Social Security: The Government Pension
Offset (GPO)
Alison M. Shelton
Analyst in Income Security
March 4, 2009
Congressional Research Service
7-5700
www.crs.gov
RL32453
CRS Report for Congress
P
repared for Members and Committees of Congress
Social Security: The Government Pension Offset (GPO)
Summary
The Government Pension Offset (GPO) applies to Social Security spousal benefits, which are
generally payable to the spouses 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 100% of the deceased worker’s benefit.
A worker is “covered” by Social Security if he or she pays into Social Security through the Old-
Age, Survivors, and Disability Insurance (OASDI) payroll tax. Currently 96% of all workers are
covered by Social Security. The majority of non-covered positions are held by federal, state, and
local government employees.
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. In order to reduce the Social Security spousal benefits of individuals who are not
financially dependent on their spouses because they receive their own benefits, one of two
provisions may potentially apply. These are:
• the “dual entitlement” rule, which applies to spouses who qualify for a Social
Security benefit based on their own work histories in Social Security-covered
employment, and
• the GPO, which applies to spouses who qualify for a government pension based
on non-Social Security-covered government employment, and may also qualify
for a Social Security spousal benefit based on their spouses’ Social-Security
covered employment.
The GPO attempts to replicate Social Security’s “dual entitlement” rule by removing an
advantage for non-covered workers who might otherwise receive both full Social Security spousal
benefits and a government pension from non-Social Security-covered 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. Therefore, the couple’s total benefit is effectively the covered worker’s
original Social Security benefit plus a reduced (or potentially eliminated) spousal benefit.
Opponents contend that the GPO provision is basically imprecise and can be unfair. Defenders
argue it is the best method currently available for eliminating an unfair advantage for spouses
working in non-Social Security-covered employment, and for preserving the spousal benefit’s
original intent of supporting financially dependent spouses.
In the 111th Congress, Representative Howard Berman has introduced H.R. 235, the Social
Security Fairness Act of 2009, to repeal the GPO. Senator Dianne Feinstein has introduced a
companion bill, S. 484, to repeal the GPO.
This report will be updated periodically.
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
Financial Dependence ........................................................................................................... 4
Parity Between Dual Entitlement and GPO Provisions .......................................................... 4
Dual Entitlement Reduction to Spousal Benefits is Larger than GPO Reduction .................... 6
Why a Two-Thirds Reduction? .............................................................................................. 6
Who Is Affected by the GPO? ..................................................................................................... 6
Issues.......................................................................................................................................... 9
Awareness of the GPO and Retirement Preparedness ........................................................... 10
Parity Among Social Security-Covered Workers and Non-Covered Workers........................ 10
Impact on Low-Income Workers ......................................................................................... 10
Imprecision of the Two-Thirds Offset to Non-Covered Government Pensions...................... 11
Application of the GPO to Government versus Private Pensions.......................................... 11
Cost of Eliminating the GPO............................................................................................... 12
The “Last Day” Rule................................................................................................................. 12
How Does the New Law Affect Exemption from the GPO? ................................................. 13
Recent Legislation .................................................................................................................... 14
Tables
Table 1. Regular Dual Entitlement Formula................................................................................. 2
Table 2. GPO Formula ................................................................................................................ 3
Table 3. Dual Entitlement Rule Compared to 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 2008................................................................................ 7
Contacts
Author Contact Information ...................................................................................................... 15
Acknowledgments .................................................................................................................... 15
Congressional Research Service
Social Security: The Government Pension Offset (GPO)
Background
Generally, Social Security spousal benefits are paid to the spouses of retired, disabled, or
deceased workers covered by Social Security. The spousal benefit is equal to 50% of the retired or
disabled worker’s benefit and 100% of the 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, individuals who qualify for both a Social
Security worker benefit (retirement or disability) based on their own work history and a Social
Security spousal benefit based on their spouse’s work history are “dually entitled” and are subject
to the dual entitlement rule. Individuals who qualify for both a non-Social Security-covered
government pension and a Social Security spousal benefit are subject to the Government Pension
Offset (GPO) provision.1 The intent of the dual entitlement rule and the GPO is the same—to
reduce the Social Security spousal benefits of individuals who are not financially dependent on
their spouses because they receive their own benefits.
Social Security-Covered and Non-Covered Work
A worker is “covered” by Social Security if he or she pays into Social Security through the Old-
Age, Survivors, and Disability Insurance (OASDI) payroll tax. Approximately 96% of all workers
are covered. 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 71% of state and local government employees are covered.2 However,
coverage varies from state to state. For example, approximately 97% of state and local employees
in New York and Vermont are covered by Social Security, while only 3% of state and local
employees in Ohio, and 5% in Massachusetts, are covered.3
This disparity in coverage occurs because, while Social Security originally did not cover any state
and local government workers, over time the law has changed. Most state and local government
employees became covered by Social Security through voluntary agreements between the Social
Security Administration and individual states.4 Beginning in July 1991, state and local employees
who were not members of a public retirement system were mandatorily covered by Social
Security. Those public employees who were already members of a public retirement system
through their employment were not mandatorily covered because their state pensions already
fulfilled the social insurance functions of Social Security.
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, “Estimated Social Security Coverage of Workers with State and
Local Government Employment,” 2006.
3 Ibid.
4 These agreements are known as “Section 218 agreements” because they are authorized by Section 218 of the Social
Security Act.
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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 their 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 primary benefits as well as two spousal benefits. The Social Security
dual entitlement rule effectively requires that a beneficiary receive the higher of the Social
Security worker’s benefit or the spousal benefit, but not both.5 The total benefit received by a
worker therefore 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.
Table 1 demonstrates how the Social Security dual entitlement rule is applied.
Table 1. Regular Dual Entitlement Formula
John Mary
Social Security monthly retirement benefit (based on worker’s earnings record)
$900.00
$400.00
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)
$200.00 $450.00
Actual Social Security SPOUSAL monthly benefit paid (subtract worker benefit from spousal
benefit)
$0.00
$50.00
TOTAL Social Security monthly benefits paid to John and Mary
$900.00 $450.00
Source: Illustrative example provided by Congressional Research Service (CRS).
In this example, both John and Mary have worked enough years in Social Security-covered
positions (i.e., paid into Social Security) to qualify for Social Security retirement benefits. John
has earned a monthly Social Security benefit equal to $900. His wife Mary has earned a monthly
Social Security benefit equal to $400. Mary is also eligible for a Social Security spousal benefit
of up to 50% of John’s retirement benefit, or $450. However, under the dual entitlement rule,
Mary’s worker benefit of $400 must be subtracted from her potential $450 spousal benefit, and
only the difference of $50 is paid as a spousal benefit. In total, Mary will receive $450 monthly—
$400 as a Social Security worker benefit and $50 as a Social Security spousal benefit. John is also
eligible to receive a Social Security spousal benefit of up to 50% of Mary’s retirement benefit, or
$200. However, in this application of the dual entitlement rule, John would not be paid a spousal
benefit because his $900 retirement benefit based on his own earnings is higher and more than
offsets the potential $200 spousal benefit. The Social Security benefits received by the couple
total $1,350 per month.
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 spouasl 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 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 the spousal benefit.
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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 2006, approximately 6.3 million
out of 30.9 million Social Security retired worker beneficiaries, or about 20%, were dually
entitled (not including those whose spousal benefit was completely offset by their retired worker
benefit).6
Government Pension Offset Formula
The Social Security spousal benefit of a person who receives a pension from government
employment (federal, state, or local) that was based on work not covered by Social Security is
reduced by a provision in the law known as the GPO. The GPO reduction to Social Security
spousal benefits is equal to two-thirds of the pension from non-covered government employment.
In December 2008, nearly 496,000 Social Security beneficiaries, or about 1.5% of all retired
worker beneficiaries, had spousal benefits reduced by the GPO (not counting those who were
eligible for spousal benefits but were deterred from filing for them because of the GPO).7 Table 2
provides an example of how the GPO is applied.
Table 2. GPO Formula
John
Mary
Social Security retirement benefit (based on worker’s earnings record)
$900.00 $0.00
Non-Social Security-covered government pension
$0.00
$400.00
Maximum Social Security spousal benefit eligible to receive (based on spouse’s earnings
record, equal to 50% of the spouse’s Social Security retirement benefit)
$0.00
$450.00
Reduction in Social Security spousal benefit due to GPO (equals 2/3 of non-Social Security-
covered pension: $400*2/3)
$0.00
$266.67
Actual Social Security SPOUSAL benefit paid (subtract 2/3 of non-Social Security-covered
worker’s pension from Social Security spousal benefit: $450–$266.67=183.33)
$0.00 $183.33
TOTAL monthly pensions paid to John (Social Security only) and Mary (Social Security plus
pension from non-covered employment)
$900.00 $583.00
Source: Illustrative example provided by CRS.
In this example, John worked enough years in Social Security-covered employment to qualify for
Social Security retirement benefits. He has earned a Social Security benefit of $900. His wife,
Mary, is not eligible for a Social Security worker benefit on her own record because she worked
in a non-Social Security-covered government position and did not contribute to Social Security.
Mary is eligible for a $400 government pension based on her work in a non-Social Security-
covered position. However, Mary is also eligible for a Social Security spousal benefit of up to
$450 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 $266.67, and only the difference of $183.33 is paid to her as a spousal
benefit. In total, Mary will receive $583.33—$400 from her non-covered pension and $183.33 as
6 Social Security Administration, Annual Statistical Supplement 2007, Table 5.G2.
7 Social Security Administration, Office of Research Evaluation and Statistics, Unpublished Table DE01, January 12,
2009.
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Social Security: The Government Pension Offset (GPO)
a Social Security spousal benefit. In this example, John is not eligible for a Social Security
spousal benefit because Mary’s employment was not covered by Social Security.
Table 3 highlights the differences between the dual entitlement rule and the GPO.
Table 3. Dual Entitlement Rule Compared to Government Pension Offset
Dual Entitlement Rule
Government Pension Offset
Applies to individuals who qualify for both a Social
Applies to individuals who qualify for both a government
Security worker benefit (retirement or disability) based
pension based on non-Social Security-covered government
on their own work history and a Social Security spousal
employment and a Social Security spousal benefit. The GPO
benefit based on their spouse’s work history. Dual y-
provision reduces Social Security benefits that a person
entitled beneficiaries effectively receive the higher of
receives as a spouse if he or she also has a federal, state or
their worker benefit or their spousal benefit. Specifically, local government pension based on work that was not
the Social Security dual entitlement rule requires that
covered by Social Security. The GPO reduction in Social
100% of a Social Security retirement or disability benefit
Security spousal benefits is equal to two-thirds of the non-
earned as a worker (based on one’s own Social
covered government pension.
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).
Only the difference, if any, is paid as a spousal benefit (in
addition to the benefit that each worker in the couple
receives based on their own covered earnings).
Rationale and Legislative History
Financial Dependence
The policy rationale for Social Security spousal benefits has been, since the inception of the
program in the 1930s, to support spouses who are financially dependent on the working spouse.
The dual entitlement rule has operated since the 1930s as a gauge of financial dependence.
Parity Between Dual Entitlement and GPO Provisions
The GPO is intended to place spouses whose government employment was not covered by Social
Security and who are eligible for a Social Security spousal benefit in approximately the same
position as spouses whose jobs were covered by Social Security and are also eligible for a Social
Security spousal benefit. Before the GPO was enacted in 1977, workers who received pensions
from a government job not covered by Social Security could also receive full Social Security
spousal benefits even though they were not financially dependent on their 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 each case, Mary’s earnings (and
thus the Social Security retirement benefit or non-covered government pension) and the
maximum spousal benefit she is eligible to receive are identical.
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Social Security: The Government Pension Offset (GPO)
Under the first scenario (as a dually entitled retiree), 100% of Mary’s own Social Security
retirement benefit of $400 is used to offset the $450 Social Security spousal benefit for which she
is eligible, leaving her with a net spousal benefit of $50 and a total Social Security benefit of
$450. Under the second 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 $450, plus the non-covered pension of $400, for total monthly pension benefits of
$850. Under the third scenario (when the GPO is put into effect), Mary’s Social Security spousal
benefit is reduced by two-thirds of her $400 non-covered government pension, leaving her with a
net spousal benefit of $183 (= 450 – 400*1/3) and a total monthly pension benefit of $583.
Therefore, with the GPO in place, Mary’s employment and resulting retirement benefit are used
to offset her Social Security spousal benefit just as they were under the dual entitlement scenario.
The GPO brings total benefits paid to spousal beneficiaries in non-Social Security-covered jobs
closer to benefits paid to spouses in covered positions.
Table 4. Mary’s Spousal Benefit, Before and After GPO Enactment
Mary works in Social
Security-Covered
Mary works in Non-Social
Position
Security-Covered Position
Dually Entitled
Before GPO
After GPO
Social Security retirement benefit (based on own
earnings record)
$400.00
$0.00
$0.00
Non-Social Security-covered pension
$0.00
$400.00
$400.00
Maximum Social Security spousal benefit eligible
to receive (based on spouse’s earnings record),
equal to 50% of the spouse’s Social Security
retirement benefit
$450.00
$450.00
$450.00
Reduction in spousal benefit due to dual
entitlement rule (equal to worker’s retirement
benefit) $400.00
—
—
Reduction in Social Security spousal benefit due
to GPO (equals 2/3 of non-Social Security-
covered pension)
— —
$266.67
Actual Social Security SPOUSAL benefit paid
$50.00
$450.00
$183.33
TOTAL monthly benefits paid to Mary (Social
Security spousal benefit plus either (a) Social
Security worker benefit or (b) non-covered
pension)
$450.00 $850.00
$583.33
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.
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Social Security: The Government Pension Offset (GPO)
Dual Entitlement Reduction to Spousal Benefits is Larger than
GPO Reduction
Table 4 also shows how, given equal Social Security retirement benefits or non-covered
government pension amounts of $400, 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 while those under the GPO face a 66.6% offset. In the example shown here, this
results in a $50 spousal benefit under dual entitlement compared to a $183.33 spousal benefit
under the GPO. If these non-Social Security-covered workers had been covered by Social
Security, they would have been subject to the dual entitlement rule and their spousal benefits
would be lower than what they receive under the GPO.
Why a Two-Thirds Reduction?
Using two-thirds of the government pension as the equivalent of a Social Security benefit was
established by the Social Security Amendments of 1983 (P.L. 98-21). The original 1977 law
provided that 100% of the government pension be subtracted from the Social Security spousal
benefit. If the original legislation had been left intact, the treatment of individuals affected by the
dual entitlement rule and the GPO would in fact have been identical because the Social Security
spousal benefit would have been offset by 100% of the retirement benefit in both cases. In 1983,
Congress passed P.L. 98-21, which made a number of amendments to Social Security. 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. The
conferees adopted the House bill except that the offset would be two-thirds of the government
pension.8
Who Is Affected by the GPO?
Government workers not paying into Social Security are potentially affected by the GPO, if they
have spouses who are covered by Social Security. 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). 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,9 they, like all covered workers in the private
sector, may be subject to the Social Security dual entitlement rule. At the end of 2008,
approximately 558,000 federal workers (21% of the federal workforce) participate in CSRS and
are potentially subject to the GPO, whereas 2.1 million (79%) participate in FERS and are
potentially subject to the dual entitlement rule.10
8 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. As a result, spousal benefits are subject to a 100% offset under the dual entitlement rule,
but to a 66.6% offset under the GPO.
9 Workers who switch from CSRS to FERS must work for five years under FERS in order to be exempt from the GPO.
10 Federal Retirement Thrift Investment Board, October, 2008, and Office of Personnel Management, “Federal
Employment Statistics,” Table 8, January 2008.
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Social Security: The Government Pension Offset (GPO)
Some state and local government workers do not pay into Social Security and are potentially
subject to the GPO upon retirement, if they have spouses who are covered by Social Security.
Social Security coverage varies by state. In 2006, approximately 6.9 million state and local
workers (29% of all state and local workers) were in non-Social Security-covered positions and
may be subject to the GPO. At the same time, approximately 17.1 million state and local workers
(71%) were in covered employment and may be subject to the dual entitlement rule.11
As of December 2008, about 496,000 Social Security beneficiaries, or about 1.5% 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 57% were spouses; 43% were
widows and widowers. About 79% of all affected 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 2008
Fully
Partially
Widos and
Offset
Offset
State Total
Spouses
Widowers
Status
Status
Alabama 3,931
1,816
2,115
3,118
813
Alaska 1,961
1,185
776
1,554
407
Arizona 6,355
3,425
2,930
4,944
1,411
Arkansas 2,703
1,440
1,263
2,125
578
California 73,629
46,134
27,495
63,223
10,406
Colorado 16,854
10,348
6,506
12,328
4,526
Connecticut 6,412
4,097
2,315
5,741
671
Delaware 446
192
254
349
97
District of Columbia
2,598
771
1,827
2,179
419
Florida 20,947
11,531
9,416
16,295
4,652
Georgia 12,937
6,682
6,255
9,891
3,046
Hawai 1,854
1,032
822
1,588
266
Idaho 1,335
736
599
1,059
276
Illinois 34,324 20,754
13,570 29,134 5,190
Indiana 3,924
1,777
2,147
2,907
1,017
Iowa 1,725
867
858
1,285
440
Kansas 1,965
853
1,112
1,388
577
Kentucky 7,843
4,835
3,008
6,568
1,275
11 Social Security Administration, unpublished table, Estimated Social Security Coverage of Workers with State and
Local Government Employment, 2006.
12 Social Security Administration, Office of Research Evaluation and Statistics, Unpublished Table G105, January 12,
2009.
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Social Security: The Government Pension Offset (GPO)
Fully
Partially
Widos and
Offset
Offset
State Total
Spouses
Widowers
Status
Status
Louisiana 23,086
12,468
10,618
14,462
8,624
Maine 4,928
2,881
2,047
3,551
1,377
Maryland 8,270
3,105
5,165
6,662
1,608
Massachusetts 24,657
14,727
9,930
17,659
6,998
Michigan 4,912
2,371
2,541
3,771
1,141
Minnesota 5,741
3,230
2,511
4,756
985
Mississippi 2,366
1,096
1,270
1,827
539
Missouri 10,653
6,278
4,375
8,909
1,744
Montana 989
519
470
759
230
Nebraska 1,117
547
570
825
292
Nevada 6,222
3,539
2,683
4,973
1,249
New Hampshire
1,713
957
756
1,244
469
New Jersey
4,258
1,778
2,480
3,508
750
New Mexico
2,948
1,662
1,286
2,404
544
New York
7,571
3,226
4,345
6,141
1,430
North Carolina
5,998
2,948
3,050
4,731
1,267
North Dakota
442
213
229
311
131
Ohio 69,805
40,888
28,917
41,341
28,464
Oklahoma 3,449
1,541
1,908
2,554
895
Oregon 3,775
2,039
1,736
2,912
863
Pennsylvania 7,501
3,303
4,198
5,789
1,712
Rhode Island
1,438
801
637
1,238
200
South Carolina
3,742
1,825
1,917
2,916
826
South Dakota
798
404
394
600
198
Tennessee 4,685
2,377
2,308
3,694
991
Texas 55,582
33,102
22,480
37,224
18,358
Utah 2,111
1,065
1,046
1,515
596
Vermont 565
315
250
438
127
Virginia 7,442
3,015
4,427
5,675
1,767
Washington 5,056
2,441
2,615
3,829
1,227
West Virginia
1,173
538
635
757
416
Wisconsin 3,090
1,624
1,466
2,427
663
Wyoming 466
238
228
343
123
Outlying areas and
7,690 4,982
2,708 6,134 1,556
foreign countries
Total
495,982 280,518
215,464 371,555 124,427
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Source: Social Security Adminstration, Office of Research, Evaluation and Statistics, January 12, 2009
a. Individuals received no Social Security spousal benefit because the reduction in their 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 were small.
b. Individual received a partial 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 overnment employment)
was less than the Social Security spousal benefit itself.
In December 2008, the average monthly non-covered government pension amount was $1,882
($1,679 for women and $2,609 for men).13 The average pre-offset Social Security spousal benefits
at that time were $642 per month overall ($710 for women, and $396 for men).14 In December
2008, the average offset caused by the GPO was $519 ($555 a month for women and $390 for
men).15 For 75% of those with spousal benefits reduced by the GPO, the GPO reduction was large
enough to fully offset any potential spousal benefit either because the non-covered pension was
large or the potential Social Security spousal benefits were small.16 In December 2008, the
average Social Security spousal benefit after the GPO was $123 per month ($156 a month for
women and $5 a month for men).17 Note that the total Social Security benefit received by a
couple would be a larger amount, i.e. the (reduced) spousal benefit plus the primary worker’s own
benefit.
By contrast, in 2006 the dual entitlement rule affected approximately 6.3 million beneficiaries. Of
these, 43% were spouses and 57% were widow(er)s. About 6.2 million (98%) of all affected were
women.18 Among dually entitled workers, the average Social Security benefit received was
$938.19 Of this, $519 was the retired worker component of the benefit. The spousal benefit
component was $419 (after reduction for dual entitlement). 20 For the average dually entitled
worker, the spousal benefit comprised almost 45% of the total Social Security benefit received.21
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 workers.
13 Ibid., Table G209, January 12, 2009. Data is limited to those beneficiaries for whom the offset amount is available.
14 Ibid., Table G309, January 12, 2009. Data is limited to those beneficiaries for whom the offset amount is available.
15 Ibid., Table G609, January 12, 2009. Data is limited to those beneficiaries for whom the offset amount is available.
16 Ibid., Table G105, January 12, 2009. Data is limited to those beneficiaries for whom the offset amount is available.
17 Ibid., Table G509, January 12, 2009. Data is limited to those beneficiaries for whom the offset amount is available.
18 Social Security Administration, Social Security Bulletin, Annual Statistical Supplement, 2007, Table 5.G2. 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 Ibid.
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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 seeks to ensure that SSA and government employers notify
potentially affected individuals about the effect of the GPO.
Parity Among Social Security-Covered Workers and Non-Covered
Workers
The majority of state and local government workers, and federal employees since 1983, are
covered by Social Security. Some argue that eliminating the GPO would be unfair to government
employees in Social Security-covered positions who are potentially subject to the dual-
entitlement provision (instead of the GPO).
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 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 compared benefit reductions under the
GPO to those under the dual entitlement rule in order to determine how well the GPO offset (two-
thirds of the government pension amounts) serves as a proxy for the Social Security worker
benefits that individuals would receive if they had worked in covered employment. The estimates
showed a great variation in outcomes. Some individuals, including lower earners, would have a
much larger offset amount (benefit reduction) under the dual entitlement rule than under the GPO,
while others, including higher earners, would have a somewhat smaller offset amount under the
dual entitlement rule compared to the GPO.
Other evidence of the effect of the GPO on low earners comes from statistics produced by the
Social Security Administration. While 75% of those affected by the GPO have their benefits fully
offset, only 33% of those with non-covered pensions of less than $1,000 per month had their
benefits fully offset, compared with 84% of those with non-covered pensions between $1,000 and
$1,999 and nearly 100% of individuals with non-covered pensions over that amount.22 Although
22 CRS calculations based on Table 1, “Estimated Number of Beneficiaries Affected by the Government Pension Offset
(GPO), by Current Offset Status and Non-Covered Government Pension Amount, Limited to Those Beneficiaries For
Which the Offset Amount is Available, December 2008,” produced by the Social Security Administration’s Office of
Research, Evaluation and Statistics, January 12, 2009.
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75% of individuals affected by the GPO had spousal benefits fully offset as a result of the GPO,
only 13% of those with a full offset had a non-covered pension amount of less than $1,000 per
month.23 Thus, if the non-covered pension amount is a reflection of the earnings levels of
individuals affected by the GPO, a greater percentage of those with lower earnings receive at least
a partial Social Security benefit relative to the overall GPO-affected population.
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%.24 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. 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 Social Security
Administration 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 provision applies only to spousal benefits received by government
workers who are not themselves covered by Social Security. They wonder why the GPO does not
apply to workers in the private sector who receive both Social Security and employer-sponsored
pensions. Defenders of the provision argue that the employment on which the private pension is
based would be covered by Social Security, and 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 the worker 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.
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. July 2007 data
23 Ibid.
24 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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from the Bureau of Labor Statistics indicate that state and local government workers earned on
average $24.15 per hour compared with the national average of $19.88 per hour and the private
sector average of $19.21 per hour.25
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 Social Security
Administration has projected the 10-year cost of repealing the GPO to be about $42 billion.26
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.27
The “Last Day” Rule
A burgeoning controversy arose in the 108th Congress with the revelation that a growing number
of state and local government workers had been making use of a little-known provision of the law
that allowed them to escape the application of the GPO if they switched jobs at the end of their
government careers. 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.
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. 108-203.28 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.29 The new GPO
provision became effective for Social Security spousal benefit applications filed after March 31,
2004.
25 U.S. Department of Labor, Bureau of Labor Statistics, National Compensation Survey: Occupational Earnings in the
United States, 2007, August 2008.
26 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.
27 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.
28 For more information on H.R. 743, see CRS Report RS21448, The Social Security Protection Act of 2003 (H.R. 743),
by Dawn Nuschler.
29 This five year period for GPO exemption is consistent with that required of federal employees converting from CSRS
to FERS.
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Social Security: The Government Pension Offset (GPO)
How Does the New Law Affect Exemption from the GPO?
Any current Social Security beneficiary who is receiving spousal benefits and is exempt from the
GPO because they retired from their non-covered position in government under the “last-day”
rule would continue to be exempt from the GPO. Individuals may still be exempt from the GPO
if:
• They applied for Social Security spousal benefits before April 1, 2004, and work
their last day in a Social Security-covered position within the same retirement
system. In this case, the individual 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 their last day of work
within the same retirement system, they are exempt from the GPO, even if they
file for Social Security benefits at a later date. However, if a worker returns to
work in a non-covered position in the same retirement system that they
previously retired from and new contributions are made by either the employee
or employer to the non-covered pension system, his or her “last-day” exemption
from the GPO will be revoked and they will be subject to the new 60-month
requirement for exemption from the GPO.
• Their last day of government service occurs on or after July 1, 2004, and before
March 2, 2009, and they work a total of 60 months in a Social Security-covered
position within the same retirement system. The required 60-month period of
Social Security-covered employment would be reduced by the number of months
the worker performed in Social Security-covered employment under the same
retirement system prior to March 2, 2004. However, in no case can the 60-month
requirement be reduced to less than one month. For example, a teacher who is
currently working in a non-covered position but who previously worked for 12
months in a Social Security-covered position under the same retirement system
would have the 60-month requirement reduced to 48 months. The remaining
months to be worked (in this case 48 months), must be worked consecutively and
after March 2, 2004. Thus, if she switched to a covered position in the same
retirement system as her prior government work for at least the final 48-month
period of her employment and her last day of employment was before March 2,
2009, she would be exempt from the GPO.
• Their last day of government service occurs after March 3, 2009, and they work
their last 60 consecutive months in a Social Security-covered position within the
same retirement system. In this case, the entire 60-month period must be worked
after March 2, 2004.
All other individuals receiving government pensions based on non-covered employment would be
subject to reductions in Social Security spousal benefits under the GPO.
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Recent Legislation
In the 111th Congress, Senator Dianne Feinstein and Representative Howard Berman have
introduced companion bills, S. 484 and H.R. 235, entitled the Social Security Fairness Act of
2009. Both bills would eliminate the GPO for Social Security benefits payable for months after
December 2009.
In the 110th Congress, five bills were introduced that would have altered the GPO. Representative
Berman and Senator Feinstein introduced H.R. 82 and S. 206, the Social Security Fairness Act of
2007. These identical bills would have eliminated the GPO for Social Security benefits payable
after December 2007. According to estimates provided by Social Security actuaries, elimination
of the GPO would cost $41.7 billion over 10 years,30 and in the long run would cost 0.06% of
taxable payroll, which would increase Social Security’s long-range deficit by about 3%.31
H.R. 1090, introduced by Representative Ron Lewis, would, among other things, have reduced
the offset to one-third of the government pension. The Social Security actuaries estimated that
reducing the offset from two-thirds to one-third of the government pension would have cost
approximately $11.0 billion over 10 years.
Representative Wynn and Senator Mikulski introduced H.R. 2988 and S. 1254, the Government
Pension Offset Reform Act. These bills would have eliminated the application of the GPO to
those whose monthly combination of Social Security spousal benefits and non Social Security-
covered pension was $1,200 or less. For those whose monthly combination of Social Security
spousal benefits and non-Social Security-covered pension was more than $1,200, the reduction in
their spousal benefit would have been equal to the lesser of (1) two-thirds of the amount by which
the combined benefit exceeded $1,200 or (2) two-thirds of the government pension. In future
years, the $1,200 threshold would have risen in proportion to the rate of inflation. The Social
Security actuaries estimated that enactment of H.R. 2988/S. 1254, would have cost $6.1 billion
over 10 years, and in the long run would have cost less than 0.005% of taxable payroll.
The last bill passed that modified the GPO eliminated a controversial exemption from the GPO
known as the “last-day rule.” The “last-day rule” is described in a preceding section. H.R. 743
from the 108th Congress was passed into law (P.L. 108-203) on March 2, 2004.
30 Social Security Administration, Memorandum from Bert M. Kestenbaum and Tim Zayats, 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. All 10-year cost
estimates are taken from this document.
31 Social Security Administration, Office of the Chief Actuary, Memorandum from Eugene Yang and Chris Chaplain to
Stephen C. Goss, Chief Actuary, “Estimated Long-Range OASDI Financial Effects from Several Proposals to Modify
the Windfall Elimination Provision and the Government Pension Offset—INFORMATION,” October 26, 2007. All
long-term cost estimates are taken from this document.
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Author Contact Information
Alison M. Shelton
Analyst in Income Security
ashelton@crs.loc.gov, 7-9558
Acknowledgments
This paper was originally written by Laura Haltzel.
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