CSU employees do not pay Social Security taxes. Because of this, employees are not eligible for Social Security benefits (see the exceptions discussed below). Because your earnings from CSU are not covered under Social Security, employees are mandated to participate in one of the following retirement programs:
• Colorado Public Employees Retirement Association (PERA)
• The Defined Contribution Plan (DCP)
• Colorado Student Employee Retirement Plan (SERP)
One of these plans will serve as your “Social Security replacement” when you retire.
An important special case is those employees who have had many years of service outside of CSU. They may have accumulated enough credits to qualify for Social Security benefits. In this situation, a law called the Windfall Elimination Provision (WEP) reduces the amount of Social Security that you can receive. AARP explains the intent of WEP as follows, “people who got both a pension from non-Social Security work and benefits from Social Security-covered work were enjoying an unfair ‘windfall’ due to technicalities of how benefit amounts are calculated.”
Another factor comes into play if your spouse is eligible for Social Security benefits based on your work history, In this case, your university pension may affect your spouse’s benefits. A law called the Government Pension Offset (GPO) covers this situation.
To complicate things a bit more, CSU employees can avoid the WEP-based Social Security benefit reduction if they withdraw their contributions and interest before they are eligible to receive such a pension. The Social Security Administration clarifies the importance of the withdrawal date as follows, “if you withdraw your contributions and interest after you are eligible to receive such a pension, SSA treats the withdrawal as a lump-sum pension and your Social Security benefit is subject to the WEP. It makes no difference whether you are working in Social Security-covered or non-SS-covered work before you are eligible for your Social Security benefit. The rule turns on whether you are eligible for the pension from the non-SS-covered work.”
As usual, there are a number of details that vary from person to person. The good news is that you don’t have to sort all of this out on your own. Guidepost Financial Planning has experience advising CSU employees on their retirement plans and other financial matters and we’re located right here in Fort Collins. Please visit our website or give us a call at 970.419.8212 so that we can discuss your financial goals in a no-charge, no-obligation initial meeting.
This article is for informational purposes only. This website does not provide tax or investment advice, nor is it an offer or solicitation of any kind to buy or sell any investment products. Please consult your tax or investment advisor for specific advice.