Social Security: The Government Pension
Offset (GPO)
Christine Scott
Specialist in Social Policy
January 8, 2013
Congressional Research Service
7-5700
www.crs.gov
RL32453
CRS Report for Congress
Prepared for Members and Committees of Congress
Social Security: The Government Pension Offset (GPO)
Summary
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) Social Security spousal benefits based on their spouses’ work histories in
Social Security-covered employment and (2) their own Social Security retired or
disabled worker benefits, based on their own work histories in Social Securitycovered employment; and
•
the GPO, which applies to spouses who qualify for both (1) Social Security
spousal benefits based on their spouses’ work histories in Social Securitycovered employment and (2) their own government pensions, based on their own
work in government employment that was not covered by Social Security.
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 ................................................. 11
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 ............................................. 6
Table 5. Number of Social Security Beneficiaries Affected by GPO,
by State, Type of Benefit, and Offset Status, December 2011 ..................................................... 7
Contacts
Author Contact Information........................................................................................................... 15
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, which Congress created in 1939, are intended for individuals who are
financially dependent on a working spouse. For this reason, but also because of the costs, 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 total benefits at the higher of
the worker’s own benefit or the spousal benefit. 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 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
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 Christine Scott.
2
Social Security Administration, unpublished table, “Estimated Social Security Coverage of Workers with State and
Local Government Employment, 2009” (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 §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
records.
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
$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
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 2011, approximately 6.8 million
out of 35.6 million Social Security retired worker beneficiaries, or about 19%, 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
Offset (GPO)
April 23, 2014
(RL32453)
Jump to Main Text of Report
Summary
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 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) Social Security spousal benefits based on their spouses' work histories in Social Security-covered employment and (2) their own Social Security retired- or disabled-worker benefits, based on their own work histories in Social Security-covered employment; and
- the Government Pension Offset (GPO), which applies to spouses who qualify for both (1) Social Security spousal benefits based on their spouses' work histories in Social Security-covered employment and (2) their own government pensions, based on their own work in government employment that was not covered by Social Security.
The GPO reduces Social Security spousal or widow(er)'s 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 is 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).
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 equals 50% of a retired or disabled worker's benefit and the survivor benefit equals 100% of a deceased worker's benefit.
Spousal benefits, which Congress created in 1939, are intended for individuals who are financially dependent on a working spouse. For this reason, but also because of the costs, Social Security 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 a spouse's work history, the "dual entitlement" rule effectively caps total benefits at the higher of the worker's own benefit or the spousal benefit. 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 disabled-worker Social Security benefits, or their non-Social Security pension benefits.
Social Security Covered and Non-Covered Work
A worker is "covered" by Social Security if he or she 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 disabled- or retired-worker benefits after paying into Social Security for 10 years (more specifically, 40 or more quarters for which the worker has covered earnings). Approximately 93% of workers were covered by Social Security in 2014.2 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.3 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.4
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 benefits of spouses or widow(er)s who are not financially dependent on their spouses because they receive retirement benefits based on their own work records.
Dual Entitlement Rule
In the absence of the dual entitlement rule, a couple with two earners covered by Social Security would receive two full primary benefits as well as two full spousal or widow(er)'s benefits. The Social Security dual entitlement rule requires that a beneficiary effectively receive the higher of the Social Security worker's benefit or of the spousal or widow(er)'s 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 or widow(er)'s benefit (if any) over his or her own benefit—not the sum of the two benefits.5 Expressed simply, the higher of the two benefits is paid.
Table 1 demonstrates how the Social Security dual entitlement rule is applied to spouses.
Table 1. Dual Entitlement Formula Applied to Spouses
|
John
|
Mary
|
Social Security monthly worker benefit (based on worker's earnings record)
|
$2,000
|
Maximum Social Security monthly spousal benefit (based on spouse's earnings record, equal to 50% of the spouse's Social Security worker benefit)
|
$450
|
Actual Social Security spousal monthly benefit paid (subtract worker benefit from spousal benefit; $0 if worker benefit is larger)
|
$0
|
Total (worker and spousal) Social Security monthly benefits paid to John and Mary
|
$2,000
|
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 will 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.
If John were to predecease Mary, Mary would then be entitled to a monthly widow's benefit of up to 100% of John's monthly amount. Mary would continue to collect her own benefit of $900 monthly, and that amount would offset John's full monthly benefit amount of $2,000. Thus, Mary would receive a Social Security worker benefit of $900 and a Social Security widow's benefit of $1,100 ($2,000 - $900), for a total monthly benefit of $2,000.
Because most workers are in Social Security-covered employment, the dual entitlement scenario is more common than the GPO among two-earner couples. In 2012, approximately 6.8 million out of 36.7 million Social Security retired worker beneficiaries, or about 19%, were dually entitled.6
Government Pension Offset Formula
The Social Security spousal or widow(er)'s benefit of a person who also 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 known as the GPO. The GPO reduction to Social Security
spousal and widow(er)
's benefits
is equal to equals 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)
's benefit, the GPO may eliminate
the entire Social Security spousal or widow(er)
's benefit.
In December
2011, about 5682013, almost 615,000 Social Security beneficiaries (about 1% of all Social Security
beneficiaries) had spousal
or widow(er)'s benefits reduced by the GPO (this figure does not include persons who
were eligible for spousal
or widow(er)'s benefits but were deterred from filing for them because of the GPO).
6
7 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
or widow(er) 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
for Spouses
John
|
Mary
|
Social Security retired
- or disabled
worker-worker monthly benefit (based on
worker’sworker'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 record)
$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
nonSocialnon-Social Security-covered pension:
$900*2/3=$600)
N/A
$600
Actual Social Security spousal monthly $900*2/3=$600)
N/A
|
$600
|
Actual Social Security spousal monthly benefit paid (subtract 2/3 of non-Social
Securitycovered worker’Security-covered worker's pension from Social Security spousal benefit: $1,000–$600=$400)
N/A
$400
$2,000
$1,300
Total
N/A
|
$400
|
Total monthly retirement benefits paid to John (Social Security only) and Mary (Social
Security plus pension from non-covered employment)
Source:
$2,000
|
$1,300
|
Source: Illustrative example provided by CRS.
Note: N/A means not applicable.
5
Social Security Administration, Annual Statistical Supplement 2012, Washington, DC, 2012, Table 5.G2
http://www.ssa.gov/policy/docs/statcomps/supplement/2012/5g.html#table5.g2.
6
Social Security Administration, Office of Research Evaluation and Statistics, unpublished Table A, December 27,
2011.
Congressional Research Service
3
Social Security: The Government Pension Offset (GPO)
Note: N/A means not applicable.
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
notnot 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
spousalspousal benefit of up to $1,000 based on
John’ 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 Social Security spousal
benefit. In total, Mary will receive retirement benefits of $1,300 per month: $900 from her
noncoverednon-covered pension and $400 as a Social Security spousal benefit.
7
Table 38
If John predeceased Mary, then two-thirds of her $900 non-covered pension ($600) would be used to offset the $2,000 Social Security benefit she would be eligible for as a widow based on John's worker benefit. She would receive a $1,400 monthly widow's benefit from Social Security (in addition to her $900 monthly non-covered pension benefit).
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
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
or widow(er)'s 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.
's work history in Social Security-covered employment.
Dually-entitled beneficiaries effectively receive the
higher of the worker benefit or the spousal
or widow(er)'s 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
or widow(er)'s benefit one is eligible to
receive. Only the difference, if any, is paid as a spousal
or widow(er)'s 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
benefit.
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 or widow(er)'s benefit based on a spouse's Social Security-covered employment The GPO reduces Social Security benefits that a person receives as a spouse or widow(er) 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 to Social Security spousal or widow(er)'s 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.
Congressional Research Service
4
Social Security: The Government Pension Offset (GPO)
Parity Between Spouses Subject to
the Dual Entitlement
and
GPO Provisions
Rule and the GPO
The GPO is intended to place spouses
and widow(er)s 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
or widow(er)'s benefits even though they were not financially dependent on their spouses. The scenarios below
demonstrate why the law was changed.
Table 4
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 before the GPO was enacted; and (3) as the recipient of a non-covered government pension and
Social Security spousal benefits
afterafter 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 is reduced by her own Social Security retired-worker benefit of $900, leaving her with a
net spousal benefit of $100 and a total Social Security benefit of $1,000. Under the second
scenario (where Mary receives a non-covered government pension instead of a Social Security
retirement benefit),
beforebefore 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
noncoverednon-covered pension of $900, for total monthly pension benefits of $1,900. Under the third scenario
(after the GPO was enacted in 1977), Mary
’'s Social Security spousal benefit is reduced by
twothirdstwo-thirds of her $900 non-covered government pension, leaving her with a net Social Security
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).
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 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 histories in Social
Security-covered employment. For those under the GPO, however, the Social Security spousal
benefit is reduced by
approximately 67 cents for every dollar of a pension from non-covered government
employment.
Congressional Research Service
5
Social Security: The Government Pension Offset (GPO)
employment.
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
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
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
Reduction
Mary works in Social Security-Covered Position
|
Mary works in Non-Social Security-Covered Position
|
Dually Entitled
|
Before GPO Enactment
|
After GPO Enactment
|
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
|
Reduction in spousal monthly benefit due to dual
entitlement rule (equal to worker
’'s Social
Security retired-worker benefit)
Reduction in Social Security spousal monthly
benefit due to GPO (equals 2/3 of non-Social
Security-covered pension)
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.
Why a Two-Thirds Reduction?
Reduction in Social Security spousal monthly benefit due to GPO (equals 2/3 of non-Social Security-covered pension)
|
Actual Social Security spousal monthly benefit paid
|
Total monthly retirement benefits paid to Mary (Social Security spousal benefit plus either (a) Social Security retired-worker benefit or (b) non-covered pension)
|
Source: Illustrative example provided by CRS.
Notes: 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.
Why a Two-Thirds Reduction?
The GPO was originally established in 1977 (P.L. 95-216) and replaced an earlier
“dependency
test”"dependency test" for spousal benefits that had been in law since 1950.
89 The 1977 law provided that 100% of
the non-covered government pension be subtracted from the Social Security spousal
or widow(er)'s 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 pension 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.
8
The dual entitlement rule has been in law since 1939 when spousal benefits were introduced.
Congressional Research Service
6
Social Security: The Government Pension Offset (GPO)
The conferees adopted the House bill except that the offset was fixed at two-thirds of the
noncoverednon-covered government pension.
9
10
Who Is Affected by the GPO?
In 2009, the last year for which data are available, approximately 6.4 million state and local
government workers (27.4% of all state and local government workers) were in non-Social
Security-covered positions.
1011 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 or ex-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).11.12 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
20112013, about
568615,000 Social Security beneficiaries, or about 1% of all
beneficiaries, had spousal
or widow(er)'s benefits reduced by the GPO (not counting those who were potentially
eligible for spousal
or widow(er)'s benefits but were deterred from filing for them because of their expectation
that the GPO would eliminate the spousal
or widow(er)'s benefit). Of these persons subject to the GPO, 56%
were spouses and 44% were widows and widowers. About
8081% of all affected persons were
women.
12 13 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 2011
State
Total
Total
Spouses
Widows and
Widowers
Fully Offset
Statusa
Partially
Offset
Statusb
567,919
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
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.
10
Social Security Administration, unpublished table, “Estimated Social Security Coverage of Workers with State and
Local Government Employment in 2009.”
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, December
27, 2011.
Congressional Research Service
7
Social Security: The Government Pension Offset (GPO)
State
Total
Spouses
Widows and
Widowers
Fully Offset
Statusa
Partially
Offset
Statusb
California
84,849
52,012
32,837
72,000
12,849
Colorado
19,673
11,892
7,781
13,851
5,822
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
Connecticut
Delaware
District of Columbia
Massachusetts
North Dakota
Ohio
Congressional Research Service
8
Social Security: The Government Pension Offset (GPO)
Fully Offset
Statusa
Partially
Offset
Statusb
Total
Spouses
Widows and
Widowers
4,259
2,112
2,147
3,306
953
836
422
414
616
220
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
State
South Carolina
South Dakota
Tennessee
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 benefit was small.
b.
Individual received partial Social Security spousal benefits 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 2011, the average non-covered government pension amount for persons affected by
the GPO was $2,065 per month ($1,858 for women and $2,882 for men).13 The average pre-offset
Social Security spousal benefit at that time was $704 per month ($772 for women and $436 for
men).14 In December 2011, the average reduction caused by the GPO was $573 per month ($609
a month for women and $428 for men).15 In December 2011, the average Social Security spousal
benefit after application of the GPO was $131 per month ($162 a month for women and $7 a
month for men).16
For 74% of those with spousal or widow(er) benefits reduced by the GPO, the GPO reduction
was large enough to fully offset any potential spousal or widow(er) benefit (either because the
13
Ibid., Table G209, December 27, 2011. Data are limited to those beneficiaries for whom the offset amount is
available.
14
Ibid., Table G309, December 27, 2011. Data are limited to those beneficiaries for whom the offset amount is
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, December 27, 2011. Data are limited to those beneficiaries for whom the offset amount is
available. Amounts may not add due to rounding.
Congressional Research Service
9
Social Security: The Government Pension Offset (GPO)
non-covered pension was large or the potential Social Security spousal benefit was small).17 Note
that the total Social Security benefit received by a couple would be a larger amount, that is, the
Social 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 2011, the dual entitlement rule affected approximately 6.8 million beneficiaries.
About 6.6 million (98%) of all affected beneficiaries were women.18 Of these women, 56% were
spouses and 48% were widow(er)s. Among dually entitled workers, the average Social Security
total benefit (retired worker plus spouse or survivor benefit) received was $1,098.19 Of this
amount, $615 was the retired worker component of the benefit. The spousal benefit component
was $483 (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 government 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);
by State, Type of Benefit, and Offset Status, December 2013
State
|
Total
|
Spouses
|
Widow(er)s
|
Fully Offset Statusa
Partially Offset Statusb
Total
|
614,644
|
341,236
|
273,408
|
451,785
|
162,859
|
Alabama
|
4,365
|
1,915
|
2,450
|
3,383
|
982
|
Alaska
|
2,588
|
1,553
|
1,035
|
2,021
|
567
|
Arizona
|
7,985
|
4,299
|
3,686
|
6,142
|
1,843
|
Arkansas
|
2,965
|
1,506
|
1,459
|
2,311
|
654
|
California
|
91,550
|
55,138
|
36,412
|
76,870
|
14,680
|
Colorado
|
21,511
|
12,822
|
8,689
|
14,583
|
6,928
|
Connecticut
|
8,196
|
5,166
|
3,030
|
7,293
|
903
|
Delaware
|
561
|
246
|
315
|
442
|
119
|
District of Columbia
|
2,536
|
693
|
1,843
|
2,080
|
456
|
Florida
|
24,771
|
13,587
|
11,184
|
19,197
|
5,574
|
Georgia
|
16,866
|
8,660
|
8,206
|
12,554
|
4,312
|
Hawaii
|
1,948
|
1,019
|
929
|
1,606
|
342
|
Idaho
|
1,634
|
879
|
755
|
1,277
|
357
|
Illinois
|
43,723
|
25,858
|
17,865
|
36,931
|
6,792
|
Indiana
|
4,501
|
2,053
|
2,448
|
3,297
|
1,204
|
Iowa
|
1,851
|
871
|
980
|
1,381
|
470
|
Kansas
|
2,151
|
928
|
1,223
|
1,532
|
619
|
Kentucky
|
10,770
|
6,569
|
4,201
|
9,024
|
1,746
|
Louisiana
|
32,131
|
17,347
|
14,784
|
19,613
|
12,518
|
Maine
|
6,326
|
3,661
|
2,665
|
4,415
|
1,911
|
Maryland
|
9,185
|
3,218
|
5,967
|
7,289
|
1,896
|
Massachusetts
|
33,008
|
19,427
|
13,581
|
23,877
|
9,131
|
Michigan
|
5,672
|
2,756
|
2,916
|
4,316
|
1,356
|
Minnesota
|
5,872
|
3,142
|
2,730
|
4,849
|
1,023
|
Mississippi
|
2,855
|
1,332
|
1,523
|
2,190
|
665
|
Missouri
|
13,639
|
8,100
|
5,539
|
11,287
|
2,352
|
Montana
|
1,118
|
599
|
519
|
848
|
270
|
Nebraska
|
1,243
|
583
|
660
|
911
|
332
|
Nevada
|
8,547
|
4,878
|
3,669
|
6,720
|
1,827
|
New Hampshire
|
2,130
|
1,160
|
970
|
1,572
|
558
|
New Jersey
|
4,443
|
1,819
|
2,624
|
3,661
|
782
|
New Mexico
|
3,206
|
1,715
|
1,491
|
2,560
|
646
|
New York
|
7,365
|
3,034
|
4,331
|
5,894
|
1,471
|
North Carolina
|
7,274
|
3,486
|
3,788
|
5,599
|
1,675
|
North Dakota
|
492
|
220
|
272
|
334
|
158
|
Ohio
|
86,019
|
49,230
|
36,789
|
52,325
|
33,694
|
Oklahoma
|
3,826
|
1,672
|
2,154
|
2,753
|
1,073
|
Oregon
|
4,351
|
2,332
|
2,019
|
3,287
|
1,064
|
Pennsylvania
|
7,906
|
3,295
|
4,611
|
6,040
|
1,866
|
Rhode Island
|
1,809
|
1,028
|
781
|
1,564
|
245
|
South Carolina
|
4,564
|
2,271
|
2,293
|
3,528
|
1,036
|
South Dakota
|
832
|
423
|
409
|
613
|
219
|
Tennessee
|
5,707
|
2,783
|
2,924
|
4,429
|
1,278
|
Texas
|
71,145
|
40,406
|
30,739
|
43,984
|
27,161
|
Utah
|
2,444
|
1,202
|
1,242
|
1,702
|
742
|
Vermont
|
630
|
340
|
290
|
479
|
151
|
Virginia
|
7,941
|
3,110
|
4,831
|
5,967
|
1,974
|
Washington
|
5,922
|
2,971
|
2,951
|
4,412
|
1,510
|
West Virginia
|
1,348
|
601
|
747
|
875
|
473
|
Wisconsin
|
3,411
|
1,775
|
1,636
|
2,715
|
696
|
Wyoming
|
533
|
275
|
258
|
385
|
148
|
Outlying areas and foreign countries
|
11,278
|
7,283
|
3,995
|
8,868
|
2,410
|
Source: Social Security Administration, Office of Research, Evaluation and Statistics, January 2014.
Notes: Includes persons entitled to spousal/widow(er)'s benefits only and those dually entitled to spousal/widow(er)'s and worker benefits.
a.
Individual received no Social Security spousal or widow(er)'s 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 benefit itself. Either the non-covered pension was large, or the potential Social Security benefit was small.
b.
Individual received partial Social Security spousal or widow(er)'s benefits because the reduction in the Social Security benefit (a reduction equal to two-thirds of the pension from non-covered government employment) was less than the Social Security benefit itself.
In December 2013, the average non-covered government pension amount for persons affected by the GPO was $2,188 per month ($1,977 for women and $3,063 for men).14 The average pre-offset Social Security spousal benefit at that time was $753 per month ($821 for women and $468 for men).15 The average reduction caused by the GPO was $613 per month ($650 a month for women and $460 for men).16 The average Social Security spousal benefit component of the total benefit after application of the GPO was $140 per month ($172 a month for women and $9 a month for men).17
For approximately 74% of those with spousal or widow(er)'s benefits reduced by the GPO, the GPO reduction was large enough to fully offset any potential spousal or widow(er)'s benefit (because the non-covered pension was large and/or the potential Social Security spousal benefit was small).18 Note that the total Social Security benefit received by a couple would be a larger amount, that is, the Social 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 2012, the dual entitlement rule affected approximately 6.8 million beneficiaries. About 6.7 million (97%) of all affected beneficiaries were women.19 Wives made up 43% of all affected, and widows made up 54%. Among dually entitled workers, the average Social Security total benefit (retired worker plus spouse or survivor benefit) received was $1,128.20 Of this amount, $633 was the retired worker component of the benefit. The spousal benefit component was $495 (after reduction for dual entitlement).21 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 government 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 35 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 sought to ensure that SSA and government employers notify
potentially affected individuals about the effect of the GPO
.
The SSA’ and the Windfall Elimination Provision (WEP).22
The SSA's personalized mailings to workers, entitled
“"Your Social Security Statement,
”
" contained a paragraph explaining the GPO and the WEP.
SSA recently announced that it will
suspend mailing Though SSA suspended the universal mailing of annual statements
to in 2011 due to budget constraints, an online version that has retained the GPO and WEP educational material can be created for those who establish an online account.23 So the material in the statements can continue to reach a broader audience, Congress directed SSA, in conjunction with the adoption of P.L. 113-76, the Consolidated Appropriations Act, 2014, to resume the mailing of statements to targeted groups and to those who are not able to successfully register for an online account.24
GPO Reduction Smaller than Dual Entitlement Reduction
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 an offset to spousal and widow(er)'s benefits equal to two-thirds of a non-Socialdue to budget constraints, and the future status of these
statements is unclear.21
17
Ibid., Table G105, December 27, 2011. Data are limited to those beneficiaries for whom the offset amount is
available.
18
Social Security Administration, Annual Statistical Supplement, 2012, Tables 5.G1 and 5.G2, available at
http://www.ssa.gov/policy/docs/statcomps/supplement/2012/5g.html#table5.g1. 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.
21
Social Security Administration at https://secure.ssa.gov/apps10/public/reference.nsf/links/03292011051744pm.
Congressional Research Service
10
Social Security: The Government Pension Offset (GPO)
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 66.7% offset to spousal benefits for every dollar received from a nonSocial Security-covered pension. In the example shown in Table 4
, in which comparable spouses each receive a $900 retirement benefit based on their own work histories, the application of the 100% offset of the dual entitlement provision results in a $100 monthly Social Security spousal benefit for Mary. Comparatively, Mary qualifies for a $400 spousal benefit under the two-thirds offset of the GPO.
, 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
Workers
The majority of state and local government workers, and federal employees
hired 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
approximately 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, 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
An 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.
22 In general, however, and holding other factors constant, the analysis found that
22
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.
(continued...)
Congressional Research Service
11
Social Security: The Government Pension Offset (GPO)
25 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.
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
3027% of those with non-covered pensions of less than $1,000 per month had
their benefits fully offset, compared with
2975% of those with non-covered pensions between
$1,001 and $1,999 and nearly 100%
of individuals with non-covered pensions over that amount.
23
26 Among the group of individuals whose
spousal benefits were completely eliminated by the GPO,
less than
1110% of this group had a non-covered pension amount of less than $1,000 per month.
24
27 Thus, if the non-covered pension amount is a reflection of the approximate earnings levels of
individuals affected by the GPO,
25 a greater percentage of those with lower earnings receive at
least a partial Social Security benefit relative to the overall GPO-affected population.
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%.
2628 The poverty rate for all
Social Security beneficiaries
ageaged 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
Government Pensions
Opponents point out that whatever the rationale for the GPO, reducing everyone
’'s spousal
benefit
or widow(er)'s 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
and the GPO. As noted above (see the previous section,
“Impact on Low-Income Workers”),
(...continued)
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.
23
CRS calculations based on data provided by the Social Security Administration’s Office of Research, Evaluation and
Statistics, unpublished Table I, December 27, 2011.
24
Ibid.
25
Clearly this figure does not incorporate other sources of income, such as private pensions and investment income.
26
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.
Congressional Research Service
12
Social Security: The Government Pension Offset (GPO)
"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.
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.
requires earnings data for a worker's entire lifetime.
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 hasIn 2007, SSA projected the 10-year
cost of repealing the GPO to be about $42 billion.
2729 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.
EliminatingIn 2003, SSA estimated that eliminating the dual entitlement rule would cost approximately
$500 billion over a five-year period.
28
30
The GPO
“"Last-Day
”" Rule
A burgeoning controversy arose in the
108th108th 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 lawThat provision 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,
27
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. SSA has not
published a more recent estimate.
28
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. SSA has not published a more recent estimate.
Congressional Research Service
13
Social Security: The Government Pension Offset (GPO)
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.
31
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
.29.32 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.
3033 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, an individual who
receivesreceived 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 retires from government employment,
regardless of
how far in the futurewhen the retirement occurs.
•
Their last day of government service occurred before July 1, 2004,
andand 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 her last day of work within
the same retirement system, she is exempt from the GPO, even if 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 she previously retired
from and new contributions are made by either the employee or employer to the
non-covered pension system, her last-day exemption from the GPO will be
revoked and she 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
29
For more information on H.R. 743, see CRS Report RL32089, The Social Security Protection Act of 2004 (H.R. 743),
by Dawn Nuschler.
30
This five-year period for GPO exemption is consistent with that required of federal employees converting from
CSRS to FERS.
Congressional Research Service
14
Social Security: The Government Pension Offset (GPO)
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 he switched to a covered position in the same
retirement system as his prior government work for at least the final 48-month
period of his employment
andand his last day of employment was before March 2,
2009, he would be exempt from the GPO.
•
Their last day of government service occurs after March 3, 2009,
andand 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.
Author Contact Information
Christine Scott
Specialist in Social Policy
cscott@crs.loc.gov, 7-7366
Acknowledgments
This report was originally written by Alison M. Shelton, a former Analyst with the Congressional Research
Service.
Congressional Research Service
15
Author Contact Information
[author name scrubbed], Analyst in Income Security
([email address scrubbed], [phone number scrubbed])
Click here to enter text.
Footnotes
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 [author name scrubbed].
|
2.
|
Social Security Administration, Social Security Basic Facts, January 14, 2014, available at http://www.ssa.gov/legislation/2014factsheet.pdf.
|
3.
|
Social Security Administration, unpublished table, "Estimated Social Security Coverage of Workers with State and Local Government Employment, 2009" (the most recent year for which data are available).
|
4.
|
Ibid. 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 §218 of the Social Security Act. Beginning in July 1991, state and local employees who were not members of a public retirement system or covered by a Section 218 agreement were mandatorily covered by Social Security.
|
5.
|
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 only his or her own benefit.
|
6.
|
Social Security Administration, Annual Statistical Supplement 2013, Washington, DC, 2014, Table 5.G2, http://www.ssa.gov/policy/docs/statcomps/supplement/2013/5g.pdf and Table 5.A1, http://www.ssa.gov/policy/docs/statcomps/supplement/2013/5a.pdf.
|
7.
|
Social Security Administration, Office of Research Evaluation and Statistics, unpublished Table A, January 2014.
|
8.
|
In this example, John is not eligible for a Social Security spousal benefit because Mary's employment was not covered by Social Security.
|
9.
|
The dual entitlement rule has been in law since 1939, when spousal benefits were introduced.
|
10.
|
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.
|
11.
|
Social Security Administration, unpublished table, "Estimated Social Security Coverage of Workers with State and Local Government Employment in 2009."
|
12.
|
Workers who switch from CSRS to FERS must work for five years under FERS in order to be exempt from the GPO.
|
13.
|
Social Security Administration, Office of Research Evaluation and Statistics, unpublished Table DE01, January 2014.
|
14.
|
Ibid., Table G209, January 2014; data are limited to those beneficiaries for whom the offset amount is available.
|
15.
|
Ibid., Table G309, January 2014; data are limited to those beneficiaries for whom the offset amount is available. Includes persons entitled to spousal/widow(er)'s benefits only and those dually entitled to spousal/widow(er)'s and worker benefits. For a dually entitled beneficiary, the pre-offset Social Security benefit is the difference between the larger spousal/widow(er)'s benefit and the smaller worker benefit.
|
16.
|
Ibid., Table G609, January 2014; data are limited to those beneficiaries for whom the offset amount is available.
|
17.
|
Ibid., Table G509, January 2014; data are limited to those beneficiaries for whom the offset amount is available. Amounts may not add due to rounding.
|
18.
|
Ibid., Table G105, January 2014; data are limited to those beneficiaries for whom the offset amount is available.
|
19.
|
Social Security Administration, Annual Statistical Supplement, 2013, Table 5.G2, available at http://www.ssa.gov/policy/docs/statcomps/supplement/2013/5g.pdf. 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.
|
20.
|
Ibid., Table 5.G3.
|
21.
|
Ibid.
|
22.
|
The WEP 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.
|
23.
|
Social Security Administration at http://www.ssa.gov/myaccount/.
24.
|
Social Security Administration plan to increase the number of individuals receiving Social Security Statements, March 2014, http://www.ssa.gov/legislation/Social%20Security%20Statement%20Plan.pdf.
|
25.
|
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 two-thirds 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 two-thirds of non-covered pensions and which rises 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 and which rises more slowly as income rises. In general, any combination of variables (such as earnings level, timing of non-covered employment, or number of years in non-covered 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.
|
26.
|
CRS calculations based on data provided by the Social Security Administration's Office of Research, Evaluation and Statistics, unpublished Table I, January 2014.
|
27.
|
Ibid.
|
28.
|
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.
|
29.
|
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. SSA has not published a more recent estimate.
|
30.
|
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. SSA has not published a more recent estimate.
|
31.
|
Government Accountability Office, Report GAO-02-950, Revision to the Government Pension Offset Exemption Should Be Reconsidered, August 15, 2002.
|
32.
|
For more information on H.R. 743, see SSA's legislative bulletin on P.L. 108-203, http://www.socialsecurity.gov/legislation/legis_bulletin_030404.html.
|
33.
|
This five-year period for GPO exemption is consistent with that required of federal employees converting from CSRS to FERS.
|