Does My Union Pension Affect My Social Security Disability Benefits?

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Wondering whether your union pension will impact your Social Security Disability benefit? This article will discuss the differences between a pension through a union and a pension through public/government employment such as the California Public Employees’ Retirement System (CalPERS), and how your union pension may reduce your monthly Social Security check depending on the type of pension you are entitled to. In some cases, an approval for Social Security disability can increase your pension’s

Understanding Union Pensions

Before delving into the impact of a union pension on a Social Security Disability benefit, it’s important to understand the different types of pensions, starting with union pensions. (The other types of pensions will be discussed later in this blog post. 

Also known as multiemployer pension plan, a union pension is a retirement plan collectively bargained and maintained by more than one employer, usually within the same or related industries (i.e., sheet metal workers, carpenters, hotel employees, etc.), and a labor union. These pensions are designed to provide retirement benefits to union workers who often move from job to job within the same field of employment. Union pensions do not reduce Social Security Disability benefits, because the pension was funded through a private employer.

Understanding Social Security Disability Benefits

Unlike union pensions, Social Security Disability benefits are federal benefits provided to individuals who cannot work due to a significant medical condition that is expected to last at least one year or result in death. Each worker’s benefit is based on their FICA-taxed earnings record. Once a disability case is approved, the worker is entitled to a unique monthly benefit, or PIA (Primary Insurance Amount). The PIA is not based on a percentage of the worker’s salary; rather, it is based on a complex formula devised by the Social Security Administration (SSA). 

In claims for Social Security Disability benefits, there is no partial or full disability payment amount to an entitled worker. Rather, the system represents an “all or nothing” approach to entitlements. If a case is approved, the disabled worker receives their full disability benefit amount. If a case is denied, the disability claimant receives nothing. 

Social Security Disability is often referred to as “long-term” or “permanent” disability, because a beneficiary often receives disability for years after an approval. However, it’s important to note that disability does not extend after the beneficiary reaches full retirement age (67 for people born after 1960).

Can I Qualify for Social Security Disability If I Am Drawing a Union “Retirement” Pension?

Yes, you can qualify for Social Security Disability even if you are drawing a union “retirement” pension. If you worked a union job for a private employer that withheld FICA taxes from your paychecks, you have “paid into” the Social Security system, and may qualify for disability benefits based on your work history. Social Security does not care whether your union pension is classified as a “retirement” pension, rather than a “disability” pension. The SSA has a unique set of rules and classifications for proving disability and does not confer any evidentiary weight on the receipt of a “retirement” pension. 

As a hypothetical, steelworker Steve worked for many different employers as a tradesman for the steelworker’s union. He stops working due to a medical condition and files for Social Security Disability. He also files for and receives his union retirement pension. Because he paid FICA taxes through his various employers through the union, his union pension does not impact his Social Security disability benefit. He can receive both his union pension and his full Social Security disability payment simultaneously.

However, in a second hypothetical, steelworker Steve worked for many years as a government employee. Instead of withholding FICA taxes through Steve’s W-2 income, Steve paid into the Federal Employees Retirement System (FERS). He also worked for several years for a private company as a steelworker. Since Steve has a “non-covered” pension through FERS and is also eligible for Social Security due to his “covered” employment with a private company, his Social Security disability may be affected. This is due to the Windfall Elimination Provision (WEP).

Congress passed the Windfall Elimination Provision  to reduce Social Security benefits for workers who also receive a non-covered retirement pension (usually through state and local government jobs). This prevents “windfalls” for workers who receive a pension through public employment and also paid SSA federal income taxes through a covered job. Before the WEP was passed in 1983, workers who earned a pension through a non-covered government job and also paid Social Security taxes received a higher Social Security benefit based on the complex formula for calculating a worker’s benefit. Essentially, these types of workers had their Social Security benefit calculated as if they were low-wage, long-term workers, who typically receive a higher retirement benefit as a percentage of their earnings. Therefore, an individual who receives a pension received a “windfall” from the more advantageous Social Security calculation. 

This reduction is not applicable to everyone and depends on several factors such as the type of pension and the amount of time worked in a job paying Social Security taxes.

It should be noted that this provision only applies to about 1 percent of retired workers. The WEP also does not apply to federal employees hired after December 31, 1983, employees of nonprofit organizations exempt from Social Security coverage on December 31, 1983, railroad pensioners, or those with over 30 years of substantial earnings for Social Security covered employment. 

If you are wondering whether the Windfall Elimination Provision will reduce your Social Security benefit, use this online calculator on the Social Security website.

Understanding CalPERS: Pension System for California State Employees

Another type of pension is CalPERS, or the California Public Employees’ Retirement System. CalPERS is the pension system for California employees. It provides retirement and health benefits to more than 1.6 million public employees, retirees, and their families. The system is funded by contributions from members and employers, as well as investment earnings. CalPERS manages the largest public investment fund in the United States.

Who is eligible for CalPERS, and how does it work?

CalPERS is available to all full-time state and public agency employees, school employees, and some part-time employees. Employees contribute a portion of their salary to the fund, which is matched by the employer. Upon retirement, members receive a defined benefit, which is a lifetime monthly retirement benefit based on their years of service, age, and final compensation. 

CalPERS and Social Security Disability

A pension from CalPERS may impact Social Security benefits, depending on whether the CalPERS employment was “coordinated” with Social Security. A CalPERS plan is “coordinated” if the worker pays into both CalPERS and Social Security for the same employment. CalPERS members who elect a “full-formula” plan that does not simultaneously pay into Social Security will not be impacted by the WEP. This is because they did not pay in Social Security at all. Thirty-three percent of CalPERS employees do not receive Social Security. CalPERS employees will know if their plan is coordinated with Social Security by the payroll deduction on the paycheck. 

While there is no reduction to a CalPERS pension based on the receipt of Social Security benefits, a CalPERS pension may reduce the Social Security benefit. This is due to the Windfall Elimination Provision discussed above. 

Tips and Advice on Maximizing Benefits from Union Pension and Social Security Disability

  • Familiarize yourself with the complexities of union pensions, CalPERS, and Social Security, including their policies, benefits, and how to effectively manage your accounts. It’s important to understand whether your pension is covered or non-covered, and whether the Windfall Elimination Provision could apply to your Social Security benefit. Create a my Social Security account to find out your disability benefit and plan ahead.
  • Consult with financial advisors or union representatives to help make informed decisions about your pension and Social Security Disability. In some cases, an approval for Social Security Disability can increase your union benefit. If you are approved for Social Security Disability, contact your plan administrator to see if the Social Security approval impacts your pension.
  • Keep all your documents, such as medical records and employment history, organized and readily available for any necessary procedures or applications. When you apply for your pension, request a copy of the pension plan, and make sure to keep copies of any Social Security approvals and Award Notices. 
  • The Windfall Elimination Provision does not begin until you begin to receive a non-covered pension, so ensure that you run a WEP calculation before collecting your pension to avoid any surprises. 
  • If you think SSA has incorrectly calculated your benefit based on your CalPERS pension, 

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