- The Washington Times - Tuesday, October 1, 2002

On the first of every month Uncle Sam legally and expertly deducts millions of dollars from the Social Security checks of retired federal workers, state workers, schoolteachers and former employees of some nonprofit organizations.

Some don't know its happening. Others aren't aware that it will happen.

Each year 65,000 surprised seniors, most either former teachers or feds, join the ranks of those whose Social Security checks shrink or disappear because of the "offset" or "windfall" rules most didn't know existed.

If you are one of the above someone with a pension from work not covered by Social Security and you also expect a Social Security benefit, one of two things may happen to that benefit:

•A chunk of the Social Security benefit you've been expecting will be reduced, in some cases by as much as $270 a month. The less time you were in a Social Security-covered job the bigger the bite. If you barely qualified for Social Security (earning 40 quarters) the bite is biggest. That's called the "windfall."

•You will get little or nothing if you are also due an annuity from work (like the federal government) not covered by Social Security. That's called offset.

Although the formulas were enacted into law in the 1970s, most feds don't learn about them until retirement. The yearly benefits statements they get from Social Security don't take into account the effect of offset or windfall.

The windfall and offset formulas were imposed after it became clear some feds were double dipping by getting maximum civil service retirement benefits (for long service and high salary) along with welfare-tilted Social Security benefits designed to protect people who had low-lifetime earnings under Social Security.

But times have changed. Many members of Congress under pressure from retired schoolteachers want the offset and windfall formulas modified (to apply to only a portion of combined civil service and Social Security benefits) or eliminated.

Bills to modify the offset formula include S. 611 by Sen. Barbara A. Mikulski, Maryland Democrat, and H.R. 664 by Rep. William J. Jefferson, Louisiana Democrat. They would exempt the first $1,200 of combined monthly benefits from the formula.

Rep. Barney Frank, Massachusetts Democrat, and Sen. John Kerry, Massachusetts Democrat, have bills (H.R. 1073 and S. 2521) that would exempt the first $2,000 in combined Social Security-civil service benefits from the offset formula.

None of the bills is likely to make it on its own. Especially with the gridlock on homeland security legislation, and the growing pre-election backlog. Their only chance is to be blended into some bigger legislative package, such as an appropriations bill, that Congress can and must pass and the president can and must sign.

Otherwise the number of people many of them low-income hit by the formulas will keep getting bigger.

Pay vs. premiums

How do you pay health insurance premiums that are going up 40 percent in January when your pay raise is 4.1 percent and your civil service annuity is going up only about 1.4 percent?

Unless you are highly paid, you have two choices: You can give up something, like smoking, drinking or one meal a day, or you can change health plans. Namely change to one that's only going up around 11.1 percent, which is the average increase next year.

The good news for federal workers is they still have nearly a dozen choices, from fee-for-service plans to health maintenance organizations. And they will have an open season in November and December to shop around. The good news for retirees is that they will pay the same premiums and have the same choices as working feds.

But both groups will need to shop around. During the open season we'll have a series of columns based on experts' opinions about which are the best plans for singles, couples, big families, retirees with and without Medicare and individuals or families with special medical needs.

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