President Reagan's proposal to eliminate "windfall" Social Security benefits for federal and postal workers and millions of state and local government employes will not reduce any civil service or Social Security payments being received by people already retired.
The changes Reagan is asking Congress to make would generally become effective next January. Although not designed to encourage anyone to retire, the proposals could stampede thousands of federal workers, already eligible for "windfall" level benefits, to get out this year before the law is changed -- if it is changed.
Details of how the plan would affect current federal workers will be out in a few days. The Social Security Administratin anmd the Office of Personnel Management are working up examples. We will pass them along in ths space. Stay tuned.
Meantime, this is what the Reagan proposal -- part of a sweeping overhaul of the Social Security system -- would mean to federal, postal and public employes who now qualify for some sort of Social Security benefit, or who planned to seek other jobs after leaving government to earn eligibility for Social Security benefits.
Under current law it is possible for federal and postal workers (and others outside the Social Security system) to spend a full career in their public jobs and to earn Social Security cvoverage either before they went to work for government, afterward or while working at a second job that is covered by Social Security. Some high-salaried feds have retired, taken well-paying jobs in industry and worked just long enough to qualify for Social Security benefits that are much higher than those for low-paid workers who spent their entire careers in the private sector working longer and paying more into the Social Security fund.
Reagan's plan would affect future retirees. This is what the social security briefing fact sheet said:
"The benefit formula now makes it possible for a person, such as a retired federal employe, who enteres Social Security-covered employment for only a few years to receive disproportionately high benefits, in some cases exceeding those paid to low-wage earners who have spent a lifetime in covered employment."
To correct that, the administration proposes to have the Social Security formula take into account "pension sources from noncovered employment" such as the pension from the civil service retirement fund to determine how much Social Security such an individual would get. The effect in many cases would "sharply lower" the Social Security benefit due the federal or postal worker.
The changes won't cut benefits for people already retired, nor affect those of people who retire before the law is changed. It will not take away future Social Security benefits earned, or earned in future. But it would lower benefits for many, by eliminating the "windfall" portion, for persons who had counted on getting federal pensions and maximum Social Security benefits for relatively short-term service under Social Security. They can still quit government and qualify for Social Security benefits. But amounts would be reduced based on what they were getting in civil service (or other non-social-security type) retirement payments.
This is complicated stuff. Don't rush out and retire tomorrow. But do keep an eye on the progress of the bill through Congress. Stay informed! If it looks as if the bill in its current form is likely to become law then, and only then, many long-service feds may want to retire before the rules change.