Report pension changes to SSA

When you have a non-SS-covered pension and you are receiving Social Security benefits, either WEP (Windfall Elimination Provision) or GPO (Government Pension Offset) may impact your benefits. It’s important to keep the Social Security Administration (SSA) up-to-date on your pension. You must report pension changes to SSA when there is an increase due to a COLA or any other change to the previously-reported amount. This requirement is in place so that when your pension changes, your WEP and/or GPO impact can be recalculated.

This is only required if the pension changes are for a pension that is based on your own non-Social Security-covered earnings. If you’re receiving a pension based on SS-covered earnings, or a pension from any source that is based on someone else’s earnings (such as a survivor pension), there is no need to report pension changes to SSA.

This reporting can be accomplished by sending a letter to the Social Security Administration. The letter should detail the name, address, birthdate and Social Security number of the pension recipient, as well as the change in the pension amount and the effective date of the change. This letter can be delivered to your local Social Security Administration office.

Most commonly, GPO is the calculation that is affected by a change to the pension amount. WEP is only dependent on the amount of the pension when the pension amount is relatively small – which we’ll review a bit more later. Let’s take a look at an example of the impact of a change to pension on GPO.

How pension changes impact GPO calculation

For example, Gloria is receiving a pension due to her work for the local health department, in the amount of $1,800 per month. Her husband, Edward, died this year. Before Edward died, he was receiving Social Security benefits in the amount of $2,000 per month. When Gloria filed for the survivor benefit based on Edward’s record, she was informed that GPO would reduce the survivor benefit. This is because of her pension from the local government.

The reduction is 2/3 of the amount of Gloria’s pension – which calculates to $1,200 per month. The pension is $1,800, multiplied by 2/3 equals $1,200. So the resulting GPO-reduced Social Security survivor benefit is $800.

Gloria’s pension increases by 3% each year. So in January, her pension increases to $1,854 per month. Gloria must report this increase to Social Security. When she does so, her GPO impact will be recalculated. The result is that the GPO impact is now $1,236 per month. The survivor benefit increased 2% for the year (annual COLA), bringing the unreduced benefit to $2,040. When the GPO reduction is applied, the final resulting benefit is $804.

How a change to pension impacts WEP calculation

WEP is different from GPO, in that it is only based on the amount of the pension when the pension itself is relatively small. In order for the amount of the pension to be important, the pension itself must be less than the maximum WEP impact – 50% of the first bend point, or 50% of the PIA if the PIA is less than the first bend point.

Jeff has had a limited working career due to debilitating illnesses throughout his life. Part of his career included teaching for several years before his illness took hold. This work as a teacher was not covered by Social Security, but it has generated a pension in the amount of $400 per month. In addition to the teaching time, Jeff had several part-time jobs off and on throughout his life, which has generated a Social Security retirement benefit in the amount of $800 per month.

Since WEP reduction is calculated as the smaller of either 50% of the first bend point, 50% of the unreduced Social Security retirement benefit, or 50% of the amount of the non-covered pension. In Jeff’s case, $816 is amount of the first bend point, since he reached 62 in 2014. So the smallest figure of the three is 50% of Jeff’s pension – which makes his WEP reduction $200, for a resulting Social Security benefit of $600 per month.

When Jeff’s teacher’s pension receives an increase of 4% due to pension fund experience, he must report it to SSA. This will increase his WEP impact to $208, since his pension was increased to $416. After the annual Social Security COLA increase of 2% (to $816 per month), his resulting WEP-reduced benefit will now be $608.

If Jeff’s pension was larger than one of the other WEP-reduction factor limits, it wouldn’t make any difference to the WEP calculation to reduce his Social Security benefit.