Order Code RL32453
CRS Report for Congress
Received through the CRS Web
Social Security: The Government Pension Offset
(GPO)
July 6, 2004Updated March 9, 2007
Laura Haltzel
Specialist in Social Legislation
Domestic Social Policy Division
Congressional Research Service ˜ The Library of Congress
Social Security: The Government Pension Offset (GPO)
Summary
A worker is “covered” by Social Security if he or she pays into Social Security
through the Old-Age, Survivors, and Disability Insurance (OASDI) payroll tax.
Currently 96% of all workers are covered by Social Security. The majority of noncovered positions are held by federal, state, and local government employees.
Generally, Social Security benefits are payable to the spouses of retired,
disabled, or deceased workers covered by Social Security. Spousal benefits are
intended for individuals who are financially dependent on spouses who work in
Social Security-covered positions. Individuals who qualify for both a Social Security
worker benefit (retirement or disability) based on their own work history and a Social
Security spousal benefit based on their spouse’s work history are “dually-entitled”
and are subject to the dual-entitlement rule. The Social Security dual-entitlement rule
requires that 100% of a Social Security retirement or disability benefit earned as a
worker (based on one’s own Social Security-covered earnings) be subtracted from
any Social Security spousal benefit one is eligible to receive (based on their spouse’s
Social Security-covered earnings), and only the difference, if any, is paid as a spousal
benefit.
Individuals who qualify for both a government pension based on non-Social
Security-covered employment and a Social Security spousal benefit are subject to the
Government Pension Offset (GPO) provision. The GPO provision reduces Social
Security benefits that a person receives as a spouse if he or she also has a federal,
state or local government pension based on work that was not covered by Social
Security. The GPO reduction in Social Security spousal benefits is equal to twothirds of the government pension.
The intent of the dual-entitlement rule and the GPO is the same — to reduce the
Social Security spousal benefits of individuals who are not financially dependent on
their spouse because they receive their own benefits. The GPO attempts to replicate
Social Security’s “dual-entitlement” rule, by removing an advantage these workers
would otherwise receive if they could receive both a government pension and full
Social Security spousal benefits. Opponents contend that the provision is basically
inaccurate and often unfair while defenders argue it is the best method currently
available for eliminating an unfair advantage for non-covered government workers.
SixThree bills have been introduced in the 108th Congress that would modify or repeal the
provision. One bill, H.R. 743, which eliminated a controversial exemption from the
GPO (known as the “last-day rule”) was passed into law (P.L. 108-203) on March 2,
110th Congress to modify or repeal the
GPO (H.R. 82, H.R. 1090 and S. 206). Six bills were introduced in the 109th
Congress that would have modified or repealed the provision. The last bill passed
that modified the GPO, H.R. 743 from the 108th Congress, eliminated a controversial
exemption from the GPO (known as the “last-day rule”) and was passed into law
(P.L. 108-203) on March 2, 2004.
This report will be updated periodically.
Contents
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Social Security-Covered and Non-Covered Work . . . . . . . . . . . . . . . . . . . . 1
Dual-Entitlement Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Government Pension Offset Formula . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Rationale and Legislative History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Why a Two-Thirds Reduction? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Who Is Affected by the GPO? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Arguments Against the GPO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Arguments for the GPO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10. . . . 11
The “Last Day” Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Recent Legislation . . . . . . . . . . . . . .. . . . 12
How Does the New Law Affect Exemption from the GPO? . . . . . . . . .13
Recent Legislation . . . . . . . . . . . . . . . . . . . . . 12
Proposed Changes to the GPO Formula. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
14
Proposed Changes to the “Last Day” Rule: P.L. 108-203GPO Formula . . . . . . . . . . . . . . . . . . . 13
How Does the New Law Affect Exemption from the GPO? . . . . . . . . 14
List of Tables
Table 1. Regular Dual-entitlementEntitlement Formula . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Table 2. GPO Formula . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Table 3. Mary’s Spousal Benefit — Before and After GPO Enactment . . . . . . . . 6
Table 4. Number of Social Security Beneficiaries Affected by the GPO,
by State and Type of Benefit, December 2003June 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Social Security: The Government Pension
Offset (GPO)
Background
Generally, Social Security benefits are payable to the spouses of retired,
disabled, or deceased workers covered by Social Security. Spousal benefits are
intended for individuals who are financially dependent on spouses who work in
Social Security-covered positions. The spousal benefit is equal to 50% of the retired
or disabled worker’s benefit and 100% of the deceased worker’s benefit. Individuals
who qualify for both a Social Security worker benefit (retirement or disability) based
on their own work history and a Social Security spousal benefit based on their
spouse’s work history are “dually-entitled” and are subject to the dual-entitlement
rule. Individuals who qualify for both a non-Social Security-covered government
pension and a Social Security spousal benefit are subject to the Government Pension
Offset (GPO) provision.1 The intent of the dual-entitlement rule and the GPO is the
same — to reduce the Social Security spousal benefits of individuals who are not
financially dependent on their spouse because they receive their own benefits. The
key difference is what is used to determine financial dependence — benefits based
on Social Security-covered work or benefits based on non-Social Security-covered
work.2
Social Security-Covered and Non-Covered Work.
A worker is
“covered” by Social Security if he or she pays into Social Security
through the OldAgeOld-Age, Survivors, and Disability Insurance (OASDI) payroll tax.
Approximately 96%
of all workers are covered. The majority of non-covered
positions are held by
government employees: most federal employees hired
before1984 and some state and
local government employees. Nationwide,
approximately 7271% of state and local
government employees are covered.3 However,
coverage varies from state to state.
For example, approximately 97% of state and local employees in Vermont are
1
The GPO is often confused with the Windfall Elimination Provision (WEP), which reduces
Social Security benefits that a person receives as a worker if he or she also has a
government pension based on work that was not covered by Social Security. For additional
information in the Windfall Elimination Provision (WEP), please refer to CRS Report 9835, Social Security: The Windfall Benefit Provision, by Laura Haltzel.
2
3
42 U.S.C. § 402(b)(4).
Social Security Administration, Estimated Social Security Coverage of Workers with State
and Local Government Employment, 2001.
CRS-2
2004.
CRS-2
local employees in New York are covered by Social Security, while only 3% of state
and local employees in Ohio are
covered.4
This disparity in coverage occurs because, while Social Security originally did
not cover any state and local government workers, over time the law has changed.
Most state and local government employees became covered by Social Security
through voluntary agreements between the Social Security Administration and
individual states.5 Beginning in July 1991, state and local employees who were not
members of a public retirement system were mandatorily covered by Social Security.
Those public employees who were already members of a public retirement system
through their employment were not mandatorily covered because their state pensions
already fulfilled the social insurance functions of Social Security.
Dual-Entitlement Rule.
The Social Security dual-entitlement rule requires
that 100% of a Social
Security retirement or disability benefit earned as a worker
(based on one’s own
Social Security-covered earnings) be subtracted from any Social
Security spousal
benefit one is eligible to receive (based on their spouse’s Social
Security-covered
earnings), and only the difference, if any, is paid as a spousal
benefit. In other words,
the dual-entitled worker will receive the higher of his or her
own retirement benefit
or the spousal benefit, but not both. The rationale is that a
Social Security spousal
benefit is based on the concept of “dependency,” and
someone who receives his or
her own Social Security benefit as a retired worker is
not financially dependent on
his or her spouse. Because most workers are in Social
Security-covered employment,
the dual-entitlement scenario is the most common
among two-earner couples. In December 2003
2005, approximately 6.23 million out of 47
30.5 million Social Security retired worker
beneficiaries, or about 1320%, were dually-entitled (not
including those whose spousal
benefit was completely offset by their retired worker
benefit).6 Table 1 demonstrates
how the Social Security dual-entitlement rule is
applied.
4
Ibid.
5
These agreements are known as “Section 218 agreements” because they are authorized by
Section 218 of the Social Security Act.
6
Social Security Administration, Annual Statistical Supplement, OASDI Monthly Statistics,
Dec. 2003 2006, Table 15.G2.
CRS-3
Table 1. Regular Dual-Entitlement Formula
John
Social Security retirement benefit (based on worker’s earnings
record)
Mary
$900.00
$400.00
$200.00
$450.00
$900.00
$400.00
$0.00
$50.00
Maximum Social Security spousal benefit eligible to receive (based
on spouse’s earnings record), equal to 50% of the spouse’s Social
Security retirement benefit
Reduction in spousal benefit due to dual-entitlement rule (equal to
worker'’s own retirement benefit)
Actual Social Security SPOUSAL benefit paid (subtract worker
benefit from spousal benefit)
Source: Illustrative example provided by Congressional Research Service (CRS).
In this example, both John and Mary have worked enough years in Social
Security-covered positions (i.e., paid into Social Security) to qualify for Social
Security retirement benefits. John has earned a Social Security benefit equal to $900.
His wife Mary has earned a Social Security benefit equal to $400. Mary is also
eligible for a Social Security spousal benefit of up to 50% of John’s retirement
benefit, or $450. However, under the dual-entitlement rule, Mary’s worker benefit
of $400 must be subtracted from her potential $450 spousal benefit, and only the
difference of $50 is paid as a spousal benefit. In total, Mary will receive $450 —
$400 as a Social Security worker benefit and $50 as a Social Security spousal benefit.
John is also eligible to receive a Social Security spousal benefit of up to 50% of
Mary’s retirement benefit, or $200. However, in this application of the dualentitlement rule, John would not be paid a spousal benefit because his $900
retirement benefit based on his own earnings is higher and more than offsets the
potential $200 spousal benefit.
Government Pension Offset Formula.
The Social Security spousal
benefit of a person who receives a pension from
government employment (federal,
state, or local) that was based on work not covered
by Social Security is reduced by
a provision in the law known as the GPO. The GPO
reduction in Social Security
spousal benefits is equal to two-thirds of the government
pension. In December
2003June 2004, approximately 390,400401,200 Social Security beneficiaries, or less than about
1% of all
retired worker beneficiaries, had spousal benefits reduced by the GPO (not
counting those who were
eligible for spousal benefits but were deterred from filing
for them because of the
GPO).7 Table 2 below provides an example of how the GPO
is applied.
7
Social Security Administration, Office of Research Evaluation and Statistics, Unpublished
Table DE01, Mar. 1, 2004A, Jun. 2, 2005.
CRS-4
Table 2. GPO Formula
John
Mary
Social Security retirement benefit (based on worker’s earnings record)
$900.00
$0.00
Non-Social Security-covered government pension
$0.00
$400.00
Maximum Social Security spousal benefit eligible to receive (based on
spouse’s earnings record), equal to 50%of the spouse’s Social Security
retirement benefit
$0.00
$450.00
Reduction in Social Security spousal benefit due to GPO (equals 2/3 of
non-Social Security-covered pension)
$0.00
$266.67
Actual Social Security spousal benefit paid (subtract 2/3 of non-Social
Security-covered worker'’s pension from Social Security spousal
benefit)
$0.00
$183.33
Source: Illustrative example provided by CRS.
In this example, John worked enough years in Social Security-covered
employment to qualify for Social Security retirement benefits. He has earned a
Social Security benefit of $900. His wife, Mary, is not eligible for a Social Security
worker benefit on her own record because she worked in a non-Social Securitycovered government position and did not contribute to Social Security. However,
Mary is still eligible for a Social Security spousal benefit of up to $450 based on
John’s work history. Mary is also eligible for a $400 government pension based on
her work in a non-Social Security-covered position. Under the GPO, Mary’s
potential Social Security spousal benefit is reduced by an amount equal to two-thirds
of her non-Social Security-covered government pension, or $266.67, and only the
difference of $183.33 is paid to her as a spousal benefit. In total, Mary will receive
$583.33 — $400 from her non-covered pension and $183.33 as a Social Security
spousal benefit. In this example, John is not eligible for a Social Security spousal
benefit because Mary did not qualify on her own earnings history for a Social
Security worker benefit.
Rationale and Legislative History
The GPO is intended to place annuitants whose government employment was
not covered by Social Security and who are eligible for a Social Security spousal
benefit in approximately the same position as workers whose jobs were covered by
Social Security and are also eligible for a Social Security spousal benefit. Before the
GPO was enacted in 1977, workers who received pensions from a government job
not covered by Social Security could also receive full Social Security spousal benefits
even though they were not financially dependent on their spouse. Because the Social
Security Administration (SSA) does not have complete earnings records of those who
work in non-Social Security-covered positions, SSA is forced to rely on the
government pension as a measure of those uncovered earnings. Essentially, it is
assumed that two-thirds of the government pension is basically equivalent to the
CRS-5
Social Security retirement or disability benefit the spouse would have earned as a
CRS-5
worker if his or her job had been covered by Social Security. Thus, the GPO
attempts to replicate the Social Security dual-entitlement rule by requiring that an
amount equal to two-thirds of the worker’s non-covered government pension be
subtracted from the Social Security spousal benefit. The scenarios below
demonstrate why the law was changed.
Table 3 shows how the spousal benefit of the same individual, Mary, would
vary under three scenarios: (1) as a dually-entitled recipient of Social Security
retirement and spousal benefits; (2) as the recipient of a non-covered government
pension and Social Security spousal benefits before the GPO was enacted; and, (3)
as the recipient of a non-covered government pension and Social Security spousal
benefits after the GPO was enacted. In each case, Mary’s earnings (and thus the
Social Security retirement benefit or non-covered government pension) and the
maximum spousal benefit she is eligible to receive are identical.
Under the first scenario (as a dually-entitled retiree), 100% of Mary’s own
Social Security retirement benefit of $400 is used to offset the $450 Social Security
spousal benefit that she is eligible for, leaving her with a net spousal benefit of $50.
Under the second scenario (where Mary receives a non-covered government pension
instead of a Social Security retirement benefit), before the GPO was enacted, Mary’s
Social Security spousal benefits are not reduced at all and she receives a full Social
Security spousal benefit of $450. Under the third scenario (when the GPO is put into
effect), Mary’s Social Security spousal benefit is reduced by two-thirds of her $400
non-covered government pension, leaving her with a net spousal benefit of $183.33.
Therefore, with the GPO in place, Mary’s earnings and resulting retirement benefit
are used to offset her Social Security spousal benefit just as they were under the dualentitlement scenario.
Table 3 also shows how, given equal Social Security retirement benefits or
non-covered government pension amounts of $400, individuals under the GPO
actually receive a lesser reduction in Social Security spousal benefits compared to
those covered by Social Security and subject to the dual-entitlement rule. Those
under dual-entitlement face a 100% offset and receive only a $50 spousal benefit
while those under the GPO face a 66.6% offset and receive $183.33 as a spousal
benefit. If those non-Social Security-covered workers had been covered by Social
Security, they would have been subject to the dual-entitlement rule and their spousal
benefits would be lower than what they receive under the GPO.
CRS-6
Table 3. Mary’s Spousal Benefit —
Before and After GPO Enactment
Duallyentitled
Social Security retirement benefit (based on own
earnings record)
Non-Social Security-covered pension
Maximum Social Security spousal benefit eligible to
receive (based on spouse'’s earnings record), equal to
50% of the spouse'’s Social Security retirement benefit
Before
GPO
After GPO
$400.00
$0.00
$0.00
$0.00
$400.00
$400.00
$450.00
$450.00
$450.00
$400.00
------
------
------
------—— —
—— —
—— —
—— —
$266.67
$50.00
$450.00
$183.33
Reduction in spousal benefit due to dual-entitlement
rule (equal to worker'’s retirement benefit)
Reduction in Social Security spousal benefit due to
GPO (equals 2/3 of non-Social Security-covered
pension)
Actual Social Security spousal benefit paid (subtract
worker benefit from spousal benefit)
Source: Illustrative example provided by CRS.
Note: Dashes are used to represent scenarios where either the dual-entitlement rule or the GPO are
not applicable. For example, in the dual-entitlement scenario, Mary does not receive a noncovered government pension and, thus, the GPO does not apply.
Table 3 also shows how, given equal Social Security retirement benefits or
non-covered government pension amounts of $400, individuals under the GPO
actually receive a lesser reduction in Social Security spousal benefits compared to
those covered by Social Security and subject to the dual-entitlement rule. Those
under dual-entitlement face a 100% offset and receive only a $50 spousal benefit
while those under the GPO face a 66.6% offset and receive $183.33 as a spousal
benefit. If those non-Social Security-covered workers had been covered by Social
Security, they would have been subject to the dual-entitlement rule and their spousal
benefits would be lower than what they receive under the GPO.
Why a Two-Thirds Reduction? Why a Two-Thirds Reduction?
Using two-thirds of the government
pension as the equivalent of a Social
Security benefit was established by the Social
Security Amendments of 1983 (P.L.
98-21). The original 1977 law provided that
100% of the government pension be
subtracted from the Social Security spousal
benefit. If the original legislation had
been left intact, the treatment of individuals
affected by the dual-entitlement rule and
the GPO would in fact have been identical
because the Social Security spousal
benefit would have been offset by 100% of the
retirement benefit in both cases. In
1983, Congress passed P.L. 98-21, which made
a number of amendments to Social
Security in an attempt to strengthen the system’s
finances. One section of the House
version of this law proposed that the amount used
in calculating the offset be one-thirdonethird of the government pension. The Senate version
CRS-7
contained no such provision.
The conferees adopted the House bill except that the
offset would be two-thirds of
the government pension.
CRS-7
Who Is Affected by the GPO?
Government workers not paying into Social Security are potentially affected by
the GPO. Generally, employees of the federal government hired before 1984 are
covered by the Civil Service Retirement System (CSRS) and are not covered by
Social Security; therefore, they are subject to the GPO upon retirement. Most federal
workers first hired into federal service after 1983 are covered by the Federal
Employees’ Retirement System (FERS), which includes Social Security coverage;
thus, although FERS retirees are not subject to the GPO,8 they, like all covered
workers in the private sector, are subject to the Social Security dual-entitlement rule
upon retirement. As of March 2003September 2005, approximately 770645,000 federal workers (30%
(26% of the federal workforce) participate in CSRS and are potentially subject to the GPO,
while 1.8
GPO, whereas 1.9 million (7074%) participate in FERS and are subject to the dual-entitlement
dualentitlement rule.9
Some state and local government workers do not pay into Social Security and
are potentially subject to the GPO upon retirement. Social Security coverage varies
by state. In 20012004, approximately 6.78 million state and local workers (2829% of all state
and local workers) were in non-Social Security-covered positions and are subject to
the GPO. At the same time, approximately 16.9 million state and local workers
(7271%) were in covered employment and are subject to the dual-entitlement rule upon
retirement.10
As of December 2003June 2004, approximately 390,400401,200 Social Security beneficiaries, or
less less
than 1% of all beneficiaries, had spousal benefits reduced by the GPO (not
counting counting
those who were eligible for spousal benefits but were deterred from filing
for them
because of the GPO).11 Of these 5958% were spouses; 4142% were widows and
widowers.
About 75% of all affected were women.11 Table 4 below provides a
breakdown of
the affected beneficiaries by state and type of benefit.
8
Workers who switch from CSRS to FERS must work for five years under FERS in order
to be exempt from the GPO.
9
Federal Retirement Thrift Investment Board, Participation in the Thrift Savings Plan by
Department and Agency, Mar. 2003.
September 2005.
10
Social Security Administration, Estimated Social Security Coverage of Workers with State
and Local Government Employment, 20012004.
11
Social Security Administration, Office of Research Evaluation and Statistics, Unpublished
Table DE01, Mar. 1, 2004Jun. 2, 2005.
CRS-8
Table 4. Number of Social Security Beneficiaries Affected by
the GPO, by State and Type of Benefit, December 2003June 2004
State
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
District of Columbia
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Total
3,631
1,271
4,914
2,279
56,262
12,437
4,641
332
2,573
17,424
9,874
1,684
980
24,686
3,340
1,514
1,771
5,462
17,663
3,795
7,445
17,957
4,274
5,431
1,999
8,119
843
1,003
4,178
1,233
4,205
2,407
7,886
4,701
409
53,818
3,142
3,030
7,195
1,211
2,973
686
4,017
42,973
1,783
449
6,743
4,045
978
Spouses
1,854
729
2,659
1,318
36,006
7,820
2,975
142
836
9,937
5,388
1,047
560
15,017
1,619
831
848
3,409
9,530
2,268
3,272
11,059
2,165
3,354
993
4,889
460
554
2,442
712
2,013
1,423
3,882
2,491
225
32,804
1,565
1,716
3,553
714
1,583
367
2,200
27,154
959
270
3,229
2,045
459
Widow(er)s
1,777
542
2,255
961
20,256
4,617
1,666
190
1,737
7,487
4,486
637
420
9,669
1,721
683
923
2,053
8,133
1,527
4,173
6,898
2,109
2,077
1,006
3,230
383
449
1,736
521
2,192
984
4,004
2,210
184
21,014
1,577
1,314
3,642
497
1,390
319
1,817
15,819
824
179
3,514
2,000
519
CRS-9
State
Wisconsin
Wyoming
Outlying areas and foreign countries
Total
Total
2,603
371
5,791
Spouses
1,460
189
3,787
Widow(er)s
1,143
182
2,004
390,431
228,781
161,650
Source: Social Security Administration, Office of Research Evaluation and Statistics, Mar. 1, 2004
Total
3,697
1,331
5,052
2,332
57,878
12,864
4,807
348
2,589
17,693
10,087
1,691
1,004
25,821
3,377
1,541
1,771
5,688
18,234
3,906
7,561
18,697
4,341
5,462
2,048
8,320
861
1,030
4,396
1,278
4,231
2,466
7,915
4,816
420
55,442
3,143
3,113
7,268
1,221
3,033
Spouses
1,860
772
2,708
1,328
36,888
8,038
3,098
147
825
10,012
5,471
1,043
568
15,721
1,620
836
843
3,529
9,792
2,312
3,281
11,455
2,192
3,338
1,006
5,007
461
561
2,561
723
1,996
1,455
3,832
2,525
224
33,628
1,553
1,753
3,510
716
1,584
Widow(er)s
1,837
559
2,344
1,004
20,990
4,826
1,709
201
1,764
7,681
4,616
648
436
10,100
1,757
705
928
2,159
8,442
1,594
4,280
7,242
2,149
2,124
1,042
3,313
400
469
1,835
555
2,235
1,011
4,083
2,291
196
21,814
1,590
1,360
3,758
505
1,449
CRS-9
State
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming
Outlying areas and foreign countries
Total
Total
707
4,082
44,288
1,816
458
6,870
4,113
999
2,662
382
6,057
401,207
Spouses
374
2,212
27,817
966
271
3,212
2,061
469
1,482
198
3,966
233,800
Widow(er)s
333
1,870
16,471
850
187
3,658
2,052
530
1,180
184
2,091
167,407
Source: Social Security Administration, Office of Research Evaluation and Statistics, Jun. 2, 2005.
In December 2003, the average monthly non-covered government pension
amount was $1,555 ($1,343 for women and $2,194 for men).12 The average preoffset Social Security spousal benefits at that time were $500 per month overall
($564 for women, and $310 for men).13 In December 2003, the average offset caused
by the GPO was $409 ($444 a month for women and $306 for men).14 For 75% of
those with spousal benefits reduced by the GPO, the GPO reduction was large
enough to fully offset any potential spousal benefit either because the non-covered
pension was large or the potential Social Security spousal benefits were small.15 In
December 2003, the average resulting Social Security spousal benefit was $91 per
month ($120 a month for women and $4 a month for men).16
By contrast, in December 2003 approximately 6.2 million beneficiaries were
affected by the dual-entitlement rule.17 Of these, 43% were spouses and 57% were
widow(er)s.18 About 6.1 million (98%) of all affected were women.19 The average
retired worker benefit was $459 overall.20 The average spousal benefit (after being
reduced for dual-entitlement) was $372.21 The average combined Social Security
retired worker benefit plus reduced spousal benefit was $831.22 It is impossible to
know from the administrative records how many individuals subject to the dualentitlement rule have their spousal benefits completely offset, because they would
then not be counted among the dually-entitled population.
12
Ibid., Table G209. Data is limited to those beneficiaries for whom the offset amount is
available.
13
Ibid., Table G309. Data is limited to those beneficiaries for whom the offset amount is
available.
14
Ibid., Table G609. Data is limited to those beneficiaries for whom the offset amount is
available.
15
Ibid., Table G105.
16
Ibid., Table G509, May 7, 2004. Data is limited to those beneficiaries for whom the offset
amount is available.
17
Social Security Administration, Social Security Bulletin, Annual Statistical Supplement,
2004, Table 5.G1.
18
Ibid., 2004, Table 5.G3.
19
Ibid., Table 5.G3.
20
Ibid., Table 5.G3.
21
Ibid.
22
Ibid.
CRS-10
Issues
Arguments Against the GPO. Critics of the GPO say that it is not well
understood and that many affected by it are unprepared for a smaller Social Security
benefit than they had assumed in making retirement plans. They also argue that the
provision especially hurts low-income workers such as teachers, and is in some
circumstances sufficient to throw these workers into poverty. They maintain that the
original purpose of the GPO was to prevent higher-paid workers from reaping
windfall benefits, and it was not intended to have such a drastic effect on lower-paid
workers. They question why the provision applies only to government workers and
not to workers in the private sector who also receive pensions from their employers.
They also point out that whatever the rationale, reducing everyone’s spousal benefit
by two-thirds of their government pension is an imprecise way to estimate what the
spousal benefit would be had the government job been covered by Social Security.
They say this procedure has uneven results and that it is especially disadvantageous
for surviving spouses and low-paid workers. Ideally, the way to compute the offset
to replicate the dual-entitlement rule would be to apply the Social Security benefit
formula to an individual’s total earnings, including the non-covered portion, and
reduce the resulting Social Security benefit by the proportion of total earnings
attributable to non-covered earnings.
Arguments for the GPO. Defenders of the GPO maintain that it is an
effective method to curtail what otherwise would be an unfair advantage for nonSocial Security-covered government workers. The provision was phased in over six
years and now has been in the law for 27 years; therefore, they say, there has been
ample time for people to adjust their retirement plans. H.R. 743 (P.L. 108-203),
discussed below, includes a provision that seeks to ensure that SSA and government
employers notify potentially affected individuals about the effect of the GPO. They
maintain that it is not true that the measure was intended to apply particularly to
higher-paid workers, nor does analysis support the position that the measure
disproportionately affects lower-paid workers. While 75% of those affected by the
GPO have their benefits fully offset, only 44% of those with non-covered pensions
of less than $1,000 per month had their benefits fully offset compared with 91% of
those with non-covered pensions between $1,000 and $1,999 and 100% of
individuals with non-covered pensions over that amount.23 Of the 75% of individuals
affected by the GPO whose benefits were fully offset as a result of the GPO, only
21% had a non-covered pension amount of less than $1,000 per month.24 Thus, if the
non-covered pension amount is a reflection of the earnings levels of individuals
affected by the GPO, a greater percentage of those with lower earnings receive at
least a partial Social Security benefit relative to the overall GPO-affected population.
Furthermore, recent data from the Bureau of Labor Statistics indicate that state and
local government workers earned on average $21.54 per hour compared to the
23
CRS calculations based on Table I, “Estimated Number of Beneficiaries Affected by the
GPO by Current Offset Status and the Non-Covered Government Pension Amount, Limited
to Those Beneficiaries For Which the Offset Amount is Available, Dec. 2003,” produced
by the Social Security Administration’s Office of Research, Evaluation and Statistics, Mar.
1, 2004.
24
Ibid.
CRS-11
national average of $17.18 per hour and the private sector average of $16.40 per
hour.25
12
Ibid., Table G209, Mar. 1, 2004. Data is limited to those beneficiaries for whom the offset
amount is available. More recent data was unavailable from the Social Security
Administration at the time of publication.
13
Ibid., Table G309, Mar. 1, 2004. Data is limited to those beneficiaries for whom the offset
amount is available. More recent data was unavailable from the Social Security
Administration at the time of publication.
14
Ibid., Table G609, Mar. 1, 2004. Data is limited to those beneficiaries for whom the offset
amount is available. More recent data was unavailable from the Social Security
Administration at the time of publication.
15
Ibid., Table G105, Mar. 1, 2004. The Social Security Administration has more recent data
on this one statistic showing that approximately 85% of those with spousal benefits had
them fully offset by the GPO as of June 2004. However, the previous estimate of 75% is
provided in the text to maintain consistency with the other data for which no updates are
available.
16
Ibid., Table G509, May 7, 2004. Data is limited to those beneficiaries for whom the offset
amount is available. More recent data was unavailable from the Social Security
Administration at the time of publication.
CRS-10
By contrast, in December 2003 approximately 6.2 million beneficiaries were
affected by the dual-entitlement rule.17 Of these, 43% were spouses and 57% were
widow(er)s.18 About 6.1 million (98%) of all affected were women.19 The average
retired worker benefit was $459 overall.20 The average spousal benefit (after being
reduced for dual-entitlement) was $372.21 The average combined Social Security
retired worker benefit plus reduced spousal benefit was $831.22 It is impossible to
know from the administrative records how many individuals subject to the dualentitlement rule have their spousal benefits completely offset, because they would
then not be counted among the dually-entitled population.
Issues
Arguments Against the GPO
Critics of the GPO say that it is not well understood and that many affected by
it are unprepared for a smaller Social Security benefit than they had assumed in
making retirement plans. They also argue that the provision especially hurts lowincome workers such as teachers, and is in some circumstances sufficient to throw
these workers into poverty. Opponents maintain that the original purpose of the GPO
was to prevent higher-paid workers from reaping windfall benefits, and it was not
intended to have such a drastic effect on lower-paid workers. They question why the
provision applies only to government workers and not to workers in the private sector
who also receive pensions from their employers. They also point out that whatever
the rationale, reducing everyone’s spousal benefit by two-thirds of their government
pension is an imprecise way to estimate what the spousal benefit would be had the
government job been covered by Social Security. They say this procedure has
uneven results and that it is especially disadvantageous for surviving spouses and
low-paid workers. Ideally, the way to compute the offset to replicate the dualentitlement rule would be to apply the Social Security benefit formula to an
individual’s total earnings, including the non-covered portion, and reduce the
resulting Social Security benefit by the proportion of total earnings attributable to
non-covered earnings.
17
Social Security Administration, Social Security Bulletin, Annual Statistical Supplement,
2004, Table 5.G1. More recent data was unavailable from the Social Security
Administration at the time of publication.
18
Ibid., 2004, Table 5.G3. More recent data was unavailable from the Social Security
Administration at the time of publication.
19
Ibid., Table 5.G3. More recent data was unavailable from the Social Security
Administration at the time of publication.
20
Ibid., Table 5.G3. More recent data was unavailable from the Social Security
Administration at the time of publication.
21
Ibid.
22
Ibid.
CRS-11
Arguments for the GPO
Defenders of the GPO maintain that it is an effective method to curtail what
otherwise would be an unfair advantage for non-Social Security-covered government
workers. The provision was phased in over six years and now has been in the law for
28 years; therefore, they say, there has been ample time for people to adjust their
retirement plans. P.L. 108-203, passed in 2004, included a provision that seeks to
ensure that SSA and government employers notify potentially affected individuals
about the effect of the GPO. They maintain that it is not true that the measure was
intended to apply particularly to higher-paid workers, nor does analysis support the
position that the measure disproportionately affects lower-paid workers. While 75%
of those affected by the GPO have their benefits fully offset, only 44% of those with
non-covered pensions of less than $1,000 per month had their benefits fully offset
compared with 91% of those with non-covered pensions between $1,000 and $1,999
and 100% of individuals with non-covered pensions over that amount.23 Of the 75%
of individuals affected by the GPO whose benefits were fully offset as a result of the
GPO, only 21% had a non-covered pension amount of less than $1,000 per month.24
Thus, if the non-covered pension amount is a reflection of the earnings levels of
individuals affected by the GPO, a greater percentage of those with lower earnings
receive at least a partial Social Security benefit relative to the overall GPO-affected
population. Furthermore, June 2005 data from the Bureau of Labor Statistics indicate
that state and local government workers earned on average $23.31 per hour compared
with the national average of $18.62 per hour and the private sector average of $17.82
per hour.25
Thus, on average, private sector workers, who are affected by the dualentitlement rule, earn less than their counterparts in state and local government who
are affected by the GPO. Defenders point out that, if these government workers had
been covered by Social Security, in many cases Social Security’s dual-entitlement
rule would produce a higher reduction in spousal benefits than does the GPO. Thus,
they say, to weaken or eliminate the GPO would be unfair to other workers, including
the majority of government workers whose jobs are covered by Social Security and
therefore are subject to Social Security’s dual-entitlement rule. They maintain that
the fact that the GPO does not apply to private sector pensions is irrelevant, because
the employment on which the private pension is based would be covered by Social
Security, and thus Social Security’s dual-entitlement rule (which the GPO is meant
to replicate) would reduce any spousal benefits for which the workers would be
eligible. They also argue that weakening or eliminating the GPO would be costly at
a time when neither Social Security nor the federal budget is in sound financial
condition. The Congressional Budget Office (CBO) has projected the savings
produced by the GPO to be about $31 billion over the next 10 years (hence, the 10year cost of repealing the provision would be about $31 billion). Finally, because
administrative considerations have precluded applying the Social Security benefit
computation rules to government employment, the GPO is defended as a practical
way to prevent undue Social Security benefits from going to government annuitants.
The “Last Day” Rule. A burgeoning controversy has arisen with the recent
revelation that a growing number of state and local government workers have been
making use of a little-known provision of the law that allows them to escape the
application of the GPO if they switch jobs at the end of their government careers.
They have been able to do this because, until recently, the law granted an exception
to the GPO if, on the last day of one’s government service, he or she worked in a
Social Security-covered position. On August 15, 2002, the General Accounting
Office (GAO) released a report that found that, as of June 2002, 4,819 individuals in
Texas and Georgia had switched to Social Security-covered positions to avoid the
application of the GPO to their Social Security spousal benefits. The GAO projected
that the cost to the program for these cases could be about $450 million. The GAO
stated that possible remedies to these potential abuses of the last-day exception clause
could be to lengthen the time period to qualify for the exemption or to prorate the
reduction in benefits to the proportion of time spent in the non-covered job compared
to the covered one. On February 11, 2004, the House of Representatives agreed to
Senate amendments and passed H.R. 743, the Social Security Protection Act of 2003,
which became P.L. 108-203.26 As discussed below, P.L. 108-203 eliminated the lastday exception clause by requiring those workers switching from non-covered
25
U.S. Department of Labor, Bureau of Labor Statistics, National Compensation Survey:
Occupational Wages in the United States, July 2002, June 2003.
26
For more information on H.R. 743, see CRS Report RS21448, The Social Security
Protection Act of 2003 (H.R. 743), by Dawn Nuschler.
CRS-12
positions to Social Security-covered positions to work in the covered position for at
least 60 months (five years) before being exempt from the GPO.27
Recent Legislation
Proposed Changes to the GPO Formula. Five bills have been introduced
in the 108th Congress that would affect the GPO formula. Representative McKeon
and Senator Feinstein have introduced identical bills, H.R. 594 and S. 349, both of
which would eliminate the GPO entirely, effective in 2004.28 Senator Mikulski has
introduced S. 363, which would eliminate the application of the GPO to those whose
monthly combination of Social Security spousal benefits and non Social Securitycovered pension is $1,200 or less.29 For those whose monthly combination of Social
Security spousal benefits and non-Social Security-covered pension is more than
$1,200, the reduction in their spousal benefit would be equal to the lesser of (1) twothirds of the amount by which the combined benefit exceeds $1,200 or (2) two-thirds
of the government pension. In future years, the $1,200 threshold would rise in
proportion to the rate of inflation. Similarly, H.R. 887, by Representative Jefferson
and 126 co-sponsors, would eliminate the application of the GPO to those whose
monthly combination of Social Security spousal benefits and non Social Securitycovered pension is $2,000 or less. For those whose monthly combination of Social
Security spousal benefits and other government benefits is more than $2,000, the
reduction in their benefit would be the lesser of the excess over $2,000 or two-thirds
of the government pension. The $2,000 threshold would rise in the future in
proportion to the rate of inflation. Lastly, Representative Shaw has introduced H.R.
75, which would reduce the offset to one-third of the government pension.30
According to estimates provided by the CBO and the Office of the Actuary of
the SSA, elimination of the GPO would cost $31.3 billion over 10 years,31 and in the
long run would cost 0.06% of taxable payroll, which would increase Social Security’s
long-range deficit by about 3%.32 They estimate that enactment of S. 363, which
would eliminate the application of the GPO to those whose monthly combination of
Social Security spousal benefits and non Social Security-covered pension is $1,200
27
This five year period for GPO exemption is consistent with that required of federal
employees converting from CSRS to FERS.
28
H.R. 594 and S. 349 are essentially the same as H.R. 2638 and S. 1523 in the 107th
Congress.
29
S. 363 is essentially the same as S. 611 from the 107th Congress.
30
H.R. 75 is essentially the same bill as H.R. 3497 in the 107th Congress.
31
Congressional Budget Office, Options to Soften or Repeal GPO, Preliminary and
Unofficial, Sept. 12, 2003.
32
Social Security Administration, Office of the Chief Actuary, Memorandum from Chris
Chaplain to Alice H. Wade, “Estimated Long-Range OASDI Financial Effects of H.R. 594,
the “Social Security Fairness Act of 2003” — Eliminate the Government Pension Offset and
the Windfall Elimination Provision – INFORMATION,” Mar. 25, 2003.
CRS-13
or less, would cost $7.9 billion over 10 years,33 and in the long run would cost 0.01%
of taxable payroll (causing an increase in Social Security’s long-range deficit of
about 0.5%).34 They estimate that enactment of H.R. 887, which would eliminate the
application of the GPO to those whose monthly combination of Social Security
spousal benefits and non Social Security-covered pension is $2,000 or less, would
cost $18.1 billion over 10 years,35 and in the long run would cost 0.02% of taxable
payroll, (causing an increase in Social Security’s long-range deficit of about 1.0%).36
On May 1, 2003, the Social Security Subcommittee of the House Committee on
Ways and Means held a hearing on the GPO, in which Members and witnesses
discussed approaches to modifying the provision. The SSA testified that if any
action were taken affecting the GPO, it should be done in the context of overall
reform of the Social Security system.
On March 10, 2004, Representative Jim Turner filed a motion to discharge the
Committee on Rules from the consideration of a resolution (H.Res. 523) to force
consideration of H.R. 594 by the Committee. If the petition is successful, H.R. 594
would be released by the Committee to the floor of the House of Representatives for
a debate and a vote on the bill. A discharge petition requires the approval of a
majority of the House of Representatives (218 signatures) for further action. As of
June 10, 2004, 158 members had signed the petition.
Changes to the “Last Day” Rule: P.L. 108-203. To address the last-day
rule controversy, Representative Shaw introduced H.R. 743, a bill to enhance
protection of Social Security benefits, which included a provision that would require
government workers who switch from non-Social Security-covered jobs to covered
ones to work for the last 60 consecutive months (five years) under the covered job
in the same retirement system in order to be exempt from the GPO (i.e., it would
repeal the “last-day” rule). The CBO estimates that the change to the last-day rule
in H.R. 743 would save $185 million over 10 years. On April 2, 2003, the House
passed H.R. 743 by a vote of 396-28.
On December 9, 2003, the Senate passed H.R. 743, with amendment, by
unanimous consent. In regard to the repeal of the GPO last day rule, the Senate
differed from the House in that it would exempt workers from the 60-month rule if
their last day of Social Security-covered government service occurs before July 1,
33
Congressional Budget Office, Options to Soften or Repeal GPO, Preliminary and
Unofficial, Sept. 12, 2003.
34
Social Security Administration, Office of the Chief Actuary, Memorandum from Chris
Chaplain to Alice H. Wade, “Estimated Long-Range OASDI Financial Effects of a Proposal
to Modify the Government Pension Offset — ‘Government Pension Reform Act’ (S. 363)
— INFORMATION,” Mar. 25, 2003.
35
Congressional Budget Office, Options to Soften or Repeal GPO, Preliminary and
Unofficial, Sept. 12, 2003.
36
Social Security Administration, Office of the Chief Actuary, Memorandum from Chris
Chaplain to Alice H. Wade, “Estimated Long-Range OASDI Financial Effects of a Proposal
to Modify the Government Pension Offset (H.R. 887) — INFORMATION,” Mar. 25, 2003.
CRS-14
2004, regardless of when they file for Social Security benefits. If the last day of
government service occurs after June 30, 2004, and within five years of enactment,
the required 60-month period of Social Security-covered employment would be
reduced (but not to less than one month) by the number of months in Social Securitycovered employment performed under the same retirement system on or before the
date of enactment.
On February 11, 2004, the House of Representatives agreed to the Senate
amendments and passed H.R. 743 by a vote of 402-19, clearing the measure for the
President’s signature. The President signed the bill into law (P.L. 108-203) on March
2, 2004. The new GPO provision becomes effective for Social Security spousal
benefit applications filed after March 31, 2004.
How Does the New Law Affect Exemption from the GPO? Any
current Social Security beneficiary who is receiving spousal benefits and is exempt
from the GPO because they retired from their non-covered position in government
under the “last-day” rule would continue to be exempt from the GPO. Individuals
who have not yet retired from non-covered government employment may still be
exempt from the GPO if:
!
They applied for Social Security spousal benefits before April 1,
2004, and work their last day in a Social Security-covered position
within the same retirement system. In this case, the individual could
continue to work in a non-covered position and still make use of the
“last-day” rule when he or she retires from government employment,
regardless of how far in the future the retirement occurs.
!
Their last day of government service occurs before July 1, 2004 and
they work their last day in a Social Security-covered position within
the same retirement system. In other words, if a worker switches
from non-covered government work to Social Security-covered work
for their last day of work within the same retirement system, they
will be exempt from the GPO, even if they file for Social Security
benefits at a later date. However, if a worker returns to work in a
non-covered position in the same retirement system that they
previously retired from and new contributions are made by either the
employee or employer to the non-covered pension system, his or her
“last-day” exemption from the GPO will be revoked and they will be
subject to the new 60-month requirement for exemption from the
GPO.
!
Their last day of government service occurs on or after July 1, 2004
and before March 2, 2009 and they work a total of 60 months in a
Social Security-covered position within the same retirement system.
The required 60-month period of Social Security covered
employment would be reduced by the number of months the worker
performed in Social Security covered employment under the same
retirement system prior to March 2, 2004. However, in no case can
the 60-month requirement be reduced to less than one month. For
example, a teacher who is currently working in a non-covered
CRS-15
position but who previously worked for 12 months in a Social
Security-covered position under the same retirement system would
have the 60-month requirement reduced to 48 months. The
remaining months to be worked (in this case 48 months), must be
worked consecutively and after March 2, 2004. Thus, if she
switched to a covered position in the same retirement system as her
prior government work for at least the final 48-month period of her
employment AND her last day of employment was before March 2,
2009, she would be exempt from the GPO.
!
Their last day of government service occurs after March 3, 2009 and
they work their last 60 consecutive months in a Social Security
covered position within the same retirement system. In this case, the
entire 60 month period must be worked after March 2, 2004.
All other individuals receiving government pensions based on non-covered
employment would be subject to reductions in Social Security spousal benefits under
the GPORegarding concerns
about pushing those affected by the GPO into poverty, in 2001, the poverty rate
among those affected by the GPO was approximately 6.0%, whereas the poverty rate
for those affected by the dual-entitlement rule was approximately 8.9%.26 The
23
CRS calculations based on Table I, “Estimated Number of Beneficiaries Affected by the
GPO by Current Offset Status and the Non-Covered Government Pension Amount, Limited
to Those Beneficiaries For Which the Offset Amount is Available, Dec. 2003,” produced
by the Social Security Administration’s Office of Research, Evaluation and Statistics, Mar.
1, 2004. More recent data was unavailable from the Social Security Administration at the
time of publication.
24
Ibid.
25
U.S. Department of Labor, Bureau of Labor Statistics, National Compensation Survey:
Occupational Wages in the United States, June 2005, August 2006.
26
Poverty rates were calculated by David Weaver of the Social Security Administration’s
(continued...)
CRS-12
poverty rate for all Social Security beneficiaries age 65 and older was about 8.5%.
For comparison purposes, the poverty rate for the general population at that time was
approximately 11.3%. Defenders of the provision maintain that the fact that the GPO
does not apply to private sector pensions is irrelevant, because the employment on
which the private pension is based would be covered by Social Security, and thus
Social Security’s dual-entitlement rule (which the GPO is meant to replicate) would
reduce any spousal benefits for which the workers would be eligible. They also argue
that weakening or eliminating the GPO would be costly at a time when neither Social
Security nor the federal budget is in sound financial condition. The Congressional
Budget Office (CBO) has projected the savings produced by the GPO to be about $38
billion over the next 10 years (hence, the 10-year cost of repealing the provision
would be about $31 billion). Finally, because administrative considerations have
precluded applying the Social Security benefit computation rules to government
employment, the GPO is defended as a practical way to prevent undue Social
Security benefits from going to government annuitants.
The “Last Day” Rule
A burgeoning controversy arose in the 108th Congress with the revelation that
a growing number of state and local government workers had been making use of a
little-known provision of the law that allowed them to escape the application of the
GPO if they switched jobs at the end of their government careers. They had been
able to do this because, until recently, the law granted an exception to the GPO if, on
the last day of one’s government service, he or she worked in a Social Securitycovered position. On August 15, 2002, the Government Accountability Office
(GAO, formerly the General Accounting Office) released a report that found that, as
of June 2002, 4,819 individuals in Texas and Georgia had switched to Social
Security-covered positions to avoid the application of the GPO to their Social
Security spousal benefits. The GAO projected that the cost to the program for these
cases could be about $450 million. The GAO stated that possible remedies to these
potential abuses of the last-day exception clause could be to lengthen the time period
to qualify for the exemption or to prorate the reduction in benefits to the proportion
of time spent in the non-covered job compared to the covered one.
On February 11, 2004, the House of Representatives agreed to Senate
amendments and passed H.R. 743, the Social Security Protection Act of 2003, which
became P.L. 108-203.27 As discussed below, P.L. 108-203 eliminated the last-day
exception clause by requiring those workers switching from non-covered positions
26
(...continued)
Office of Retirement Policy using the March 2001 Current Population Survey (CPS).
Poverty status is taken directly from the CPS and is thus subject to errors in the reporting
of income. The sample for the GPO and dually-entitled poverty rates only includes persons
for whom SSA administrative records could be matched. The sample size for the GPO
poverty rate is relatively small (130 cases). The poverty rates for the Social Security
beneficiary population age 65 and over and for the general population do not require
matched data and are based completely on CPS data.
27
For more information on H.R. 743, see CRS Report RS21448, The Social Security
Protection Act of 2003 (H.R. 743), by Dawn Nuschler.
CRS-13
to Social Security-covered positions to work in the covered position for at least 60
months (five years) before being exempt from the GPO.28 The new GPO provision
became effective for Social Security spousal benefit applications filed after March
31, 2004.
How Does the New Law Affect Exemption from the GPO? Any
current Social Security beneficiary who is receiving spousal benefits and is exempt
from the GPO because they retired from their non-covered position in government
under the “last-day” rule would continue to be exempt from the GPO. Individuals
may still be exempt from the GPO if:
28
!
They applied for Social Security spousal benefits before April 1,
2004, and work their last day in a Social Security-covered position
within the same retirement system. In this case, the individual could
continue to work in a non-covered position and still make use of the
“last-day” rule when he or she retires from government employment,
regardless of how far in the future the retirement occurs.
!
Their last day of government service occurred before July 1, 2004
and they worked their last day in a Social Security-covered position
within the same retirement system. In other words, if a worker
switched from non-covered government work to Social Securitycovered work for their last day of work within the same retirement
system, they are exempt from the GPO, even if they file for Social
Security benefits at a later date. However, if a worker returns to
work in a non-covered position in the same retirement system that
they previously retired from and new contributions are made by
either the employee or employer to the non-covered pension system,
his or her “last-day” exemption from the GPO will be revoked and
they will be subject to the new 60-month requirement for exemption
from the GPO.
!
Their last day of government service occurs on or after July 1, 2004
and before March 2, 2009 and they work a total of 60 months in a
Social Security-covered position within the same retirement system.
The required 60-month period of Social Security covered
employment would be reduced by the number of months the worker
performed in Social Security covered employment under the same
retirement system prior to March 2, 2004. However, in no case can
the 60-month requirement be reduced to less than one month. For
example, a teacher who is currently working in a non-covered
position but who previously worked for 12 months in a Social
Security-covered position under the same retirement system would
have the 60-month requirement reduced to 48 months. The
remaining months to be worked (in this case 48 months), must be
worked consecutively and after March 2, 2004. Thus, if she
This five year period for GPO exemption is consistent with that required of federal
employees converting from CSRS to FERS.
CRS-14
switched to a covered position in the same retirement system as her
prior government work for at least the final 48-month period of her
employment AND her last day of employment was before March 2,
2009, she would be exempt from the GPO.
!
Their last day of government service occurs after March 3, 2009 and
they work their last 60 consecutive months in a Social Security
covered position within the same retirement system. In this case, the
entire 60 month period must be worked after March 2, 2004.
All other individuals receiving government pensions based on non-covered
employment would be subject to reductions in Social Security spousal benefits under
the GPO.
Recent Legislation
Proposed Changes to the GPO Formula
In the 110th Congress, three bills have been introduced that would alter the GPO.
Representative Berman and Senator Feinstein introduced H.R. 82 and S. 206, the
Social Security Fairness Act of 2007. These identical bills would eliminate the GPO
for Social Security benefits payable after December 2007. According to estimates
provided by CBO and the Social Security actuaries, elimination of the GPO would
cost $38.1 billion over 10 years,29 and in the long run would cost 0.06% of taxable
payroll, which would increase Social Security’s long-range deficit by about 3%.30
H.R. 1090, introduced by Representative Ron Lewis, would, among other things,
reduce the offset to one-third of the government pension. CBO estimates that
reducing the offset from two-thirds to one-third of the government pension would
cost approximately $8.2 billion over 10 years.31
29
Congressional Budget Office, Options to Soften or Repeal GPO, Preliminary and
Approximate, Oct. 5, 2005. This estimate is based on certain assumptions, which may have
changed since this estimate was developed. More recent cost estimates are currently
unavailable.
30
Social Security Administration, Office of the Chief Actuary, Memorandum from Chris
Chaplain to Alice H. Wade, “Estimated Long-Range OASDI Financial Effects of H.R. 594,
the “Social Security Fairness Act of 2003” — Eliminate the Government Pension Offset and
the Windfall Elimination Provision — INFORMATION,” Mar. 25, 2003. This estimate is
based on the intermediate assumptions of the 2003 Social Security Trustees Report. More
recent actuarial estimates are not available. However, the Social Security Office of the
Chief Actuary does not believe that the results would be significantly different using the
2006 Trustees Report.
31
Congressional Budget Office, Options to Soften or Repeal GPO, Preliminary and
Approximate, Oct. 5, 2005. This estimate is based on certain assumptions, which may have
changed since this estimate was developed. More recent cost estimates are currently
unavailable.
CRS-15
In the 109th Congress, six bills were introduced that would have altered the
GPO. Representative McKeon and Senator Feinstein introduced identical bills, H.R.
147 and S. 619, both of which would have eliminated the GPO entirely effective in
2006. Representative Paul introduced H.R. 3661 and H.R. 5210, both of which
would have repealed the 60-month period of employment requirement for exemption
from the GPO established by H.R. 743 in the 108th Congress. Both bills would
reinstate the “last day” rule that was in place prior to passage of H.R 743. Senator
Mikulski introduced S. 1799, which would have eliminated the application of the
GPO to those whose monthly combination of Social Security spousal benefits and
non Social Security-covered pension was $1,200 or less. For those whose monthly
combination of Social Security spousal benefits and non-Social Security-covered
pension was more than $1,200, the reduction in their spousal benefit would have
been equal to the lesser of (1) two-thirds of the amount by which the combined
benefit exceeded $1,200 or (2) two-thirds of the government pension. In future years,
the $1,200 threshold would have risen in proportion to the rate of inflation. Lastly,
Representative Shaw introduced H.R. 750, which would have reduced the offset to
one-third of the government pension.
CBO and the Social Security actuaries estimated that enactment of S. 1799,
which would have eliminated the application of the GPO to those whose monthly
combination of Social Security spousal benefits and non Social Security-covered
pension was $1,200 or less, would have cost $5.6 billion over 10 years,32 and in the
long run would have cost 0.01% of taxable payroll (causing an increase in Social
Security’s long-range deficit of about 0.5%).33
On May 1, 2003, the Social Security Subcommittee of the House Committee on
Ways and Means held a hearing on the GPO, in which Members and witnesses
discussed approaches to modifying the provision. The SSA testified that if any
action were taken affecting the GPO, it should be done in the context of overall
reform of the Social Security system.
32
33
Ibid.
Social Security Administration, Office of the Chief Actuary, Memorandum from Chris
Chaplain to Alice H. Wade, “Estimated Long-Range OASDI Financial Effects of a Proposal
to Modify the Government Pension Offset — ‘Government Pension Reform Act’ (S. 363)
— INFORMATION,” Mar. 25, 2003. This estimate is based on certain assumptions, which
may have changed since this estimate was developed. More recent cost estimates are
currently unavailable.