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BENEFITS SUMMARY

Please note: You will need Adobe Acrobat Reader in order to open PDF documents.

- Federated Benefits Fact Sheet - Tier 1 (Effective 6/22/14) (File Size: 118kb)

- Federated Benefits Fact Sheet - Tier 2 (Effective 6/22/14) (File Size: 203kb)

- Federated Benefits Fact Sheet - Tier 2B (Effective 6/22/14) (File Size: 201kb)

- IRC 415(b) Benefit Limit Information (File Size: 170kb)

- Federated 115 Trust (File Size: 66kb)

- Return of Contributions (ROC) Fact Sheet (File Size: 73kb)


SOCIAL SECURITY REDUCTIONS

The pension that is received from a governmental agency such as the City of San José, may reduce any Social Security benefits you are eligible for, either through your previous employment in a job where you did contribute to Social Security or through the spouse's or widow's benefit.

There are two laws that may reduce your benefits. They are the:

1.) Windfall Elimination Provision - This provision affects the way your Social Security or disability benefits are figured if you also receive a pension from the City of San José.

2.) Governmental Pension Offset - This offset affects Social Security benefits that you may receive as a spouse or widow of a Social Security recipient. In other words, if you are eligible to receive Social Security benefits because you have or had a spouse who paid into the Social Security system, the pension you receive will be reduced if you also receive a pension from the City of San José.


WINDFALL ELIMINATION PROVISION

WHO IS AFFECTED BY THE OFFSET
If you have worked at a job where you paid Social Security taxes long enough to qualify for benefits for retirement or disability, your Social Security benefit will be reduced if you are also receiving a pension from the City of San José. It applies if you reach age 62 or become disabled after 1985 and first become eligible after 1985 for a monthly pension based in whole or in part on work where you did not pay Social Security taxes.

HOW YOUR SOCIAL SECURITY PENSION IS CALCULATED
If you were only receiving Social Security benefits your pension would be calculated using the unmodified formula. Depending on your age at retirement, the first $310(retirement age 70 in 1995) to $426(retirement age 62 in 1995) of your average monthly salary is multiplied by 90%, the next $1,556 to $2,141 is multiplied by 32% and the remaining amount of the monthly salary is multiplied by 15%. For example, using the unmodified formula for a worker who turns 65 in 1995, the Social Security allowance would be determined by:

Multiplying the first $387 of average monthly salary by 90%
Multiplying the next $1,946 of average monthly salary by 32%
Multiplying the remaining monthly salary by 15%
Add the total of the above computations.

If you are receiving a government pension, the formula is modified so that the first $310 to $426 of average monthly salary is multiplied by 40% instead of 90%. An example using the modified formula for a worker who turns 65 in 1995, the Social Security allowance would be determined by:

Multiplying the first $387 of average monthly salary by 40%
Multiplying the next $1,946 of average monthly salary by 32%
Multiplying the remaining monthly salary by 15%
Add the total of the above computations.

Adjustments to the Modified Formula:
If you have 21 or more years of substantial earnings in a job where you paid Social Security taxes, the percentage applied to the first $387 may increase from 45% to a maximum of 90% (with 30 or more years of substantial earnings). The amount considered substantial earnings vary by year, but for 1995 earnings greater than $11,324 are considered substantial.

The table below shows an example of how much a person's Social Security pension would be offset in 1995, assuming the person is 65 years of age in the first example and 62 years of age in the second example (the earliest that you can start collecting benefits from Social Security). The numbers listed below are approximations. You should check with the Social Security office to verify your actual benefit.


Age 65 in 1995

Average Monthly Salary
Unmodified
Modified
% of Reduction
1,000.00
544.46
350.96
35.54%
1,500.00
704.46
510.96
27.47%
2,000.00
864.46
670.96
22.38%
3,000.00
1,071.07
877.57
18.07%
4,000.00
1,221.07
1,027.57
15.85%
       


Age 62 in 1995

Average Monthly Salary
Unmodified
Modified
% of Reduction
1,000.00
453.66
283.26
37.56%
1,500.00
581.66
411.26
29.30%
2,000.00
709.66
539.26
24.01%
3,000.00
906.78
736.38
18.79%
4,000.00
1,026.78
856.38
16.60%
       

The modified formula does not apply to survivors benefits.


PURPOSE
The formula that is used to calculate Social Security benefits includes factors that ensure lower paid workers get a higher percentage of their per-retirement earnings than higher paid workers. The Social Security pensions of government workers, that had not contributed to Social Security for many years, were calculated as if they were long term low wage workers and therefore received the advantage of the higher percentage of their Social Security benefit. Therefore, the formula used to calculate your social security benefits is modified, giving you a lower Social Security benefit.


GOVERNMENTAL PENSION OFFSET

PURPOSE
The purpose of Social Security spouse's or widows benefit is to provide income to wives or husbands who have no Social Security benefits on their own. It was intended for husbands and wives who were financially dependent on their spouses. Without the offset a person who qualified for a governmental pension, such as San José's retirement plans, was also eligible to collect from Social Security even though they were not dependent on their husband or wife.


WHO IS AFFECTED BY THE OFFSET
All retirees who receive a monthly allowance from the City of San José and are also eligible to receive Social Security benefits because they are a widow or spouse of a Social Security recipient are affected.
However, the following individuals would be exempt from the offset.

  • Anyone who received or who was eligible to receive the governmental pension before December 1982 and who meets all the requirements of Social Security spouse's's benefits in effect in January 1977. (This includes divorced woman whose marriage lasted at least 20 years and a husband or widower who received 1/2 of his support from his spouse.)

  • Anyone who received or was eligible to receive a Federal, State or local government pension before July 1, 1983 and was receiving 1/2 of their support from her or his spouse.

HOW MUCH THE OFFSET WILL BE
The amount of your Social Security spouse's or widow's benefit will be reduced by
2/3 of the amount of your San José pension. For example, if you receive $1,200 monthly from San José, 2/3 of that or $800 will be subtracted from the amount that you receive from Social Security. If you are eligible to receive $900 for a widow's benefit, you will only get $100 from Social Security because of the offset. (900-800=100).

This offset will not affect Medicare benefits at age 65 if you receive them under your spouse's record.

 


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