If you are receiving an annuity from a job where you didn’t pay Social Security taxes and are married to someone who did, you may be subject to the Government Pension Offset. The GPO can reduce or eliminate your Social Security spousal benefit. That definition applies to a lot of spouses who receive a Civil Service Retirement System annuity.
The reason the GPO became law goes back to the original purpose of the spousal benefit feature in the Social Security system. It was designed to provide a modest level of security for those who didn’t work or who had earned little during their working life. It wasn’t designed to put extra income into the pockets of working couples who were both entitled to a Social Security benefit.
In a two-worker family where both pay Social Security taxes, when one of them is eligible for an earned Social Security benefit and a spousal benefit, he or she will only get the higher of the two amounts, not both.
That’s the way it is today for most federal retirees. But it wasn’t always that way. At one time, anyone covered by CSRS who was married to someone covered by Social Security was entitled to receive both a full CSRS annuity and a full Social Security spousal benefit. However, Congress concluded that an employee who was in a retirement system where he or she wasn’t paying Social Security taxes was enjoying an unfair advantage. So, in 1983 it changed the law.
The best explanation of how the GPO works comes from the National Association for Active & Retired Employees, which has developed two clear examples.
Example 1: Worker A has earned a Social Security benefit of $300 per month based on her own work record. Her spouse has earned a Social Security benefit of $1,200.
One half of $1,200, or $600, is worker A’s Social Security spousal benefit. $300 (her own Social Security benefit amount) plus $300 from her spouse’s work record brings her benefit to the highest amount of the two benefits for which she is eligible: $600. Thus, she receives a $600 Social Security benefit: not a $900 benefit.
Example 2: Worker B has earned a Social Security benefit off $1,200 per month, His spouse has earned her own Social Security benefit of $800.
Fifty percent of $800 is $400 — Worker B’s spousal benefit.
His $1,200 worker benefit is more than his $400 spousal benefit.
Thus worker B does not receive any Social Security benefit based on his spouse’s earnings because his own benefit is higher. His benefit remains at $1,200.
In the words of the Social Security Administration, “The Government Pension Offset ensures that we calculate the benefits of government employees who don’t pay Social Security taxes the same as workers in the private sector who pay Social Security taxes.”
However, there are exceptions to the GPO. Your Social Security benefit as a spouse, widow or widower won’t be reduced if you:
- Receive a government pension that’s not based on your earnings; or
- Are a federal employee (including CSRS Offset) whose government pension is from a job for which you paid Social Security taxes; and you filed for and were entitled to a spouse, widow or widower benefit before April 1, 2004; or the last day of employment on which your annuity is based is before July 1, 2004; or you paid Social Security taxes on your earnings during the last 60 months of government service; or less than 60 months is your last day of employment fell after June 30, 2004, but before March 2, 2009.)
There are other less common situations for which SSA won’t reduce your Social Security benefit as a spouse, widow or widower.
For a list of these, go to https://www.socialsecurity.gov/pubs/EN-05-10007.pdf.
Unfortunately, the GPO has a major impact on low-income workers and surviving spouses. For that reason, over the last 30 year, bills have been introduced in Congress to either reduce the impact of the GPO or even eliminate it. So far those bills haven’t gained any traction. And it doesn’t appear that they will in the foreseeable future