Keywords: Government Pension Offset (GPO), Social Security, Spousal Benefits, Widow(er) Benefits, Non-Covered Pensions, Federal Pensions, Retirement Planning
Many individuals who have worked for state or local governments or non-U.S. employers may be eligible for both a government pension and Social Security benefits. However, a little-known provision called the Government Pension Offset (GPO) can impact the amount of Social Security spousal or widow(er) benefits they receive. This article will delve into the GPO, explaining how it works, who it affects, and its implications for retirement planning.
Understanding the Government Pension Offset (GPO)
The GPO is a provision within the Social Security program that reduces spousal or widow(er) benefits for individuals who receive non-covered pensions. A non-covered pension is a pension paid by an employer that does not withhold Social Security taxes from your salary, typically state and local governments or non-U.S. employers.
The GPO was created in 1977 to ensure fairness in the Social Security system. Under Social Security’s dual-entitlement rule, spouses with their own covered earnings have their spousal benefits offset dollar-for-dollar by their own earned benefit. The GPO operates on a similar principle, aiming to ensure that spousal and widow(er) benefits are roughly equal for those with covered or non-covered lifetime earnings.
How the GPO Works
The GPO reduces the spousal or widow(er) benefit by two-thirds of the monthly non-covered pension. This reduction can partially or fully offset an individual’s spousal/widow(er) benefit, depending on the amount of the non-covered pension.
For example, if an individual receives a non-covered pension of $3,000 per month, their spousal or widow(er) benefit would be reduced by $2,000 (two-thirds of $3,000). If their spousal or widow(er) benefit before the GPO was $2,500, it would be completely offset, leaving them with no spousal or widow(er) benefit.
Characteristics of GPO Beneficiaries
In 2020, the GPO applied to approximately 11.5% of the 6.25 million spousal or widow(er) beneficiaries. Beneficiaries affected by the GPO had an average monthly non-covered pension of $2,531, which was significantly higher than the average Social Security retired worker benefit of $1,544.
Nearly three-quarters of beneficiaries affected by the GPO had their entire spousal or widow(er) benefit offset. These individuals had an average monthly non-covered pension of $3,193. Those with partially offset benefits had an average non-covered pension of $930.
Implications for Retirement Planning
Understanding the GPO is crucial for individuals who may be affected by it. If you are eligible for both a government pension and Social Security spousal or widow(er) benefits, it is essential to factor the GPO into your retirement planning.
Here are some key considerations:
- Estimate the potential impact of the GPO on your benefits. You can use the Social Security Administration’s online calculators to estimate your spousal or widow(er) benefit with and without the GPO.
- Consider delaying claiming your Social Security benefits. Delaying claiming your benefits can increase your monthly benefit amount, potentially mitigating the impact of the GPO.
- Explore other retirement income sources. Diversifying your retirement income sources can help reduce your reliance on Social Security spousal or widow(er) benefits and minimize the impact of the GPO.
The GPO is a complex provision that can significantly impact Social Security spousal or widow(er) benefits for individuals receiving non-covered pensions. By understanding how the GPO works and its potential implications, individuals can make informed retirement planning decisions to ensure a secure financial future.
Additional Resources
- Social Security Administration: Government Pension Offset (GPO): https://www.ssa.gov/policy/docs/program-explainers/government-pension-offset.html
- Can you collect 2 federal pensions? – Quora: https://www.quora.com/Can-you-collect-2-federal-pensions
Disclaimer: This article is for informational purposes only and should not be considered financial advice. Please consult with a qualified financial advisor for personalized guidance on your retirement planning.
In order to help guarantee that spousal and widow(er) benefits for individuals with covered or non-covered lifetime earnings would be roughly equal, Congress established the GPO in 1977. Spouses who have their own covered earnings are subject to the dual-entitlement rule under Social Security, which means that their earned benefit is used to offset their spousal benefits dollar for dollar. Similar goals underlie the GPO; in 1983, Congress reduced the offset for non-covered pensions from dollar-for-dollar to two-thirds.
Features of GPO Recipients: b In 2020, the GPO provided funding to roughly 11 5 percent of the 6. 25 million spousal or widow(er) beneficiaries c (716,662 beneficiaries). The average monthly non-covered pension for beneficiaries impacted by the GPO was $2,531, nearly $1,000 more than the average Social Security retired worker benefit of $1,544 in 2020. With an average monthly non-covered pension of $3,193, nearly three-quarters of the beneficiaries impacted by the GPO had their entire spousal or widow(er) benefit offset. The average non-covered pension for those with partially offset benefits was $930.
HOW THE GPO WORKS: Depending on the amount of the non-covered pension, the GPO can partially or completely offset an individual’s spousal or widow(er) benefit. It does this by reducing the benefit by two-thirds of the monthly non-covered pension. The following chart illustrates how two non-covered pension amounts’ spousal benefits would be impacted by the GPO.
Go into your myCalPERS account, select Retirement, and then choose Retirement Summary from the drop-down menu to submit a request to establish reciprocity. Under Reciprocity, select submit a request to establish reciprocity. We’ll send you a letter verifying receipt of your approved request to establish reciprocity as soon as it’s submitted. To track the status of your online request, view it in myCalPERS.
How Pension Income Affects Social Security Benefits
FAQ
Can you have two federal pensions?
Can you have multiple government pensions?
What happens if I have two pensions?
Can a person collect two pensions?
What happens if a government pension is more than social security?
If two-thirds of your government pension is more than your Social Security benefit, your benefit could be reduced to zero. If you take your government pension annuity in a lump sum, Social Security will calculate the reduction as if you chose to get monthly benefit payments from your government work. Why will my Social Security benefits be reduced?
Can you collect Social Security and a pension at the same time?
You can retire with Social Security and a pension at the same time, but the Social Security Administration (SSA) might reduce your Social Security benefit if your pension is from a job at which you did not pay Social Security taxes on your wages.
Will Social Security be reduced by two-thirds of my government pension?
We’ll reduce your Social Security benefits 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.
Can you get a pension if you don’t work for Social Security?
By participating in a government job not covered by Social Security, though, some workers were able to earn a pension during their working years. Under the Social Security system at the time, they also qualified for a Social Security spousal or survivor benefit, as though they had never worked.