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Government Pension Offset for Social Security

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There’s a somewhat confusing situation that occurs when a spouse is receiving either a Spousal benefit or a Survivor’s benefit from Social Security while at the same time is receiving a pension from a federal, state, or local government. This is specifically so if the pension being received is from a job where Social Security taxes (OASDI) were not withheld. This situation triggers the Government Pension Offset, or GPO.

What happens is that the Social Security Administration will reduce the Spousal or Survivor’s benefit by a factor equal to two-thirds of the government pension that he or she is receiving. This is called the Government Pension Offset, or GPO (yay, another acronym from the Social Security Administration SSA!) The GPO is often confused with the Windfall Elimination Provision (WEP), but they are different provisions.

Why?

Eligibility for Spousal or Survivor’s benefits are based upon your spouse’s record with the Social Security administration. If your own benefit is greater than the Survivor’s or Spousal benefit, of course you would not be receiving the Survivor’s or Spousal benefit. You can only receive either your own benefit or the Survivor’s or Spousal benefit, whichever is greater.

If you are receiving a pension from a government job that did not require you to have Social Security tax withheld, your own Social Security record doesn’t reflect the income earned from that job. The government pension is designed to take the place of Social Security benefits – at least to some degree. This particular quandary was first addressed in 1977 with the amendments in that year – but it really went too far at that stage.

1977 Amendment

Government pensions from jobs not subject to Social Security tax withholding are designed to be equal to partially pension, and partially compensation intended to replace Social Security benefits for the retiree. In 1977 an amendment was made to the Social Security Act to address the fact that, otherwise, a Spousal benefit or Survivor’s benefit would be compensating the Spouse more than the system originally intended. The 1977 Amendment offset (reduced) the Social Security Spousal or Survivor’s benefit by one dollar for each dollar of pension received from government work that was not subject to Social Security tax. This only applied if the pension was from a job that the Spouse or Survivor worked.

1983 Amendment

In the 1983 Amendment (which is the current set of rules), the Government Pension Offset (or GPO) was improved for Spousal and Survivor’s benefits. Instead of the original dollar-for-dollar offset, now the Social Security Spousal or Survivor’s benefit is only reduced by two-thirds of the government pension amount. This more accurately reflects the fact that the government pension is part pension and part compensation to replace the Social Security benefit.

When Does the GPO NOT Apply?

It’s possible that your particular situation may provide for your Spousal or Survivor’s benefit to not be impacted by the Government Pension Offset. Listed below are several situations that will permit the GPO to not apply:

  • If you are receiving a government pension that is not based on earnings;
  • If you are a state or local employee whose government pension is based on a job where you were paying Social Security taxes
    • on the last day of your employment and your last day was prior to July 1, 2004; or
    • during the last five years of employment and your last day of employment was July 1, 2004 or later. Depending upon the circumstances, fewer than five years could be required for folks whose last day of employment fell between July 1, 2004 and March 1, 2009 inclusive.
  • If you are a federal employee, including Civil Service Offset employee, who pays Social Security taxes on your earnings. (A Civil Service Offset employee is a federal employee who was rehired after December 31, 1983, following a break in service of more than 365 days and had five years of prior civil service retirement system coverage);
  • If you are a federal employee who elected to switch from the Civil Service Retirement System (CSRS) to the Federal Employees’ Retirement System (FERS) on or before June 30, 1988. If you switched after that date, including during the open season from July 1, 1998 through December 31, 1998, you need five years under FERS to be exempt from the GPO;
  • If you received or were eligible to receive a government pension before December 1982 and meet all the requirements for Social Security Spousal benefits or Survivor’s benefits in effect in January 1977; or
  • If you received or were eligible to receive a federal, state or local government pension before July 1, 1983, and were receiving one-half support from your spouse.

Unlike WEP, there is no way to work your way out of the impact, other than the aforementioned final five years covered option.

5 Comments

  1. dklane says:

    Would GPO apply if my wife and disabled child survive me? I have 29 years of significant SS earnings and also hope to receive a pension for 10 years as a teacher. SS was not withheld when I was teaching. I would prefer to configure the pension with survivor benefits but don’t want reduce the SS benefits that my wife and child will receive. Given that my wife has been a full time caregiver for our son, her SS benefits as a spouse would probably be higher than SS benefits based on her earnings.

    1. jblankenship says:

      GPO only applies to your spousal or survivor benefit when the pension being received is based on your own earnings. So if you are receiving a government pension based on your own earnings and you are eligible for a spousal or survivor benefit, GPO could apply and reduce your spousal or survivor benefit.

      In your case, your spouse and surviving child did not earn the pension (even if they’re receiving a survivor pension), so their Social Security survivor benefit would not be impacted after your passing.

  2. robrien says:

    Mr. Blankenship, You have the best information on the web, thank you. In my case, I will have the max WEP and I left 100% of my pension to my wife. When I die, she can collect my SS unreduced by WEP and not subject to the GPO. Is that correct? Again, thanks for your help

    1. jblankenship says:

      Yes, that’s correct. WEP and GPO only apply to a pension that is based on your own earnings. In the case of your surviving spouse receiving your previously-WEP-impacted pension and SS benefit, the pension is not based on her earnings, so neither WEP nor GPO apply to that SS benefit.

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