Understanding the Government Pension Offset (GPO) and its Impact on Social Security Spouse’s Benefits, § 404.408a

If you receive a government pension based on non-covered employment, your Social Security spouse’s benefits may be reduced.

This reduction, known as the Government Pension Offset (GPO), can be a complex topic. In this blog post, we will break down the essentials of the GPO, its exceptions, and its impact on your Social Security benefits.

Key Terms:

1. Government Pension: A monthly benefit based on your Federal, State, or local government employment.
2. Noncovered Employment: Employment that is not covered by Social Security and for which you did not pay Social Security taxes.
3. Spouse’s Benefits: Social Security benefits you receive as a wife, husband, widow(er), mother, father, divorced spouse, or surviving divorced spouse.

When is the reduction required?

The GPO applies when you receive a government pension based on noncovered employment, unless an exception applies.

Exceptions to the GPO:

There are several exceptions to the GPO, including:

1. Government pensions based on employment for an interstate instrumentality.
2. If you received or are eligible for a Government pension for specific months between December 1977 and November 1982 and meet certain requirements.
3. If you were eligible for a Government pension for months before July 1983 and meet a one-half support dependency test.
4. If you would have been eligible for a pension except for a requirement delaying eligibility.
5. If you receive a Government pension based on service as a member of a uniformed service.
6. If the last 60 months of your government employment were covered by both Social Security and your pension plan.
7. If you are a former Federal employee and your pension is based on work that included at least 60 months of Social Security-covered employment.
8. If you are a State or local government employee or a Federal employee who switched to the Federal Employees Retirement System (FERS) before 1988.

The One-Half Support Test:

To meet some exceptions, you must pass the one-half support test. One-half support is defined in § 404.366, and you must meet this requirement at specific times, depending on the insured person’s disability, entitlement, or death.

Amount and Priority of Reduction:

1. For post-June 1983 government pensions, your monthly Social Security spouse’s benefits will be reduced by two-thirds of your government pension.
2. For pre-July 1983 government pensions, your monthly Social Security spouse’s benefits will be reduced by the full amount of your pension for months before December 1984 and by two-thirds of your pension for months after November 1984.
3. Reductions for age and simultaneous entitlement will be applied before GPO reductions.

When is the GPO effective?

The GPO only applies to applications for benefits filed in or after December 1977 and benefits for December 1977 and later.

Let’s consider an example to illustrate the Government Pension Offset (GPO) and its impact on Social Security spouse’s benefits.

Jane is a retired state employee who worked in noncovered employment, meaning she did not pay Social Security taxes during her career. She receives a monthly government pension of $1,500 based on her state employment. Jane’s husband, John, worked in the private sector and paid Social Security taxes throughout his career. Jane is now eligible for Social Security spouse’s benefits based on John’s work record.

Since Jane receives a government pension based on noncovered employment, the GPO will likely apply to her Social Security spouse’s benefits. Let’s assume none of the GPO exceptions apply to Jane’s situation.

To calculate the GPO reduction, we take two-thirds of Jane’s government pension amount:

$1,500 (government pension) × (2/3) = $1,000

If Jane’s Social Security spouse’s benefit based on John’s work record is $1,200 per month, the GPO reduction would reduce her monthly benefit by $1,000:

$1,200 (Social Security spouse’s benefit) – $1,000 (GPO reduction) = $200

In this example, Jane would receive a reduced Social Security spouse’s benefit of $200 per month due to the GPO.

Conclusion: Understanding the GPO and its impact on your Social Security spouse’s benefits can help you make informed decisions about your retirement planning. Be aware of the exceptions and how they may apply to your situation. If you have any questions or concerns, consult with a Social Security expert or financial advisor.

https://www.ssa.gov/OP_Home/cfr20/404/404-0408a.htm