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Updated May 14, 2019
Social Security: The Windfall Elimination Provision (WEP) and
the Government Pension Offset (GPO)
Background
eligible for benefits in 2019, the PIA is determined based
Social Security is a work-related, federal insurance program
on the formula in Table 1. The dollar amounts in the table,
that provides income support to workers and their eligible
known as bend points, are adjusted annually for average
family members in the event of the worker’s retirement,
earnings growth.
disability, or death. A worker’s employment or self-
employment is considered covered by Social Security if the
Table 1. Social Security Benefit Formula for Workers
services performed in that job result in earnings that are
Who Attain Age 62, Become Disabled, or Die in 2019
taxable and creditable for program purposes. Although
participation in Social Security is compulsory for most
Factor
Average Indexed Monthly Earnings (AIME)
workers, about 7% of all workers in paid employment or
self-employment are not covered by Social Security.
90%
of the first $926 of AIME, plus
Noncovered workers include state and local government
32%
of AIME over $926 and through $5,583, plus
employees covered by alternative staff-retirement systems;
most permanent civilian federal employees hired before
15%
of AIME over $5,583
January 1, 1984, who are covered by the Civil Service
Retirement System (CSRS) or other alternative retirement
For people with 20 or fewer YOCs who become eligible for
plan; employees covered by the Railroad Retirement
benefits in 2019, the WEP reduces the first factor from 90%
system; domestic, election, or farm workers with earnings
to 40%, resulting in a maximum reduction of $463 (90% of
below certain thresholds; people with low levels of net
$926 minus 40% of $926). For each year of substantial
earnings from self-employment; and certain nonimmigrants.
earnings in covered employment or self-employment in
excess of 20, the first factor increases by 5%. For example,
The Windfall Elimination Provision (WEP) and the
the first factor is 45% for those with 21 YOCs. The WEP
Government Pension Offset (GPO) are two separate
factor reaches 90% for those with 30 or more YOCs and at
provisions that reduce regular Social Security benefits for
that point is phased out.
workers and their eligible family members if the worker
receives (or is entitled to) a pension based on earnings from
The WEP includes a guarantee that the reduction in the
employment not covered by Social Security.
benefit amount caused by the WEP formula can never
exceed more than one-half of the noncovered pension.
The Windfall Elimination Provision
Thus, for workers who become eligible for benefits in 2019,
The WEP applies to most people who receive both a
the maximum reduction under the WEP may be less than
pension from noncovered work (including certain foreign
$463. In addition, because the WEP reduces the initial
pensions) and Social Security benefits based on fewer than
benefit amount before it is reduced or increased due to early
30 years of substantial earnings in covered employment or
retirement, delayed retirement credits, COLAs, or other
self-employment. In 2019, the amount of substantial
factors, the difference between the final benefit with the
earnings in covered employment or self-employment
WEP and the final benefit without the WEP may be less
needed for a year of coverage (YOC) is $24,675. This
than or greater than $463. However, the maximum WEP
amount is adjusted annually by the growth in average
reduction is still limited to 50% of the noncovered pension.
earnings in the economy, provided a cost-of-living
adjustment (COLA) is payable. The WEP affects retired- or
How Many People Are Affected by the WEP?
disabled-worker beneficiaries and their eligible dependents.
As of December 2018, nearly 1.9 million people (or about
However, it does not affect survivor beneficiaries.
3% of all Social Security beneficiaries) were affected by the
WEP. About 1.7 million of those affected were retired-
The Social Security benefit formula is progressive,
worker beneficiaries, which was about 4% of the entire
replacing a greater share of career-average earnings for
retired-worker beneficiary population. The remaining
low-paid workers than for high-paid workers. The regular
affected individuals were disabled-worker beneficiaries and
benefit formula applies three factors—90%, 32%, and
eligible family members of retired- or disabled-worker
15%—to three different brackets of a worker’s average
beneficiaries.
indexed monthly earnings (AIME), which is a measure of
career-average earnings in covered employment or self-
Legislative History and Rationale
employment. The result is the primary insurance amount
The WEP was enacted in 1983 as part of major
(PIA), which is the worker’s basic benefit before any
amendments designed to shore up the financing of Social
adjustments are made for factors such as COLAs, early
Security. Its purpose was to remove an unintended
retirement, or delayed retirement. For workers who become
advantage or “windfall” that the regular Social Security
https://crsreports.congress.gov
Social Security: The Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO)
benefit formula provided to workers who also had pensions
then he or she would receive $200 per month from Social
from noncovered employment. The regular formula was
Security ($800 - $600 = $200). The other one-third of the
intended to help workers who spent their careers in low-
noncovered government pension is assumed to be
paying jobs, by providing them with a benefit that is
equivalent to a supplementary private pension, which would
relatively higher in relation to their career-average earnings
not cause a reduction in the Social Security spousal benefit.
in covered employment than the benefit that is provided for
workers with high career-average earnings.
How Many People Are Affected by the GPO?
In December 2018, about 695,059 Social Security
However, the formula could not differentiate between those
beneficiaries, or about 1% of all beneficiaries, had their
who worked in low-paid jobs throughout their careers and
benefits reduced by the GPO. Of those directly affected by
other workers who appeared to have been low paid because
the GPO, 54% were spouses and 46% were widow(er)s.
they worked many years in jobs not covered by Social
The GPO affected 15% of all spouse beneficiaries and 8%
Security (these years are shown as zeros for Social Security
of all widow(er) beneficiaries. About 72% of all GPO-
benefit purposes). Thus, under the old law, workers who
affected beneficiaries had their benefits fully offset and
were employed for only a portion of their careers in jobs
about 28% had their benefits partially offset.
covered by Social Security—even highly paid ones—also
received the advantage of the weighted formula, because
Legislative History and Rationale
their few years of covered earnings were averaged over
The GPO was enacted in 1977, after the Supreme Court
their entire working career to determine the average
ruled that men were not required to prove that they received
covered earnings on which their Social Security benefits
at least one-half of their support from their wives in order to
were based. The WEP is intended to remove this advantage.
qualify for husband’s or widower’s benefits. (Women were
not subject to an explicit dependency test, as they were
The Government Pension Offset
presumed to be dependent on their husbands.) This ruling
The GPO reduces the Social Security spouse’s or
made hundreds of thousands of male retirees who worked
widow(er)’s benefits (hereinafter “spousal benefits”) of
in noncovered government employment immediately
most people who also receive a pension based on federal,
eligible for Social Security benefits as spouses or widowers,
state, or local government employment not covered by
adding hundreds of millions of dollars annually to the cost
Social Security. The program provides benefits to the
of the program and raising questions about whether these
spouses and widow(er)s of insured workers, because
were unnecessary or “windfall” benefits. To prevent the
immediate family members are presumed to be dependent
payment of full Social Security spousal benefits to people
on a worker for their financial support and thus are
receiving a pension from noncovered government
presumed to be in need of such benefits when the family
employment, Congress created the GPO as part of the
experiences a loss of income due to the worker’s retirement,
Social Security Amendments of 1977 (P.L. 95-216), which
disability, or death. In general, a spouse receives up to 50%
provided that 100% of the noncovered government pension
of the worker’s PIA, and a widow(er) receives up to 100%.
be subtracted from the Social Security spousal benefit.
Under Social Security’s dual entitlement rule, a person’s
The dollar-for-dollar reduction implicitly assumed exact
spousal benefit is reduced, dollar-for-dollar, by the amount
equivalency between government pensions and Social
of his or her own Social Security retired- or disabled-
Security worker benefits. However, government pensions
worker benefit but not below zero (i.e., a 100% offset). The
often combined the elements of a worker’s Social Security
difference, if any, is paid as a spousal benefit and is added
benefit and a pension intended to supplement Social
to the worker’s Social Security benefit. In effect, the person
Security. Although a spouse covered under Social Security
receives the higher of the two Social Security benefit
may have his or her spousal benefits reduced under the dual
amounts, but not both. For example, if a person is entitled
entitlement rule, that rule takes into account only his or her
to a $600 retired-worker benefit (based on his or her own
worker’s Social Security benefits and does not count
work history in covered employment) and an $800 spousal
income he or she may have from a private pension.
benefit (based on his or her spouse’s work history in
covered employment), then the person would receive the
In response to this criticism, Congress lowered the GPO
$600 worker benefit plus the $200 difference between the
reduction to two-thirds of the noncovered government
worker benefit and the spousal benefit ($800 - $600 =
pension under the Social Security Amendments of 1983
$200). The dual entitlement rule is an implicit test of a
(P.L. 98-21). The House version of the 1983 amendments
spouse’s or widow(er)’s dependency on an insured worker
called for the reduction to be lowered to one-third of the
for his or her financial support.
noncovered government pension. The House proposed a
one-third reduction the previous year based on the rationale
The GPO is intended to replicate the dual entitlement rule
that “thirty-three percent approximates the portion of the
for spouses and widow(er)s who receive pensions based on
CSRS annuity which is equivalent to social security
noncovered employment. The Social Security spousal
retirement benefits for the average earner.” The Senate
benefit is reduced by an amount equal to two-thirds of the
version of the bill contained no such provision and thus
noncovered government pension (i.e., a 67% offset). If a
would have left standing the existing 100% offset. In
person receives a monthly noncovered pension of $900,
conference, lawmakers agreed to a two-thirds reduction.
two-thirds of that amount (or $600) is deducted from his or
her Social Security spousal benefit. For example, if the
Zhe Li, Analyst in Social Policy
same person were also entitled to a spousal benefit of $800,
IF10203
https://crsreports.congress.gov
Social Security: The Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO)
Disclaimer
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https://crsreports.congress.gov | IF10203 · VERSION 11 · UPDATED