How does our pension affect our social security?

Social Security has two provisions that could possibly affect a pension benefit they are:

  1. The Windfall Elimination Provision and
  2. The Government Pension Offset

Each are explained in detail on their website at www.ssa.gov. For more information on computing your Social Security benefit call the Social Security office at 1-800-772-1213.

The April 2004 Employees Retirement Fund active member newsletter, contained the following article and examples on the subject:

City employees, that have worked outside of the City often ask, “How will not contributing to Social Security as a City employee affect my Social Security benefit?”

Social Security uses the Windfall Elimination Provision (WEP) to compute benefits for retired and disabled workers with a pension from non-covered employment. Non-covered employment refers to employment where Social Security taxes were not deducted from employee’s pay.

The WEP uses a modified benefit formula when computing a retired or disabled worker’s benefit if the worker also receives a pension based in whole, or in part, on his/her pension from non-covered employment.

Permanent City employees contribute 6.5% every pay period to the Employees’ Retirement Fund instead of Social Security.

Social Security benefits are based on a worker’s average monthly earnings. Social Security separates a worker’s average earnings into three amounts and multiplies the figures using three factors. For example a worker who turns 62 in 2004 and will retire with only a Social Security benefit:

  • the first $612 of their average monthly earnings is multiplied by 90%
  • the next $3,077 is multiplied by 32%
  • the remainder is multiplied by 15%

Under the Windfall Elimination Provision, Social Security uses a modified formula in which the 90 percent factor is reduced to 40 percent (See example in the right margin). Benefits are reduced using the modified WEP formula, but they are never totally eliminated.

Social Security Benefit Formula

1. SSN Benefit & no ERF Pension 2. ERF Pension & SSN Benefit
John is 62 years old and will retiree in 2004. He worked and contributed wages to Social Security for 30 years.

John’s average monthly salary computed for his Social Security benefit is $3,700.

Step 1. $ 612 x 90% = $550.80

Step 2. $3,077 x 32% = $984.64

Step 3. $11 x 15% = $1.65

Monthly salary $3,700

Gloria is a 62 year old City retiree with a monthly pension of $2,025. She worked outside the City for 10 years.

Her average monthly income computed for her Social Security benefit is $1,000.

*Step 1. $612 x 40% = $244.80

Step 2. $388 x 32% = $124.16

Step 3. $0 x 15% = 0.00

Monthly salary $ 1,000

Total monthly SSN Benefit $1,537.09 Total monthly SSN Benefit $ 368.96

Total monthly ERF Pension $2,025.00

Total monthly Benefit $2,393.96

*There are exceptions to the WEP. If a worker has 30 or more years of “substantial” earning in a job where Social Security taxes were paid the 90 percent factor is not reduced. If a worker has 21 to 29 years of substantial earnings the 90 percent factor is reduced between 45 and 85 percent.

For more information on computing your Social Security benefit call the Social Security office at 1-800-772-1213.

Are there property tax exemptions for residents of Dallas County over the age of 65?

You will qualify for this exemption on the date you become age 65. This exemption includes a school tax limitation, or ceiling. You must submit proof of age. Acceptable proof includes a copy of the front side of your driver’s license, or a copy of your birth certificate. You may not receive both this exemption and the Disability Exemption. If you qualify for both exemptions, you must choose one. The Over-65 Exemption is generally the better choice, since it qualifies for a school tax ceiling. In addition the Over-65 Exemptions and the school tax ceiling may be transferred to another property if you change your primary residential status to that property.

Who Qualifies for disability homestead exemption?

You must meet all of the qualifications for the General Residential Homestead Exemption outlined above and you must be under a disability for the purposes of payment of disability benefits under the Federal Old-Age, Survivor’s and Disability Insurance Act. Or, you must have met the definition of disabled in that act on January 1 of the year for which you are applying. You must submit proof of disability which includes a current printout from Social Security showing that you are disabled and the date on which your disability began. You may also submit a current letter of verification from your physician stating that you are disabled, giving the date your disability began, and that you are unable to engage in any substantial gainful work for a period which has lasted or can be expected to last for a continuous period of a year or more. You may not receive both this exemption and the Over-65 Exemption.

Does a surviving spouse still receive the homestead exemption after the qualified spouse dies?

If qualified, you will receive an extension of your spouse’s Over-65 exemptions and the school tax ceiling. In order to qualify, your deceased spouse must have been receiving the Over-65 Exemption on this residence homestead or would have applied and qualified before the spouse’s death. You must have been 55 years of age or older on the date your spouse died and death must have occurred on or after December 1, 1987. You must submit proof of age and proof of death of your spouse.

Why don’t City retirees get the same raise as active employees?

Retirees and active employees are paid by different systems. Retired employees are paid by the Employees Retirement Fund under the rules governing the Fund. (The Employees plan is not in any way connected with the Police and Fire Pension Plan, either) Active employees are paid by the City of Dallas.

What is meant by base pension?

Base pension is the monthly amount you received when you first retired rather than what you were receiving this year. If you retired in 1980, say, your base pension probably is about 56% of what you are receiving now per month.

Is the price index used to determine our cost-of-living the same as used for Social Security?

No. Social Security is adjusted with the National Consumer Price Index as at September 30 each year. The Dallas Retirement Fund uses the index published by the Department of Labor for the Dallas-Fort Worth area.

Can Medicare beneficiaries file for replacement cards “on line”?

Medicare beneficiaries can file for replacement cards on the Social Security Administration Web site, according to William A. Halter, deputy commissioner of Social Security. The Internet address is www.ssa.gov.

“Medicare beneficiaries will now be able to apply for a replacement Medicare Card at their convenience,” said Halter. “We are pleased to partner with the Health Care Financing Administration (FWCA) to make obtaining a replacement Medicare Card easy and convenient for beneficiaries.”

Applicants using SSA’s web site to request a replacement card will fill out the online form and send it electronically to the agency. SSA uses the highest commercially available encryption to ensure that a beneficiary’s confidential information is secure as it travels over the Internet. Requests will be forwarded each day to the HCFA which will process the requests and mail the new cards to beneficiaries, interested individuals can go directly to www.ssa.gov/medicarecard, the location for the replacement Medicare card application form. Currently, Medicare beneficiaries can apply for a replacement card by calling the Social Security Administration’s toll-free number or visiting one of SSA’s 1,300 field offices . SSA processes approximately 750,000 requests annually for a replacement Medicare Card.