Q: Will my military retirement pension reduce my Social Security? I heard that a government pension could reduce SSA benefits.
A: Your military retirement pension will not reduce your Social Security benefit. Current military personnel pay SSA taxes and earn Social Security coverage. Earnings for active duty service or active duty training have been covered employment since 1957. Earnings for inactive duty service in the reserves, such as weekend drills, have been covered since 1988. As with other employment covered by Social Security, military employment is posted automatically to your SSA record without any action needed by you. In addition to retirement, military employment provides coverage for SSA disability and survivor benefits.
Most pensions have no impact on Social Security benefits because they are based on work that is covered by Social Security. However, a government pension from work that was not covered by Social Security can affect the amount of your SSA benefit. This involves all levels of government and dates to 1983 legislation signed by President Reagan.
For example, until 1984 Federal government employment was under the Civil Service Retirement System (CSRS) and not covered by Social Security. If you worked for a Federal agency with CSRS coverage, you did not pay Social Security tax on your earnings and those earnings are not on your SSA record. Since it is a government pension based on work not covered by Social Security, a CSRS pension affects SSA benefits.
In 1984, the Federal Employees Retirement System (FERS) began. People starting Federal employment in 1984 or later are covered by FERS, as are some who switched to FERS from CSRS. Work under FERS is covered by Social Security so a FERS pension does not affect SSA benefits.
A pension from any level of government can affect SSA benefits if the work was not covered by Social Security. Depending on the state, not all state employees are covered by Social Security. Local government entities, such as a school district, might not have SSA coverage. If you are covered only by your state or local pension plan and do not pay Social Security taxes on your earnings, that government pension will likely affect any SSA benefits to you. Sometimes a government pension from another country could be involved.
If your employment is covered by Social Security, a pension from it is unlikely to impact your SSA benefits. Most employment is covered by Social Security. Most pensions do not affect SSA benefits.
A government pension from work not covered by Social Security could affect your Social Security in two ways. The first, called the Windfall Elimination Provision, involves benefits payable to you on your own SSA record. The second, called the Government Pension Offset, involves benefits payable to you based on the SSA record of someone else.
More about these in the future.
Note that the Social Security Administration will not routinely know if you are eligible for a government based pension from work not covered by Social Security until you file an application for benefits. As a result, benefit estimates you have received may not have been adjusted that pension.