more details about this option.
The attached information sheet, Government Pension Offset, provides more details about the GPO. It has been provided by the Social Security Administration.
Computing Your Own Benefit
SSA has a web site at www.ssa.gov that contains a wealth of information, including a benefit estimate program for personal computers. It is an interactive program that works on IBM PC's and compatibles running Microsoft Windows operating system version 3.1, Windows 95, or Windows NT version 3.5 or 4.0. It computes the WEP. Since past earnings are required by the program, if you have a PEBES, you should use the earnings shown on it. If you don't have a PEBES, you may be able to estimate your past earnings reasonably well. If you don't want to do this, you can request a PEBES as follows.
Requesting a PEBES
If you think you will need a PEBES to help make a decision whether to transfer to FERS, the fastest way to obtain one is to visit www.ssa.gov to request one online. This will provide you with quick turnaround, usually 2-4 weeks. You may also use the attached Request for Earnings and Benefits Estimate Statement, SSA-7004, to request a PEBES by mail. However, using the paper request will take longer.
If you have questions concerning the information contained in this letter or need to request additional information, please contact (agency fill in contact person).
Updated 14 May 1998