1. GPO AND WEP MAY REDUCE AMOUNT OF YOUR SOCIAL SECURITY BENEFITS: Government Pension Offset and Windfall Elimination Provision may cause your or your spouse’s or your widow’s or your widower’s benefits to be reduced. Here, in the words of the Social Security Administration itself, is how they work.
Government Pension Offset
If you receive a pension from a federal, state or local government based on work where you did not pay Social Security taxes, your Social Security spouse's or widow's or widower's benefits may be reduced. Social Security Administration Publication No. 05-10007 provides answers to questions you may have about the reduction.
Your Social Security benefits will be reduced by two-thirds of your government pension. In other words, if you get a monthly civil service pension of $600, two-thirds of that, or $400, must be deducted from your Social Security benefits. For example, if you are eligible for a $500 spouse's, widow's or widower's benefit from Social Security, you will receive $100 per month from Social Security ($500 - $400 = $100).
If you take your government pension annuity in a lump sum, Social Security still will calculate the reduction as if you chose to get monthly benefit payments from your government work.
Benefits Social Security pays 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. But as it has become more common for both spouses in a married couple to work, each earned 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.
In other words, 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 that wife's benefit because her own Social Security benefit offset it. But, 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.
Generally, your Social Security benefits as a spouse, widow or widower will not be reduced if you:
Are receiving a government pension that is not based on your earnings; or
- Are a federal (including “Civil Service Offset”), state or local government employee whose government pension is based on a job where you were paying Social Security taxes; and
- you filed for and were entitled to spouse’s, widow’s or widower’s benefits before April 1, 2004; or
- your last day of employment (that your pension is based on) is before July 1, 2004; or
- you paid Social Security taxes on your earnings during the last 60 months of government service. (Under certain conditions, fewer than 60 months may be required for people whose last day of employment falls after June 30, 2004, and before March 2, 2009.)
Also, there are other situations where Social Security benefits as a spouse, widow or widower will not be reduced; for example, if you:
- Are a federal employee who elected to switch from the Civil Service Retirement System (CSRS) to the Federal Employees’ Retirement System (FERS) after December 31, 1987; and
- you filed for and were entitled to spouse's, widow's or widower's benefits before April 1, 2004; or
- your last day of service (that your pension is based on) is before July 1, 2004; or
- you paid Social Security taxes on your earnings for 60 months or more during the period beginning January 1988 and ending with the first month of entitlement to benefits; or
- Received or were eligible to receive a government pension before December 1982 and meet all the requirements for Social Security spouse's benefits in effect in January 1977; or
- 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.
Note: A “Civil Service Offset” employee is a federal employee, rehired after December 31, 1983, following a break in service of more than 365 days, with five years of prior CSRS coverage.
Even if you do not receive cash benefits based on your spouse's work, you still can get Medicare at age 65 on your spouse's record if you are not eligible for it on your own record.
The offset applies only to Social Security benefits as a spouse or widow or widower. However, your own benefits may be reduced because of the Windfall Elimination Provision, discussed below.
Windfall Elimination Provision
If you work for an employer that does not withhold Social Security taxes from your salary, such as a government agency or an employer in another country, the pension you get based on that work may reduce your Social Security benefits. Social Security Administration Publication No. 05-10045 provides answers to questions you may have about the provision.
The Windfall Elimination Provision affects how the amount of your retirement or disability benefit is calculated if you receive a pension from work where Social Security taxes were not taken out of your pay. A modified formula is used to calculate your benefit amount, resulting in a lower Social Security benefit than you otherwise would receive.
The Windfall Elimination Provision primarily affects you if you earned a pension in any job where you did not pay Social Security taxes and you also worked in other jobs long enough to qualify for a Social Security retirement or disability benefit.
For example, this provision affects Social Security benefits when any part of a person's federal service after 1956 is covered under the Civil Service Retirement System (CSRS). However, federal service where Social Security taxes are withheld (Federal Employees’ Retirement System) will not reduce your Social Security benefit amounts.
The Windfall Elimination Provision may apply if:
- You reached 62 after 1985; or
- You became disabled after 1985; and
- You first became eligible for a monthly pension based on work where you did not pay Social Security taxes after 1985, even if you are still working.
Social Security benefits are intended to replace only a percentage of a worker's pre-retirement earnings. The way Social Security benefit amounts are figured, lower-paid workers get a higher return than highly paid workers. For example, lower-paid workers could get a Social Security benefit that equals about 55 percent of their pre-retirement earnings. The average replacement rate for highly paid workers is about 25 percent.
Before 1983, people who worked mainly in a job not covered by Social Security had their Social Security benefits calculated as if they were long-term, low-wage workers. They had the advantage of receiving a Social Security benefit representing a higher percentage of their earnings, plus a pension from a job where they did not pay Social Security taxes. Congress passed the Windfall Elimination Provision to remove that advantage.
Social Security benefits are based on the worker’s average monthly earnings adjusted for inflation. Social Security separates your average earnings into three amounts and multiplies the amounts using three factors. For example, for a worker who turns 62 in 2012, the first $767 of average monthly earnings is multiplied by 90 percent; the next $3,857 by 32 percent; and the remainder by 15 percent. The sum of the three amounts equals the total monthly payment amount.
The 90 percent factor is reduced in the modified formula and phased in for workers who reached age 62 or became disabled between 1986 and 1989. For those who reached 62 or became disabled in 1990 or later, the 90 percent factor is reduced to 40 percent.
There are exceptions to this rule. For example, the 90 percent factor is not reduced if you have 30 or more years of “substantial” earnings in a job where you paid Social Security taxes. See the first table below that lists the amount of substantial earnings for each year.
The second table below shows the percentage used depending on the number of years of substantial earnings. If you have 21 to 29 years of substantial earnings, the 90 percent factor is reduced to between 45 and 85 percent.
To see the maximum amount your benefit could be reduced, visit www.socialsecurity.gov/retire2/wep-chart.htm.
The Windfall Elimination Provision does not apply if:
- You are a federal worker first hired after December 31, 1983;
- You were employed on December 31, 1983, by a nonprofit organization that did not withhold Social Security taxes from your pay at first, but then began withholding Social Security taxes from your pay;
- Your only pension is based on railroad employment;
- The only work you did where you did not pay Social Security taxes was before 1957; or
- You have 30 or more years of substantial earnings under Social Security.
The Windfall Elimination Provision does not apply to survivors benefits. However, benefits may be reduced for widows or widowers because of the Government Pension Offset, discussed above.
If you get a relatively low pension, you are protected. The reduction in your Social Security benefit cannot be more than one-half of the amount of your pension that is based on earnings after 1956 on which you did not pay Social Security taxes.
Year Substantial earnings Year Substantial earnings
1937-1954 $900 1989 $8,925
1955-1958 $1,050 1990 $9.525
1959-1965 $1,200 1991 $9,900
1966-1967 $1,650 1992 $10,350
1968-1971 $1,950 1993 $10,725
1972 $2,250 1994 $11,250
1973 $2,700 1995 $11,325
1974 $3,300 1996 $11,625
1975 $3,525 1997 $12,150
1976 $3,825 1998 $12,675
1977 $4,125 1999 $13,425
1978 $4,425 2000 $14,175
1979 $4,725 2001 $14,925
1980 $5,100 2002 $15,750
1981 $5,550 2003 $16,125
1982 $6,075 2004 $16,275
1983 $6,675 2005 $16,725
1984 $7,050 2006 $17,475
1985 $7,425 2007 $18,150
1986 $7,875 2008 $18,975
1987 $8,175 2009-2011 $19,800
1988 $8,400 2012 $20,475
Years of substantial earnings Percentage
30 or more 90 percent
29 85 percent
28 80 percent
27 75 percent
26 70 percent
25 65 percent
24 60 percent
23 55 percent
22 50 percent
21 45 percent
20 or less 40 percent
For more information and to find copies of Social Security publications, visit its website at www.socialsecurity.gov or call toll-free, 800.772.1213 (for the deaf or hard of hearing, call the TTY number, 800.325.0778). Social Security treats all calls confidentially. Social Security can answer specific questions from 7 a.m. to 7 p.m., Monday through Friday. Generally, you will have a shorter wait time if you call during the week after Tuesday. Social Security can provide information by automated phone service 24 hours a day.
Social Security also wants to make sure you receive accurate and courteous service. For this reason, Social Security has a second Social Security representative monitor some telephone calls.
Every year there is talk about repealing the GPO or WEP, or both. After all this time, we are convinced that it is not going to happen.
2. GOLF WISDOMS: If you seem to be hitting your shots straight on the driving range, it's probably because you're not aiming at anything.
3. PUNOGRAPHICS: I tried to catch some fog, but I mist.
4. QUOTE OF THE WEEK: “The problem with political jokes is they get elected.” Henry Cate, VII
5. ON THIS DAY IN HISTORY: In 1939, 1st German air attack on Great Britain in WW II.
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