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Everything You Need to Know About Social Security’s WEP and GPO

The Windfall Elimination Provision and the Government Pension Offset, explained.

By Hannah Sammut

There are two Social Security policies that have an impact on a select number of earners who benefit from a public pension that is based on work that was not covered under Social Security: The Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO). These provisions only affect about 3% of households, but can significantly reduce the amount of Social Security benefits one may receive.

The WEP, enacted in 1983, is a reform that was intended to even the Social Security playing field. The Social Security benefit computation formula is intended to favor lower-income workers. Prior to the enactment of the WEP, earners who had worked in both covered and non-covered positions within their careers could be considered lower earners. As a result, the individual would receive a high replacement rate, earning more benefits. In essence, an individual who may have received a high government salary would also be receiving the same benefits as a low-income worker.

The Windfall Elimination Provision prevents career uncovered workers (with minimal covered work in addition) from taking advantage of such circumstances. In 2022, the maximum reduction of Social Security benefits from those who receive a public pension in addition to Social Security is $512 a month (but can’t be more than 50% of your pension). An employee who works for under 20 years at a substantial earnings level will see the maximum reduction in his/her monthly benefit, although the reduction decreases with additional years of work paying into the social security system. This chart from the Social Security Administration highlights the reductions for each year of work, with over 30 years of covered work resulting in a zero reduction.

Kurt Czarnowski of Czarnowski Consulting, a retirement planning firm, gives an example using a Massachusetts schoolteacher who receives a public pension. The teacher can apply for and receive a full, unreduced social security benefit until they retire and draw from their pension, which will then trigger the WEP. At this point, he says, the benefit will be recalculated since a pension is also being received.

Czarnowski warns recipients to make sure they notify the Social Security Administration about receiving a public pension. The SSA sends frequent reminders to ensure participants are aware of deadlines. Should one decide not to notify the SSA of their plan to withdraw from their pension, it could lead to some trouble. The IRS receives annual W2’s from pension entities and shares that information with the SSA, so he warns others that government will eventually find out.

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The Government Pension Offset, or GPO, is another provision that can significantly reduce Social Security benefits as well. GPO also applies to individuals who get a public pension, based on work not covered under the Social Security program, but is specifically for those collecting benefits as a spouse, divorced spouse, widow, or widower.

Under GPO, any spousal, divorced spousal, or survivor benefit is reduced by 2/3 of the amount of the public pension. Similar to the previous example, if a Massachusetts teacher is a widow and receiving a survivor benefit but has not retired, they should expect to receive full Social Security benefit. However, once the teacher retires and begins to draw their public pension, their Social Security survivor benefit will be reduced by two-thirds of the amount of the pension. An important takeaway is that the WEP impacts benefits based on the individual’s own work record, while GPO impacts benefits based on the work and earnings of a spouse, ex-spouse, or deceased spouse.

Both provisions are not mutually exclusive, Czarnowski says, meaning that it’s possible to be impacted by one policy and not the other, or one can be affected by both at the same time. Additionally, he adds that the WEP and GPO provisions cannot be circumvented by withdrawing funds as a lump sum, instead of receiving a recurring pension.

And while those impacted by these provisions are seldom pleased with the SSA denying them funds, experts agree that it would be rare to have Congress overturn such policies. Unfortunately, only a small percentage of Americans are subject to these provisions, and lawmakers seldom prioritize passing legislation that only influences a select few. 

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