As the times evolve, so too does the Social Security Administration.
While Social Security has existed for the better part of a century, it certainly hasn’t remained stagnant since then-President Franklin D. Roosevelt signed it into law in 1935. The SSA has made a number of tweaks to this vital social safety net—sometimes to close loopholes, sure, but sometimes also to reflect broader societal changes.
That brings us to the Government Pension Offset (GPO)—a Social Security provision that reduces (or in some cases, wipes out completely) some Americans’ Social Security benefits.
Read on as I explain the GPO, including why it was introduced, what it does, and who it affects.
Who Does the Government Pension Offset Affect?
To understand who the GPO affects, you have to understand Social Security spousal and survivor (aka widow’s/widower’s benefits).
Social Security spousal benefits pay eligible people a portion of their spouse’s full Social Security benefits. By virtue of receiving benefits, the spouse would have had some amount of “covered” employment, which means they were paying Social Security taxes on their wage income or self-employment income.
The maximum spousal benefit is 50% of what Social Security’s benefit formula determines the spouse’s full retirement age benefit (also known as the primary insurance amount, or PIA) to be.
Meanwhile, survivor benefits work roughly the same way, though the maximum benefit is 100% of PIA.
These benefits can be vital for people who don’t qualify for Social Security on their own, or who would only qualify for a very small amount.
However, the Government Pension Offset affects the Social Security spousal or survivor benefits of most workers who receive federal, state, and local pensions for employment that isn’t covered by Social Security.
As of December 2023, about 1% of all beneficiaries had their benefits reduced by the GPO, split roughly half-and-half between spouses and widows/widowers.
Related: How to Maximize Social Security Spousal Benefits
Why Was the Government Pension Offset Enacted?
When Social Security began in the 1930s, women were becoming a more common sight in the workplace. Still, being a housewife or stay-at-home mother remained popular, and women who did work were paid less than men. So, in general, it was fair to say that men largely supported their wives, while the opposite wasn’t commonplace.
The law, then, under the assumption that wives were monetarily dependent on their husbands (and not the other way around), was somewhat unequal. In Califano v. Goldfarb, it is described that “survivors’ benefits based on the earnings of a deceased husband covered by the Act are payable to his widow regardless of dependency” while “such benefits on the basis of the earnings of a deceased wife covered by the Act are payable to her widower only if he was receiving at least half of his support from her.”
In short: Men had to prove they were dependent on their wives. Women did not have to prove they were dependent on their husbands.
Califano v. Goldfarb, by the by, was a case heard by the Supreme Court, which ruled in 1977 that the sex-based distinction was unconstitutional. Thus, Social Security could no longer require men to prove they received at least half of their support from their wives to qualify for husband’s or widower’s benefits.
But as so often happens with complex laws, changes can cause unintended issues.
Suddenly, hundreds of thousands of retired men who worked in noncovered government positions qualified for Social Security benefits as spouses or widowers. People questioned the fairness of this large windfall considering those workers had pensions that didn’t require them to pay Social Security taxes. It also added hundreds of millions of dollars to the annual cost of the Social Security program.
The fix? The Government Pension Offset.
Congress created the GPO as part of the Social Security Amendments of 1977 so people receiving a pension from noncovered government employment wouldn’t receive full Social Security spousal and survivors benefits. (Remember: State and local government employees are classified as noncovered workers because they don’t pay Social Security taxes on their government earnings.)
Originally, 100% of one’s noncovered government pension was subtracted from that person’s Social Security spousal benefits. This decision was heavily criticized, however, and so the reduction was changed to its current form.
Related: When Should You Take Social Security?
How Does the Government Offset Pension Currently Work?
The GPO’s spousal benefit reduction is an amount equal to two-thirds of the noncovered government pension.
Let’s say you receive a monthly noncovered pension payment of $1,200. Two-thirds ($800) would be deducted from your spousal benefit. If your spousal benefit were $1,000, you would receive $200 ($1,000 – $800 = $200) per month from Social Security.
Note: If the reduction amount is higher than your monthly Social Security benefit, you might not receive any Social Security benefits at all.
You can estimate the most your benefit could decrease at SSA.gov.
Related: How Long Will My Savings Last in Retirement? 4 Withdrawal Strategies
Is the Government Pension Offset the Same as the Windfall Elimination Provision?
No. The Windfall Elimination Provision and the Government Pension Offset (GPO) are two separate provisions that apply to different groups of people:
- The WEP can affect people who receive both a non-covered pension and Social Security retirement or disability benefits
- The GPO can affect people who receive both a government pension plus Social Security spousal or survivor benefits
Also:
- The WEP can not completely wipe out a person’s benefits.
- The GPO can completely wipe out a person’s benefits.
It’s an understandable mistake. People often talk about these provisions together because both involve pensions and a reduction in Social Security payments.
Related:
