Government pension offset (GPO) applies to spousal benefits when the spouse is also entitled to a pension from work not covered by Social Security. Government includes federal, state and local entities. These include but are not limited to Civil Service Pensions, Public Employees Retirement Systems, some teachers, police and firemen/women. If you have wages where you contribute to a pension other than Social Security you may see a reduction of any benefit that is payable for another’s Social Security work record.
A spouse includes a wife, widow, husband, widower, divorced wife or husband, surviving divorced wife or husband, mother, father, surviving divorced mother or father, young husband or wife who have a child of the worker in their care.
If any of these conditions apply you may be wondering why your benefits may be reduced. Benefits paid to wives, husbands, widows and widowers are “dependent’s” benefits. These benefits were established in the 1930s to compensate spouses who stayed home to raise a family and who were financially dependent on the working spouse.
It has since become more common for both spouses in a married couple to work, each earning his or her own Social Security retirement benefit. The law has always required that a person’s benefit as a spouse, widow or widower be offset dollar for dollar by the amount of his or her own retirement benefit. For example, if a woman worked and earned her own $800 monthly Social Security retirement benefit, but she also was due a $500 wife’s benefit on her husband’s Social Security record, Social Security could not pay the wife’s benefit because her own Social Security benefit offset it.
Before enactment of the Government Pension Offset provision, if that same woman was a government employee who did not pay into Social Security, and who earned an $800 government pension, there was no offset, and Social Security was required to pay her a full wife’s benefit in addition to her government pension. If this government employee’s work had instead been subject to Social Security taxes, any Social Security benefit payable as a spouse, widow or widower would have been reduced by the person’s own Social Security retirement benefit. In enacting the Government Pension Offset provision, Congress intended to ensure that when determining the amount of spousal benefit, government employees who do not pay Social Security taxes would be treated in a similar manner to those who work in the private sector and do pay Social Security taxes.
A pension is any periodic or lump sum payment received from a defined benefit or defined contribution plan (i.e. 401(k), 403(b), or 457) which is based on your own non-covered earnings while in the service of a State, local, or federal government and is payable because of retirement or permanent disability. Some pensions that are not included for offset purposes include but are not limited to Social Security benefits, VA benefits, Black Lung benefits, Railroad Retirement annuities, workers compensation, state reimbursements for Medicare Medical Insurance premiums, and survivor annuities.
For GPO to apply, you must be eligible for and entitled to a pension from work not covered by Social Security. This is determined by the pension paying agency, not the Social Security Administration. Eligibility for a pension means a pension payment is payable for a month if you had been separated from the employment and you made the proper application for the pension payment. Entitled to a pension means you meet the entitlement requirements for the pension plan which includes filing the application and a benefit is payable for the month.
Determining the offset amount is as simple as taking 2/3rds of your government pension amount and subtracting it from the auxiliary benefit payable to you. To do this, divide your government pension by 3, multiple that amount by 2 and deduct the sum from your auxiliary benefit.
Here are a couple of examples…
Example 1:
Government Pension $1,500
Social Security Spousal benefit $1,000
$1,500 divided by 3 = $500
$500 x 2 = $1,000
$1,000 – $1,000 = $0
Verdict: You are not eligible for any benefit from your spouse’s Social Security record.
Example 2:
Government Pension $1,500
Social Security Widows benefit $2,000
$1,500 divided by 3 = $500
$500 x 2 = $1,000
$2,000 – $1,000 = $1,000
Verdict: You are eligible for a monthly benefit of $1,000 from your deceased spouse’s Social Security record.