Employment in a Job Not Covered by Social Security

Teachers' Retirement System of Louisiana, Optional Retirement Plan, and Louisiana State Employees' Retirement System

You are now working for an employer who does not withhold Social Security Taxes. When you retire or become disabled, you may receive a pension based on your earnings from this job. If you do, and you are also entitled to a benefit from Social Security based on either your own work or the work of your husband or wife, or former husband or wife, your government pension may affect the amount of the Social Security benefit you receive.

Under Social Security law, there are two ways your Social Security benefit amount may be affected. One is the "government pension offset" and applies only if you received a government pension and are eligible for Social Security benefits as a spouse or widow(er). The other way - the "windfall elimination provision" - affects how your retirement or disability benefits are figured if you receive a pension from work not covered by Social Security. The formula used to figure your benefit amount is modified, giving you a lower Social Security benefit.

Windfall Elimination Provision:

Who is Affected?

The modified formula applies to you if you reach 62 or become disabled after 1985 and first became eligible after 1985 for a monthly pension based in whole, or in part, on work where you did not pay Social Security Taxes. You are considered eligible for a pension if you meet the pension requirements, even if you continue to work.

How does it work?

Social Security benefits are based on the workers' average monthly earnings adjusted for inflation. We separate your average earnings into three amounts and multiply the amounts using three factors. For example, for a worker who turns 62 in 2002, the first $592 of average monthly earnings is multiplied by 90%; the next $2,975 by 32% and the remainder by 15%.

The 90% factor is reduced in the modified formula and phased in for workers who reached age 62 or became disabled between 1986 and 1989. For those who reach 62 or become disabled in 1990 or later,the 90% factor is reduced to 40%.

There are exceptions to this rule. The 90% factor is not reduced if you have 30 or more years of "substantial" earnings for each year. If you have 21 or 29 years of substantial earnings, the 90% factor is reduced to between 45% and 85%.

Government Pension Offset Provision:

Under the Government Pension Offset Provision, any Social Security spouse or widow(er) benefit to which you become entitled will be offset if you also receive a pension based on work where you did not pay Social Security tax. The offset reduces the amount of your Social Security benefit by 2/3 of the amount of your pension. You may receive a monthly pension high enough to totally offset your spouse or widow(er) Social Security benefit.

For More Information

Social Security publications and additional information, including information about exceptions to each provision, are available at www.socialsecurity.gov. You may also call toll-free 1-800-772-1213, or contact your local Social Security Office.