My wife worked as a teacher in Ohio from 1978 through 1986 and again from 1990 through 1994. She participated in the STRS (State Teachers Retirement System) defined benefit plan, she became vested in 19864(5 years of service). In 2016 when she was 61 years old she was eligible to retire with a reduced benefit or wait until she was 65 years old and retire with a full benefit ($900 per month) - she opted to take a lump sum distribution instead . Will this lump sum distribution affect her social security benefits or her spousal social security benefits ? I am so confused by the SSA publications. Thank you.

Hi,

It certainly sounds like it, assuming that the earnings on which your wife's STRS pension eligibility was based were exempt from Social Security taxes. Lump sum payments in lieu of a pension are prorated by Social Security to arrive at a monthly rate, and that rate is then treated just as though the person was receiving a non-covered pension for purposes of the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO) provision (https://secure.ssa.gov/apps10/poms.nsf/lnx/0300605364).

In your wife's case, the proration of her lump sum distribution will likely result in her qualifying for a lower Social Security retirement benefit on her own record than she would normally receive (https://www.ssa.gov/pubs/EN-05-10045.pdf). And if she would normally qualify for a spousal benefit on your record, those benefits will likely be offset by 2/3rds of the amount of her prorated lump sum (https://www.ssa.gov/pubs/EN-05-10007.pdf).

Our maximization software is fully programmed to handle cases involving both WEP and GPO, so your wife may want to consider using it in order to determine how her lump sum distribution will affect her Social Security benefit options.

Best, Jerry