Social Security: The Government Pension
Offset (GPO)
Alison M. Shelton
Analyst in Income Security
February 10, 2011January 30, 2012
The House Ways and Means Committee is making available this version of this Congressional Research Service
(CRS) report, with the cover date shown above, for inclusion in its 20112012 Green Book website. CRS works
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Social Security: The Government Pension Offset (GPO)
Summary
The Government Pension Offset (GPO) applies tomay reduce Social Security spousal and survivor
benefits,
which are generally payable to the spouses and survivors of retired, disabled, or
deceased workers
covered by Social Security. The Social Security spousal benefit is equal to 50%
of the retired or
disabled worker’s benefit and the survivor benefit is 100% of the deceased
worker’s benefit.
Social Security spousal benefits were established in the 1930s to help support wives who are
financially dependent on their husbands. It has since become more common for both spouses in a
couple to work, with the result that, in more cases, both members of a couple are entitled to
Social Security or other government pensions based on their own work records. Social Security
generally does not provide both a full retired-worker and a full spousal benefit to the same
individual.
Two provisions are designed to reduce the Social Security spousal benefits of individuals who are
not financially dependent on their spouses because they receive benefits based on their own work
records. These are
•
the “dual entitlement” rule, which applies to spouses who qualify for both (1) a
Social Security retired or disabled worker benefit based on their own work
histories in Social spousal benefit based on a spouse’s work history in Social
Security-covered employment and (2) a Social Security
spousal retired or disabled
worker benefit based on a spouse’s work historytheir own work histories in Social Security-covered
employment; and
•
the GPO, which applies to spouses who qualify for both (1) a government
pension based on their own non-Social Security
spousal benefit based on a spouse’s work history in Social Security-covered government
employment and (2) a Social Security spousal benefit based on a spouse’s work
history in Social government pension based on their own non-Social
Security-covered government employment.
The GPO reduces Social Security spousal benefits by two-thirds of the pension from non-covered
government employment. The GPO does not reduce the benefits of the spouse who was covered
by Social Security.
Opponents contend that the GPO provision is basically imprecise and can be unfair. Defenders
argue it is the best method currently available for preserving the spousal benefit’s original intent
of supporting financially dependent spouses, and also for eliminating an unfair advantage for
spouses working in non-Social Security-covered employment compared with spouses working in
Social Security-covered jobs (who are subject to the dual entitlement rule).
Congressional Research Service
Social Security: The Government Pension Offset (GPO)
Contents
Background ...................................................................................................................................... 1
Social Security Covered and Non-Covered Work..................................................................... 1
The Dual Entitlement Rule and the GPO .................................................................................. 2
Dual Entitlement Rule......................................................................................................... 2
Government Pension Offset Formula.................................................................................. 3
Rationale and Legislative History.................................................................................................... 4
Spouses’ Financial Dependence ................................................................................................ 4
Parity Between Spouses Subject to Dual Entitlement and GPO Provisions.............................. 5
Why a Two-Thirds Reduction? ................................................................................................. 6
Who Is Affected by the GPO? ......................................................................................................... 7
Issues.............................................................................................................................................. 10
Awareness of the GPO and Retirement Preparedness ............................................................. 10
GPO Reduction is Smaller than Dual Entitlement Reduction ................................................. 10
Parity Among Social Security-Covered Workers and Non-Covered Workers........................ 11
Impact on Low-Income Workers ............................................................................................. 11
Imprecision of the Two-Thirds Offset to Non-Covered Government Pensions...................... 12
Application of the GPO to Government versus Private Pensions ........................................... 13
Cost of Eliminating the GPO................................................................................................... 13
The GPO “Last-Day” Rule ............................................................................................................ 13
How Does the Last-Day Rule Affect Exemption from the GPO? ........................................... 14
Tables
Table 1. Dual Entitlement Formula ................................................................................................. 2
Table 2. GPO Formula ..................................................................................................................... 3
Table 3. Dual Entitlement Rule Compared with Government Pension Offset ................................ 4
Table 4. Mary’s Spousal Benefit, Before and After GPO Enactment ............................................. 5
Table 5. Number of Social Security Beneficiaries Affected by GPO,
by State, Type of Benefit, and Offset Status, December 20102011 ..................................................... 7
Acknowledgments ......................................................................................................................... 15
Congressional Research Service
Social Security: The Government Pension Offset (GPO)
Background
Generally, Social Security spousal and survivor benefits are paid to the spouses of retired,
disabled, or deceased workers covered by Social Security. The spousal benefit is equal to 50% of
a retired or disabled worker’s benefit and the survivor benefit is equal to 100% of a deceased
worker’s benefit.
Spousal benefits are intended for individuals who are financially dependent on spouses who work
in Social Security-covered positions. For this reason, but also because of the cost that would be
involved, Social Security generally does not provide both full worker and full spousal benefits to
the same individual. For persons 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, the “dual entitlement” rule effectively caps the benefit at the
higher of the worker’s own benefit or the spousal benefit to which he or she would be entitled.
The Government Pension Offset (GPO) is analogous in purpose to the “dual entitlement”
provision and applies to individuals who qualify for both a pension based on their own non-Social
Security-covered government work and a Social Security spousal benefit based on a spouse’s
work in Social Security-covered employment. 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 spouses because they receive their own retired-worker or pension
benefits.
Social Security Covered and Non-Covered Work
A worker is “covered” by Social Security if he or she pays works in “covered” employment and pays
into Social Security through the
Federal Insurance Contributions Act (FICA) payroll tax. A
worker is entitled to Social Security disability or retired worker benefits after paying into Social
Security for 10 years (40 quarters). Approximately
96% of all workers are covered by Social
Security. The majority of non-covered positions are
held by government employees: most federal
employees hired before 1984 and some state and
local government employees. Nationwide,
approximately 73% of state and local government
employees are covered by Social Security. 2 2
However, coverage varies from state to state. For
example, approximately 97% of state and local
employees in New York are covered by Social
Security, whereas less than 3% of state and local
employees in Ohio, and about 4% in
Massachusetts, are covered. 3
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
98-35, Social Security: The Windfall Elimination Provision (WEP), by Alison M. Shelton.
2
Social Security Administration, unpublished table dated January 14, 2011, “Estimated Social Security Coverage of
Workers with State and
Local Government Employment,” 2008 (the most recent year for which data are available). The
disparity in coverage
among states 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 (SSA) and individual states,
known as “Section 218
Agreements” because they are authorized by Section §218 of the Social Security Act. Beginning in July
1991, state and
local employees who were not members of a public retirement system were mandatorily covered by
Social Security.
3
Ibid.
Congressional Research Service
1
Social Security: The Government Pension Offset (GPO)
The Dual Entitlement Rule and the GPO
The GPO is intended to approximate Social Security’s dual entitlement rule. The intent of both
provisions is to reduce the Social Security spousal benefits of individuals who are not financially
dependent on their spouses because they receive retirement benefits based on their own work
recordstheir own benefits.
Dual Entitlement Rule
In the absence of the dual entitlement rule, a couple with two earners, both covered by Social
Security, would receive two full primary benefits as well as two full spousal benefits. The Social
Security dual entitlement rule requires that a beneficiary effectively receive the higher of the
Social Security worker’s benefit or the spousal benefit, but not both. The total benefit received by
a worker consists of his or her own worker benefit plus the excess of the spousal benefit (if any)
over his or her own benefit—not the sum of the two benefits.4
Table 1 demonstrates how the Social Security dual entitlement rule is applied.
Table 1. Dual Entitlement Formula
John
Social Security monthly worker benefit (based on worker’s earnings record)
Mary
$2,000
$900
Maximum Social Security spousal monthly benefit eligible to receive (based on spouse’s
earnings record, equal to 50% of the spouse’s Social Security worker benefit)
$450
$1,000
Actual Social Security spousal monthly benefit paid (subtract worker benefit from
spousal benefit)
$0
$100
Total (worker and spousal) Social Security monthly benefits paid to John and Mary
$2,000
$100
$1,000
Source: Illustrative example provided by the 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 monthly Social Security worker benefit equal to $2,000. His wife Mary has earned a
monthly Social Security worker benefit equal to $900. Both Mary and John are also eligible for
spousal benefits based on the other’s earnings: John is eligible for a $450 monthly spousal
benefit, and Mary is eligible for a $1,000 monthly spousal benefit. Under the dual entitlement
rule, Mary’s worker benefit of $900 must be subtracted from her potential $1,000 spousal benefit,
and only the difference of $100 is paid as a spousal benefit. In total, Mary will receive $1,000
monthly—$900 as a Social Security worker benefit and $100 as a Social Security spousal benefit.
John would not be paid a spousal benefit because his $2,000 worker benefit based on his own
earnings is higher than and more than offsets the potential $450 spousal benefit. The Social
Security benefits received by the couple total $3,000 per month.
4
4
The 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 a spouse’s Social Security-covered earnings). So, in cases where the spousal benefit is
higher than the worker’s own benefit, the worker receives his or her own worker benefit plus the reduced spousal
benefit, which is the difference between the spousal benefit and the worker’s own benefit. In cases where the worker’s
own benefit is higher than the spousal benefit, the worker receives his or her own benefit but not the spousal benefit.
Congressional Research Service
2
Social Security: The Government Pension Offset (GPO)
Because most workers are in Social Security-covered employment, the dual entitlement scenario
is more common than the GPO among two-earner couples. In 20092010, approximately 6.67 million
out of 33.534.6 million Social Security retired worker beneficiaries, or about 2019%, were dually
entitled (not including those whose spousal benefit was completely offset by their retired worker
benefit). 5
Government Pension Offset Formula
The Social Security spousal or widow(er) benefit of a person who also receives a pension from government
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 to Social Security
spousal and widow(er) benefits is equal to two-thirds of the pension from non-covered
government employment.
If the pension from non-covered work is sufficiently large in
comparison to a person’s Social
Security spousal or widow(er) benefit, the GPO may eliminate
the entire Social Security spousal or widow(er) benefit.
In December 20102011, about 544568,000 Social Security beneficiaries (about 1% of all Social Security
beneficiaries) had spousal benefits reduced by the GPO (this figure does not include persons who
were eligible for spousal benefits but were deterred from filing for them because of the GPO).6
The GPO has no effect on the amount of the Social Security benefit a worker may receive based
on his or her own work in Social Security-covered employment, but it does limit the amount that
can be paid to his or her spouse who has worked in non-Social Security-covered employment.
Table 2 provides an example of how the GPO is applied, assuming that John worked in Social
Security-covered employment while Mary spent her full career in state or local government
employment that was not covered by Social Security.
Table 2. GPO Formula
John
Social Security retired or disabled worker monthly benefit (based on worker’s earnings
record)
Mary
$2,000
N/A
Non-Social Security-covered (government) monthly pension
N/A
$900
Maximum Social Security spousal monthly benefit eligible to receive (based on spouse’s
earnings record, equal to 50% of the spouse’s Social Security retired worker benefit)
N/A
$1,000
Reduction in Social Security spousal monthly benefit due to GPO (equals 2/3 of the nonSocial Security-covered pension: $900*2/3=$600)
N/A
$600
Actual Social Security spousal monthly benefit paid (subtract 2/3 of non-Social Securitycovered worker’s pension from Social Security spousal benefit: $1,000–$600=$400)
N/A
$400
$2,000
$1,300
Total monthly pensionsretirement benefits paid to John (Social Security only) and Mary (Social
Security plus
pension from non-covered employment)
Source: Illustrative example provided by CRS.
Note: N/A means not applicable.
5
Social Security Administration, Annual Statistical Supplement 20102011, Washington, DC, 20102011, Table 5.G2
http://www.ssa.gov/policy/docs/statcomps/supplement/20102011/5g.html#table5.g2.
6
Social Security Administration, Office of Research Evaluation and Statistics, unpublished table A, January 14, Table A, December 27,
2011.
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3
Social Security: The Government Pension Offset (GPO)
In this example, John worked enough years in Social Security-covered employment to qualify for
a monthly Social Security retired-worker benefit of $2,000. His wife, Mary, is not eligible for a
Social Security retired-worker benefit on her own record because she worked in a non-Social
Security-covered government position and did not contribute to Social Security. Instead, Mary is
eligible for a $900 government pension based on her work in a non-Social Security-covered
position. Mary is also eligible for a Social Security spousal benefit of up to $1,000 based on
John’s work history. 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
$600), and the difference of $400 ($1,000 - $600) is paid to her as a spousal Social Security spousal
benefit. In total,
Mary will receive $1,300—$900 from her non-coveredretirement benefits of $1,300 per month: $900 from her noncovered pension and $400 as a Social Security
spousal benefit. 7
Table 3 highlights the differences between the dual entitlement rule and the GPO.
Table 3. Dual Entitlement Rule Compared with Government Pension Offset
Dual Entitlement Rule
Government Pension Offset
Applies to individuals who qualify for both (a) a Social
Security worker benefit (retirement or disability) based
on their own work history in Social Security-covered
employment and (b) a Social Security spousal benefit
based on their spouse’s work history in Social Securitycovered employment.
Applies to individuals who qualify for both (a) a government
pension based on non-Social Security-covered government
employment and (b) a Social Security spousal benefit. based
on a spouse’s Social Security-covered employment 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.
Dually-entitled beneficiaries effectively receive the
higher of theirthe worker benefit or theirthe spousal benefit.
Specifically, the Social Security dual entitlement rule
requires that 100% of a Social Security retirement or
disability benefit earned as a worker be subtracted from
any Social Security spousal benefit one is eligible to
receive. Only the difference, if any, is paid as a spousal
benefit and is added to the beneficiary’s own worker
benefit.
The GPO reduction to Social Security spousal benefits is
equal to two-thirds of the non-covered government
pension.
Source: Table compiled by CRS.
Rationale and Legislative History
Spouses’ Financial Dependence
The policy rationale for Social Security spousal benefits has been, since the creation of spousal
benefits in the 1930s, to support spouses who are financially dependent on the working spouse.
The dual entitlement rule has operated since 1939 as a gauge of financial dependence.
7
In this example, John is not eligible for a Social Security spousal benefit because Mary’s employment was not
covered by Social Security.
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Social Security: The Government Pension Offset (GPO)
Parity Between Spouses Subject to Dual Entitlement and
GPO Provisions
The GPO is intended to place spouses whose government employment was not covered by Social
Security in approximately the same position as spouses whose jobs were covered by Social
Security. 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 spouses. The scenarios below
demonstrate why the law was changed.
Table 4 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 all three examples, it is assumed
that Mary is potentially eligible for a Social Security spousal benefit of $1,000 per month,
computed as 50% of her husband’s monthly Social Security benefit of $2,000.
As a dually entitled retiree, under the first scenario, Mary’s $1,000 Social Security spousal benefit
benefit is reduced by her own Social Security retired-worker benefit of $900, leaving her with a net
net spousal benefit of $100 and a total Social Security benefit of $1,000. Under the second scenario
scenario (where Mary receives a non-covered government pension of instead of a Social Security
retirement benefit), before the GPO takes effect, Mary’s Social Security spousal benefits are not
reduced at all and she receives a full Social Security spousal benefit of $1,000, plus the noncovered pension of $900, for total monthly pension benefits of $1,900. Under the third scenario
(after the GPO is put into effectwas enacted in 1977), Mary’s Social Security spousal benefit is reduced by two-thirds
twothirds of her $900 non-covered government pension, leaving her with a net Social Security spousal
spousal benefit of $400 (= $1,000 – $900*2/3) and a total monthly pension benefit of $1,300 (=
$900
from the non-covered pension + $400 from the Social Security spousal benefit).
Table 4. Mary’s Spousal Benefit, Before and After GPO Enactment
Mary works in
Social SecurityCovered Position
Mary works in Non-Social
Security-Covered Position
Before GPO
Enactment
After GPO
Enactment
$900
$0
$0
$0
$900
$900
$1,000
$1,000
$1,000
$900
—
—
—
—
$600
Dually Entitled
Social Security retired-worker monthly benefit
(based on own earnings record)
Non-Social Security-covered monthly pension
Maximum Social Security spousal monthly benefit
eligible to receive (based on spouse’s earnings
record), equal to 50% of the spouse’s Social
Security retirement benefit
$1,000
$1,000
$1,000
Reduction in spousal monthly benefit due to dual
entitlement rule (equal to worker’s Social Security
retired-worker benefit)
$900
—
—
—
—
$600
Dually Entitled
Social Security retired-worker monthly benefit
(based on own earnings record)
Non-Social Security-covered monthly pension
Security retired-worker benefit)
Reduction in Social Security spousal monthly
benefit due to GPO (equals 2/3 of non-Social
Congressional Research Service
Mary works in Non-Social
Security-Covered Position
5
Social Security: The Government Pension Offset (GPO)
Mary works in
Social SecurityCovered Position
Dually Entitled
Mary works in Non-Social
Security-Covered Position
Before GPO
Enactment
After GPO
Enactment
Security-covered pension)
Actual Social Security spousal monthly benefit paid
$100
$1,000
$400
Total monthly retirement benefits paid to Mary
(Social
Security spousal benefit plus either (a) Social
Security retired-worker benefit or (b) non-covered
pension)
$1,000
$1,900
$1,300
Source: Illustrative example provided by CRS.
Note: Dashes are used to represent scenarios in which either the dual entitlement rule or the GPO are not
applicable. For example, in the dual entitlement scenario, Mary does not receive a non-covered government
pension and, thus, the GPO does not apply.
It is important to note that the reduction to Social Security spousal benefits is smaller under the
GPO than it is under the dual entitlement rule: Mary receives monthly Social Security spousal
benefits of $100 under the dual entitlement rule, compared with $400 under the GPO. Her total
monthly retirement benefits are $1,000 under the dual entitlement rule, compared with $1,300
under the GPO. For those the GPO. For those
under dual entitlement, the Social Security spousal benefit is reduced
by one dollar for every
dollar of Social Security retirement benefits based on their own work history
histories in Social SecuritycoveredSecurity-covered employment. For those under the GPO, however, the Social
Security spousal benefit is
reduced by 67 cents for every dollar of a pension from non-covered
government employment.
Why a Two-Thirds Reduction?
The GPO was originally established in 1977 (P.L. 95-216) and replaced an earlier “dependency
test” for spousal benefits that had been in law since 1950.8 The 1977 law provided that 100% of
the non-covered 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 have been identical because, in both cases, the Social
Security spousal benefit would have been reduced by 100% of the retirement benefitpension from non-covered
employment.
The GPO’s two-thirds offset to the non-government pension was established by the Social
Security Amendments of 1983 (P.L. 98-21), which made a number of amendments to Social
Security. One section of the House version of this law proposed that the amount used in
calculating the offset be one-third of the government pension. The Senate version contained no
such provision and would therefore have left standing the 100% offset that existed at the time.
The conferees adopted the House bill except that the offset was fixed at two-thirds of the noncovered government pension. 9
9
8
The dual entitlement rule has been in law since 1939 when spousal benefits were introduced.
9
Effectively, the GPO offset formula assumes that two-thirds of the government pension is roughly equivalent to the
Social Security retirement (or disability) benefit the spouse would have earned as a worker if his or her job had been
covered by Social Security.(continued...)
9
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Social Security: The Government Pension Offset (GPO)
Who Is Affected by the GPO?
In 2008, the last year for which data are available, approximately 6.6 million state and local
government workers (27.5% of all state and local government workers) were in non-Social
Security-covered positions and may be subject to the GPO.10 A government worker who does not
pay into Social Security may potentially be affected by the GPO if he or she is entitled to a Social
Security spousal benefit based on a spouse’s work in Social Security-covered employment.
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 may
be subject to the GPO (if they are spouses).11 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, they, like all
covered workers in the private sector, may be subject to the Social Security dual entitlement rule.
As of December 20102011, about 544568,000 Social Security beneficiaries, or about 1% of all
beneficiaries, had spousal benefits reduced by the GPO (not counting those who were potentially
eligible for spousal benefits but were deterred from filing for them because of their expectation
that the GPO would eliminate the spousal benefit). Of these persons subject to the GPO, 56%
were spouses; and 44% were widows and widowers. About 80% of all affected were women. 12 Table
persons were
women.12 Table 5 below provides a breakdown of the affected beneficiaries by state and type of
benefit.
Table 5. Number of Social Security Beneficiaries Affected by GPO,
by State, Type of Benefit, and Offset Status, December 2010
State
Total2011
Total
Spouses
Widows
and
Widowers
Fully
Offset
Statusa
Partially
Offset
StatusError!
Reference
source not
found.
544,000
304,899
239,101
403,574
140,426
Alabama
4,198
1,902
2,296
3,303
895
Alaska
2,269
1,388
881
1,793
476
Arizona
7,000
3,776
3,224
5,423
1,577
Arkansas
2,874
1,487
1,387
2,258
616
California
81,244
50,085
31,159
69,009
12,235
Colorado
18,686
11,373
7,313
13,295
5,391
7,123
4,507
2,616
6,351
772
Connecticut
10
At the same time567,919
317,552
250,367
421,472
146,447
Alabama
4,276
1,952
2,324
3,370
906
Alaska
2,404
1,463
941
1,898
506
Arizona
7,381
3,979
3,402
5,711
1,670
Arkansas
2,929
1,502
1,427
2,295
634
California
84,849
52,012
32,837
72,000
12,849
Colorado
19,673
11,892
7,781
13,851
5,822
State
Total
Fully
Offset
Statusa
Partially
Offset
Statusb
(...continued)
covered by Social Security.
10
In 2008, approximately 17.2 million state and local workers (72.5%) were in covered employment and may
be be
subject to the dual entitlement rule. Social Security Administration, unpublished table, Estimated Social Security
Coverage of Workers with State and Local Government Employment in 2008.
11
Workers who switch from CSRS to FERS must work for five years under FERS in order to be exempt from the GPO.
12
Social Security Administration, Office of Research Evaluation and Statistics, unpublished Table DE01, January 14,
December
27, 2011.
Congressional Research Service
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Social Security: The Government Pension Offset (GPO)
State
DelawareConnecticut
Total
Spouses
Widows
and
Widowers
Fully
Offset
Statusa
Partially
Offset
StatusError!
Reference
source not
found.
489
215
274
388
101
2,580
726
1,854
2,132
448
Florida
22,421
12,240
10,181
17,385
5,036
Georgia
14,512
7,478
7,034
10,960
3,552
Hawaii
1,876
1,006
870
1,591
285
Idaho
1,459
793
666
1,159
300
Illinois
38,043
22,811
15,232
32,204
5,839
Indiana
4,122
1,882
2,240
3,047
1,075
Iowa
1,793
870
923
1,335
458
Kansas
2,005
861
1,144
1,399
606
Kentucky
9,049
5,550
3,499
7,563
1,486
Louisiana
27,144
14,668
12,476
16,689
10,455
Maine
5,479
3,178
2,301
3,891
1,588
Maryland
8,677
3,151
5,526
6,942
1,735
27,785
16,529
11,256
19,962
7,823
Michigan
5,224
2,526
2,698
3,982
1,242
Minnesota
5,845
3,220
2,625
4,816
1,029
Mississippi
2,558
1,185
1,373
1,967
591
Missouri
11,814
7,002
4,812
9,865
1,949
Montana
1,090
586
504
835
255
Nebraska
1,201
579
622
887
314
Nevada
7,139
4,029
3,110
5,658
1,481
New Hampshire
1,902
1,065
837
1,381
521
New Jersey
4,340
1,775
2,565
3,533
807
New Mexico
3,075
1,674
1,401
2,472
603
New York
7,526
3,134
4,392
6,029
1,497
North Carolina
6,563
3,193
3,370
5,115
1,448
468
215
253
325
143
76,127
44,104
32,023
45,389
30,738
Oklahoma
3,582
1,585
1,997
2,614
968
Oregon
4,029
2,180
1,849
3,075
954
Pennsylvania
7,769
3,326
4,443
5,949
1,820
Rhode Island
1,581
878
703
1,353
228
South Carolina
4,091
2,024
2,067
3,174
917
District of Columbia
Massachusetts
North Dakota
Ohio
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State
South Dakota
Total
Spouses
Widows
and
Widowers
Fully
Offset
Statusa
Partially
Offset
StatusError!
Reference
source not
found.
822
409
413
615
207
5,213
2,592
2,621
4,076
1,137
Texas
61,174
35,592
25,582
39,514
21,660
Utah
2,249
1,124
1,125
1,586
663
596
331
265
463
133
Virginia
7,744
3,055
4,689
5,843
1,901
Washington
5,418
2,672
2,746
4,087
1,331
West Virginia
1,254
572
682
819
435
Wisconsin
3,254
1,717
1,537
2,576
678
Wyoming
498
253
245
369
129
9,026
5,826
3,200
7,128
1,898
Tennessee
Vermont
Outlying areas and
foreign countries
Source: Social Security Administration, Office of Research, Evaluation and Statistics, January 14, 2011.
a.
Individuals received no Social Security spousal benefit because the reduction in theirStatusb
7,547
4,760
2,787
6,741
806
500
219
281
396
104
2,583
733
1,850
2,135
448
Florida
23,250
12,742
10,508
18,063
5,187
Georgia
15,259
7,813
7,446
11,514
3,745
Hawaii
1,888
1,003
885
1,593
295
Idaho
1,515
819
696
1,195
320
Illinois
39,942
23,873
16,069
33,873
6,069
Indiana
4,238
1,908
2,330
3,114
1,124
Iowa
1,798
872
926
1,333
465
Kansas
2,069
895
1,174
1,457
612
Kentucky
9,713
5,996
3,717
8,146
1,567
Louisiana
28,825
15,638
13,187
17,856
10,969
Maine
5,757
3,342
2,415
4,091
1,666
Maryland
8,865
3,198
5,667
7,080
1,785
29,382
17,408
11,974
21,252
8,130
Michigan
5,347
2,590
2,757
4,089
1,258
Minnesota
5,803
3,159
2,644
4,801
1,002
Mississippi
2,649
1,222
1,427
2,034
615
Missouri
12,419
7,367
5,052
10,333
2,086
Montana
1,116
604
512
857
259
Nebraska
1,211
571
640
893
318
Nevada
7,595
4,321
3,274
6,012
1,583
New Hampshire
1,985
1,113
872
1,458
527
New Jersey
4,389
1,807
2,582
3,585
804
New Mexico
3,131
1,708
1,423
2,524
607
New York
7,482
3,102
4,380
5,996
1,486
North Carolina
6,825
3,278
3,547
5,303
1,522
481
218
263
333
148
79,584
45,878
33,706
48,022
31,562
Oklahoma
3,687
1,627
2,060
2,687
1,000
Oregon
4,161
2,253
1,908
3,182
979
Pennsylvania
7,779
3,289
4,490
5,946
1,833
Rhode Island
1,666
940
726
1,431
235
South Carolina
4,259
2,112
2,147
3,306
953
836
422
414
616
220
Delaware
District of Columbia
Massachusetts
North Dakota
Ohio
South Dakota
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State
Tennessee
Total
Spouses
Widows
and
Widowers
Fully
Offset
Statusa
Partially
Offset
Statusb
5,390
2,663
2,727
4,219
1,171
Texas
64,338
37,152
27,186
41,211
23,127
Utah
2,292
1,121
1,171
1,606
686
622
348
274
489
133
Virginia
7,808
3,036
4,772
5,877
1,931
Washington
5,591
2,782
2,809
4,202
1,389
West Virginia
1,261
575
686
819
442
Wisconsin
3,296
1,717
1,579
2,606
690
Wyoming
511
251
260
373
138
9,762
6,307
3,455
7,698
2,064
Vermont
Outlying areas and foreign countries
Source: Social Security Administration, Office of Research, Evaluation and Statistics, December 27, 2011.
a.
Individual received no Social Security spousal benefit because the reduction in the Social Security spousal
benefit (a reduction equal to two-thirds of the pension from non-covered government employment) was
greater than the Social Security spousal benefit itself. Either the non-covered pension was large, or the
potential Social Security spousal benefits werebenefit was small.
b.
Individual received a partial Social Security spousal benefitbenefits because the reduction in the Social Security
spousal benefit (a reduction equal to two thirds of the pension from non-covered government employment)
was less than the Social Security spousal benefit itself.
In December 20102011, the average monthly non-covered government pension amount for persons
affected by
the GPO was $1,993 ($1,7912,065 per month ($1,858 for women and $2,783882 for men).13 The average preoffset pre-offset
Social Security spousal benefitsbenefit at that time were $675was $704 per month overall ($742($772 for women
and $416436 for
men).14 In December 20102011, the average reduction caused by the GPO was $553
($590 573 per month ($609
a month for women and $409428 for men).15 In December 20102011, the average Social Security
spousal spousal
benefit after application of the GPO was $122131 per month ($152162 a month for women and
$6 a $7 a
month for men).16
For 74% of those with spousal or widow(er) benefits reduced by the GPO, the GPO
reduction reduction
was large enough to fully offset any potential spousal or widow(er) benefit (either because the noncovered
non-covered pension was large or the potential Social Security spousal benefits werebenefit was small). 17 Note
that the total Social Security benefit received by a couple would be a larger amount, that is, the
(reduced) Social Security spousal benefit plus the primary worker’s own Social Security benefit
(which is not reduced by the GPO).
13
Ibid., Table G209, January 1413
Ibid., Table G209, December 27, 2011. Data are limited to those beneficiaries for whom the offset amount is
available.
14
Ibid., Table G309, January 14December 27, 2011. Data are limited to those beneficiaries for whom the offset amount is available.
15
Ibid., Table G609, January 14
available. Includes persons entitled to spousal/widow(er) benefits only and those dually entitled to spousal/widow(er)
and worker benefits. For a dually entitled beneficiary, the pre-offset Social Security benefit is the difference between
the larger spousal/widow(er) benefit and the smaller worker benefit.
15
Ibid., Table G609, December 27, 2011. Data are limited to those beneficiaries for whom the offset amount is
available.
16
Ibid., Table G509, January 14December 27, 2011. Data are limited to those beneficiaries for whom the offset amount is available
available. Amounts may not add due to rounding.
17
Ibid., Table G105, January 14December 27, 2011. Data are limited to those beneficiaries for whom the offset amount is
available.
14
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By contrast, in 2009Social Security spousal benefit (after the GPO reduction) plus the primary worker’s own Social
Security benefit (which is not reduced by the GPO).
In comparison, in 2010, the dual entitlement rule affected approximately 6.67 million beneficiaries.
Of these, 43% were spouses and 57% were widow(er)s. About 6.4About 6.5 million (98%) of all affected
beneficiaries were women. 1818 Of these women, 44% were
spouses and 56% were widow(er)s. Among dually entitled workers, the average Social Security
total benefit (retired worker plus spouse or survivor benefit) benefit received was
$1,041 $1,053.19 Of this
amount, $588, $580 was the retired worker component of the benefit. The spousal benefit
component was $462 component
was $465 (after reduction for dual entitlement).20 For the average dually entitled
worker,
therefore, the spousal benefit comprised about 44% of the total Social Security benefit
received.
Issues
Opponents argue that the GPO is not well understood and that it harms lower-income workers.
Defenders of the GPO maintain that it helps ensure that only financially dependent spouses
receive the Social Security spousal benefit, while curtailing what otherwise would be an unfair
advantage for non-Social Security-covered government workersgovernment workers who are not covered by Social Security.
Awareness of the GPO and Retirement Preparedness
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.
Supporters of the provision say it has been law for more than 30 years (it was enacted in 1977);
therefore, people have had ample time to adjust their retirement plans. P.L. 108-203, passed in
2004, included a provision that seekssought to ensure that SSA and government employers notify
potentially affected individuals about the effect of the GPO. Currently the
The SSA’s personalized
mailings to workers, entitled “Your Social Security Statement,” contain
contained a paragraph explaining
the GPO. A sample annual statement can be found here: http://www.socialsecurity.gov/
mystatement/statsamples.htm. the GPO and the WEP. SSA recently announced that it will
suspend mailing annual statements due to budget constraints, and the future status of these
statements is unclear.21
GPO Reduction is Smaller than Dual Entitlement Reduction
Table 4 shows that the reduction to Social Security spousal benefits is smaller under the GPO
than it is under the dual entitlement rule. Those under dual entitlement face a 100% offset to
spousal benefits for every dollar received from a Social Security retired-worker benefit, whereas
those under the GPO face a 66.67% offset to spousal benefits for every dollar received from a nonSocial Security-covered pension. In the example shown in Table 4, the result was a $100 Social
Security spousal benefit under dual entitlement compared with a $400 spousal benefit under the
GPO (both persons also received a $900 retirement benefit based on their own work histories).
18
non18
Social Security Administration, Annual Statistical Supplement, 2010, Table2011, Tables 5.G1 and 5.G2, available at
http://www.ssa.gov/
policy/docs/statcomps/supplement/20102011/5g.html#table5.g2g1. The term “dually entitled” applies only
to those who
receive spousal benefits. If an individual’s own worker benefit is greater than his or her spousal benefit,
that person
receives the higher worker benefit and is not considered “dually entitled.” Administrative data do not
provide the
number of people in this latter category.
19
Ibid., Table 5.G3.
20
Ibid.
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21
Social Security Administration at https://secure.ssa.gov/apps10/public/reference.nsf/links/03292011051744pm.
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Social Security-covered pension. In the example shown in Table 4, the result was a $100 Social
Security spousal benefit under dual entitlement compared with a $400 spousal benefit under the
GPO (both persons also received a $900 retirement benefit based on their own work histories).
Parity Among Social Security-Covered Workers and
Non-Covered Workers
The majority of state and local government workers, and federal employees since 1984, are
covered by Social Security. Some argue that eliminating the GPO would be unfair to government
employees in Social Security-covered positions, who would continue to be subject to the dual
entitlement provision. As discussed above, for those under dual entitlement, the Social Security
spousal benefit is reduced by one dollar for every dollar of Social Security retirement benefits
based on their own work history in Social Security-covered employment. For those under the
GPO, however, the Social Security spousal benefit is reduced by 67 cents for every dollar of a
pension from non-covered government employment.
Impact on Low-Income Workers
There is disagreement about the original intention of the GPO, which was enacted in 1977. Some
argue that the original purpose was to prevent higher-paid workers from reaping over-generous
spousal benefits. Others contest this, saying that the GPO was never targeted to a particular
income group.
Opponents of the GPO argue that the provision hurts lower- and middle-income workers such as
teachers, and in some circumstances is sufficient to throw these workers into poverty. Opponents
also say that the GPO is especially disadvantageous for surviving spouses.
A unpublished 2007 CRS analysis found that the common criticism that the GPO penalizes lower
earners more than higher earners may not be accurate. The CRS analysis showed a great variation
in outcomes.2122 In general, however, and holding other factors constant, the analysis found that
low earners and some other individuals experience a much smaller offset to spousal benefits
under the GPO than they would experience under the dual entitlement rule if the same work had
been covered by Social Security. Others, including higher earners, experience a slightly larger
offset to spousal benefits under the GPO than they would experience if the same work had been
covered by Social Security and they had been subject to the dual entitlement rule.
2122
How an individual would be affected by the GPO versus the dual entitlement rule is determined by several key
variables, including the relative earnings level of the individual, the timing of the worker’s non-covered employment
during his or her career, and the number of years in non-covered employment. The primary difference between
outcomes among high- and low-earners is driven by the fact that a worker’s Social Security benefit (the basis for the
dual entitlement offset, which reduces the spousal benefit by 100% of this amount) is progressive, while pensions from
non-covered government employment (the basis for the GPO reduction, which reduces spousal benefits by 2/3 of this
amount) generally provide a pension that is the same fixed percentage of earnings regardless of the earnings level. As
earnings rise, if the earnings are from non-covered employment then the pension from this employment rises
proportionately; if the earnings are from covered employment, then the Social Security benefit, which is progressive,
rises less than proportionately. Hence for high earners, the GPO offset to spousal benefits, which is 2/3 of non-covered
pensions which rise proportionately as income rises, becomes more significant than the dual-entitlement offset to
spousal benefits which involves a 100% offset to the Social Security benefit which rises more slowly as income rises.
In general, any combination of variables (earnings level, timing of non-covered employment, number of years in noncovered employment) that increases the size of the non-covered government pension more than it increases the size of
the Social Security benefit (assuming the same earnings were covered by Social Security) would make the dual
entitlement rule more advantageous to an individual than the GPO.
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offset to spousal benefits under the GPO than they would experience if the same work had been
covered by Social Security and they had been subject to the dual entitlement rule.
Other evidence of the effect of the GPO on low earners comes from Social Security
Administration data on the program. While 74% of those affected by the GPO have their benefits
fully offset, about 3230% of those with non-covered pensions of less than $1,000 per month had
their benefits fully offset, compared with 8129% of those with non-covered pensions between
$1,001 and $1,999 and nearly 100% of individuals with non-covered pensions over that amount.2223
Among the group of individuals whose spousal benefits were completely eliminated by the GPO,
less than 1211% of thosethis group had a non-covered pension amount of less than $1,000 per month.23 24
Thus,
if the non-covered pension amount is a reflection of the approximate earnings levels of
individuals affected by the GPO,2425 a greater percentage of those with lower earnings receive at
least a partial Social Security benefit relative to the overall GPO-affected population.
On average, private sector workers, who are affected by the dual entitlement rule, earn less than
their counterparts in state and local government who are affected by the GPO. The Bureau of
Labor Statistics reports that state and local government workers earned on average $25.7426.08 per
hour in 20082010, compared with the national civilian worker average of $20.9921.29 per hour and the
private sector
average of $20.1847 per hour.2526
Regarding 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%.2627 The 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%.
Imprecision of the Two-Thirds Offset to Non-Covered
Government Pensions
Opponents point out that whatever the rationale for the GPO, reducing everyone’s spousal benefit
by two-thirds of their government pension is an imprecise way to estimate what the spousal
benefit would have been if the government job had been covered by Social Security. If two-thirds
of the government pension were in fact a good proxy for Social Security retirement benefits, there
would be no significant difference in outcomes between the dual entitlement rule compared with
the GPO. As noted above (see the previous section, “Impact on Low-Income Workers”), however,
there is great variation in outcomes. The GPO may lead to a smaller offset relative to the dual
entitlement rule for low earners than for high earners.
22
23
CRS calculations based on data provided by the Social Security Administration’s Office of Research, Evaluation and
Statistics, unpublished table 1, January 14, 2011.
23
Ibid.
24Table I, December 27, 2011.
24
Ibid.
25
Clearly this figure does not incorporate other sources of income, such as private pensions and investment income.
2526
U.S. Department of Labor, Bureau of Labor Statistics, National Compensation Survey: Occupational Earnings in the
United States, 2009, August 2010. 2010, May 2011,Table 1, http://www.bls.gov/ncs/ocs/sp/nctb1344.pdf.
26ncswage2010.pdf.
27
Poverty rates were calculated by David Weaver of the Social Security Administration’s 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. Updated data for this comparison are
not available.
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however, there is great variation in outcomes. The GPO may lead to a smaller offset relative to
the dual entitlement rule for low earners than for high earners.
Ideally, opponents argue, the way to compute the offset to replicate the dual entitlement rule
would be to apply the Social Security benefit formula to a spouse’s total earnings, including the
non-covered portion, and reduce the resulting Social Security spousal benefit by the proportion of
total earnings attributable to non-covered earnings. Currently, however, the SSA does not have
complete records of non-covered earnings histories. Although SSA started collecting W-2s in the
early 1980s, the initial records were sometimes incomplete. The Social Security benefit formula
requires a full 35 years of earnings data.
Application of the GPO to Government versus Private Pensions
Some question why the GPO does not apply to the spousal benefits received by the spouses of
private sector workers, who may receive private, employer-sponsored pensions (defined benefit
or defined contribution) in addition to Social Security benefits. Generally, the private sector
employment on which the private pension is based would be covered by Social Security.
Therefore, the dual entitlement rule (which the GPO is meant to replicate) would instead take
effect to reduce any Social Security spousal benefits for which a beneficiary might be eligible. As
noted earlier, in many cases the dual entitlement rule would produce a higher reduction in spousal
benefits than does the GPO.
Cost of Eliminating the GPO
Some 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 SSA has projected the 10-year
cost of repealing the GPO to be about $42 billion. 2728 Such a move could also lead to demands for
repeal of the dual entitlement rule to ensure parallel treatment for those working in Social
Security-covered employment. Eliminating the dual entitlement rule would cost approximately
$500 billion over a five-year period.2829
The GPO “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 very end of
their government careers. 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 Government Accountability 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.
2728
Social Security Administration, Memorandum from Bert M. Kestenbaum and Tim Zayatz of the Office of the Chief
Actuary, “Estimated Additional OASDI Benefit Payments Resulting From Several Proposals to Modify the Windfall
Elimination Provision and the Government Pension Offset—INFORMATION,” October 26, 2007.
2829
Social Security Administration, Memorandum from Bert Kestenbaum of the Office of the Chief Actuary, “Estimated
Additional OASDI Benefit Payments from Proposals to Eliminate or Change the Dual-Entitlement Offset Provision—
INFORMATION,” April 17, 2003.
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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.
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. 108-203.2930 As discussed
below, P.L. 108-203 eliminated the last-day exception clause by requiring those workers
switching from non-covered 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.3031 The new GPO
provision became effective for Social Security spousal benefit applications filed after March
31, 2004.
How Does the Last-Day Rule 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:
•
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, thean individual who receives a Social Security spousal benefit
before April 1, 2004, 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 Security-covered work for theirher last day of work
within within
the same retirement system, they areshe is exempt from the GPO, even if they
file for she files 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
she 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 theyshe 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 switched to a covered position in the same
29
30
For more information on H.R. 743, see CRS Report RL32089, The Social Security Protection Act of 2004 (H.R. 743),
by Dawn Nuschler.
3031
This five-year period for GPO exemption is consistent with that required of federal employees converting from
CSRS to FERS.
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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 he switched to a covered position in the same
retirement system as hisretirement system as her prior government work for at least the final 48-month
period of herhis employment and herhis last day of employment was before March 2,
2009, shehe would be exempt from the GPO.
•
Their last day of government service occurs after March 3, 2009, and they work
their last 60 months in a Social Security-covered position within the same
retirement system.
All other individuals receiving government pensions based on non-covered employment would be
subject to reductions in Social Security spousal benefits under the GPO.
Acknowledgments
This report was originally written by Laura Haltzel.
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