The interaction of Social Security and CalPERS can be very complicated depending on your employers and whether or not you paid into Social Security in all previous employment.
CalPERS Pension Calculation
The first $133 of earnings is not counted towards retirement for those covered by Social Security. Keep in mind that many government employees such as many state employees are not covered by Social Security.
Social Security Retirement Income
If you paid into social security for all CalPERS employment, you will receive 100% of your Social Security benefits. When you are planning your retirement, add in Social Security income depending on when you will collect Social Security.
One strategy to consider is to take advantage of CalPERS temporary annuity, where you get an increased monthly benefit for a set number of years in exchange for a permanent reduction in CalPERS benefits after the end of the temporary annuity. It’s possible to exchange the income loss from the temporary annuity with Social Security as early as age 62. Keep in mind that Congress has changed Social Security many times, and that it may act to change Social Security benefits again. Also, Social Security benefits may be reduced in the future because more money will be given out as benefits than being collected via employment.
Medicare Health Insurance
If you’re in a CalPERS health insurance plan for retirees, you will be required to enroll in Medicare when eligible. This provision also affects those who are younger than Medicare’s normal eligibility age of 65 that become eligible due to Social Security disability income.
Windfall Elimination Provision – WEP
Those who did not pay into Social Security on CalPERS covered employment income will experience a reduction in their Social Security benefits. Under no circumstances will the WEP reduce your income below zero. The Windfall Protection Provision does not affect your CalPERS benefits in any way.
If you are subject to WEP but have previous employment covered by Social Security, your benefit will be about half of what’s forecast in your annual Social Security earnings statement.
Government Pension Offset – GPO
Widows or spouses collecting Social Security benefits may face a reduction or elimination due to collecting benefits from CalPERS if the CalPERS employment was not covered by Social Security.
Currently, there are several bills in Congress that will repeal the WEP and GPO. Many of the information in this article may change over time due to future legislation.