Government Pension Offset - How it Affects Your Spousal or Survivor Benefit
The Government Pension Offset rule is a provision of Social Security that may affect the amount of your Social Security spousal benefit or Social Security survivor benefit that you are eligible to receive.
It only affects you if you will be eligible for a pension that is based on earnings that were not covered under the Social Security system. In this situation, the Government Pension Offset rule may reduce the Social Security benefits you are eligible to receive as a spouse, ex-spouse or as a widow/widower.
Benefits you are eligible to receive based on your own earnings record may be affected by a different rule called the Windfall Elimination Provision (WEP).
The Government Pension Offset (GPO) rule most commonly affects teachers, law enforcement workers, postal workers, firefighters and other government employees who work for an entity that has their own pension system and does not participate in the Social Security system. It can also affect you if you receive a pension based on work done outside of the country.
For couples who are not affected by these offset provisions, there are Social Security strategies you can use, such as one spouse claiming a spousal benefit at their full retirement age, then switching over to their own benefit when they reach 70. If the GPO or WEP affects you and/or your spouse, these strategies have to be carefully evaluated in light of the effects of these rules.
Prior to enactment of the GPO, some workers who did not pay into the Social Security system were able to receive benefits that they would not otherwise have been eligible for if they had paid into the system. The GPO was put into place to level the playing field and make sure that the benefits of government employees who don’t pay Social Security taxes are calculated the same as workers in the private sector who do pay Social Security taxes.
Spousal or Widow/Widower Benefits Reduction
Your Social Security benefits will be reduced by two-thirds of the amount of the qualifying pension. In some cases, you may also receive a pension from an employer where the work was covered under Social Security. That pension does not affect your Social Security benefits.
If you will receive a pension of $900 that is from years of work that were not covered under Social Security then two-thirds of this amount (or $600) will be deducted from the spousal or widow/widower benefit that you would have otherwise received. If you were also eligible for a $1,600 widow/widower benefit, in this situation your widow/widower benefit would be $1,000 instead of the $1,600.
Estimating Benefits if GPO Applies
The Social Security website provides a government pension offset calculator that will calculate your benefits after the relevant impact of the GPO. Other commercially available Social Security software calculators allow you to do even more detailed projections where you input your earnings history and pension estimates into the software. Several of the software packages are then designed to produce a claiming recommendation for you based on your personal situation.
As you near retirement, you can also ask the Social Security office to prepare an estimate for you that includes the effects of provisions like the GPO and WEP. Be prepared to have to wait in the Social Security office for quite some time, or spend a substantial amount of time on the phone with them to get the information you need. With about 10,000 people a day turning 62, Social Security offices and representatives are often overwhelmed with work.