GN DAL02608.102 Exemption – The Last Day of Employment Covered Under Social Security – State or Local Periodic Government Benefits (RTN 6, 01/2010)
See GN 02608.102 and GN 02608.107
A. Background on Texas Deferred Retirement Option Plan
In 1997, the Texas Legislature added the Deferred Retirement Option Plan (DROP) as an option under the Texas Teachers Retirement System (TRS). TRS members who are eligible to retire and receive a standard TRS retirement annuity, and who have at least 25 years of service credit in the TRS, may elect to participate in the DROP while employment continues. The period of participation is a minimum of 12 months and a maximum of 60 months. The filing of an election to participate in the DROP is not considered an application for retirement.
DROP participants remain members of TRS but do not accrue additional service credit toward their standard TRS annuity while participating in DROP. During participation in the DROP, the employee and the employer continue to pay contributions to the TRS. Participation in the DROP plan ends when the employee retires or dies, or when the term of the DROP expires. Upon retirement, TRS members are entitled to their standard TRS annuity, in addition to the amount in the DROP account, plus interest. DROP funds may be taken as a lump sum or in periodic installments.
B. Policy – GPO Applicability
SSA has determined that the Texas DROP plan is part of the Texas TRS and is not a separate pension plan. Therefore, if an individual receives a TRS annuity and a DROP payment(s), both payments are considered one pension for GPO purposes. (See GN 02608.400 to determine the combined pension amount.)
GPO does not apply to the combined TRS annuity and DROP payment if, on the last day of government employment, the individual:
was in a position that was covered under Social Security and TRS; and either
performed his or her last day of covered government service (whether on account of retirement, resignation, or termination) prior to July 1, 2004; or
filed for Social Security spouse's benefits before April 1, 2004 and was entitled to benefits based on that filing. A person who filed for spouse's benefits before April 1, 2004 and was entitled based on that filing may work his or her last day in Social Security covered government employment at any time.
Mr. Smith filed for auxiliary benefits in July 2008. He worked in non-covered employment for 30 years and paid in to TRS. During his last five years of employment, he elected to participate in DROP. While participating in DROP, he worked his last day on June 1, 2004 in a position covered under Social Security. Mr. Smith's spousal benefit will not be subject to GPO since he worked his last day in covered employment before July 1, 2004 and his last day was under DROP, which is considered the same pension plan as TRS.
Same scenario as Example 1, except Mr. Smith does not work his last day in a position covered under Social Security. In this example, Mr. Smith does not meet the “last day” GPO exemption since he did not work his last day in a covered position. Mr. Smith received a lump sum payment from his DROP account and his TRS annuity is paid on a monthly basis. Therefore, both payments are considered one pension for GPO purposes and offset would apply. Apply the procedures in GN 02608.400 to determine the combined pension amount for offset purposes.
Ms. Jones filed for widow's benefits on March 3, 2004. She worked in non-covered employment for 25 years and paid in to TRS. She then elected to participate in DROP for three years but returned to work under TRS after her DROP participation ended. She worked her last day on August 30, 2009 in a position covered under Social Security and TRS. She received a lump sum from her DROP account and a monthly pension from TRS. In this example, Ms. Jones's widow's benefit will not be subject to GPO since she filed for widow's benefits before April 1, 2004 and she worked her last day in covered employment under TRS. GPO will not apply to either pension since the TRS monthly annuity and the Texas DROP lump sum are considered the same pension plan for GPO purposes.