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In what some, including myself, may find a surprising move, recently Congress approved a measure to completely eliminate the Government Pension Offset and Windfall Elimination Provision. The President has signed this bill into law.
What this means is that there is no longer a reduction factor for Social Security benefits (including Spousal and Survivor Benefits) if you are receiving a pension based on work that was not subject to Social Security taxation.
Let’s go over each provision briefly to review what is changing.
WEP (Windfall Elimination Provision)
The WEP was originally put into place as a measure to eliminate a perceived “windfall” that would otherwise occur without it.
The design of the Bend Point calculations for determining an individual’s own retirement benefit is meant to provide significantly higher replacement rates for lower income individuals. As such, the first Bend Point of average lifetime income ($1,226 for 2025) is replaced at a rate of 90%. Higher levels of income result in increasingly lower rates of income replacement, resulting in a regressive policy, which is what a social insurance is often designed to do.
However, in the case where the individual in question has worked much of his or her life in a job that was not subject to Social Security taxation, and therefore earned only a small amount of income under Social Security taxation, the resulting Social Security benefit calculation (without WEP) provides the higher income replacement rate with no regard for a pension being received for the non-SS-taxed earnings. In response to this, WEP was introduced – and the result has been that in many if not most cases, the income replacement rate in the first Bend Point was reduced to 40% instead of 90%.
Now, with the elimination of WEP, there is no additional calculation involved when a non-SS-taxed pension is being received. The Primary Insurance Amount calculation retains the 90% income replacement rate regardless of the presence of a non-covered pension. Note that this provision not only applied to government workers, but all persons who receive a pension based on work that was not taxed by Social Security. This can include foreign pensions and other non-governmental pensions.
Under the old rules there were ways to work your way out of WEP impact by earning “substantial” wages for 30 years or more, but now there is no need to have this part of the process.
GPO (Government Pension Offset)
The GPO affected Survivor and Spousal Benefits, and could result in complete elimination of these for an individual who is receiving a government pension while also eligible for Survivor or Spousal benefits. Only US-based governmental pensions were included in this provision.
The offset was put into place to result in a different treatment for a recipient of a government pension as compared to a non-working (or lower-earning) spouse – each of which is otherwise in line to receive a Social Security Spousal or Survivor benefit from a spouse or ex-spouse (or late spouse).
The rules of GPO subtracted 2/3 of the amount of the government pension (non-SS-taxed) that is being received from any Spousal or Survivor Benefit that was available to the individual. Oftentimes this would result in the Spousal or Survivor Benefit being completely wiped out – no benefit at all was available.
But now in the new world, GPO has been eliminated completely and government pension recipients will be treated just the same as any other spouse, regarding Social Security Survivor or Spousal Benefits.
Timing
The change to the provisions – elimination of WEP and GPO – are set to be retroactive to January 1, 2024. This means that, if you otherwise were impacted by WEP and/or GPO during that period, you will be eligible to receive a lump sum retroactive payment for the months you were impacted by these, now eliminated, rules.
There has been no comment by SSA about retroactive filings, however. I can see that there are likely many situations where the individual affected by WEP and especially GPO simply did not file for those benefits earlier, because the impact to benefits was so great that it was deemed not worthwhile to file for the benefit. This is only pure conjecture on my part, but I wouldn’t be surprised if there was a provision for some period of time to allow a retroactive filing back to January 2024 to pick up benefits that should have been available. I’ll keep you posted if I find out anything more on this.