Update: I’ve added a video on this topic at the bottom of this article.
Nearly 3,000 rules govern the Social Security programs. There are approximately 110,000 pages on the Social Security websites.
It’s a convoluted mess. The rules are often misapplied and misunderstood. In many cases, even the technicians at the Social Security Administration don’t understand which rules apply in which circumstances. You may be nodding your head in agreement. If you don’t have a horror story of your own, you’ve probably heard one from a friend.
But if you think it’s complex for someone with a traditional job, try making sense of the Social Security rules if you’re a teacher with a teachers retirement pension.
Understanding how teachers retirement and Social Security survivor benefits coordinate is almost unintelligible for the teachers who qualify for a TRS pension from work in one of the 15 states who do not participate in Social Security. It’s not only the teacher’s benefit that gets reduced, often their spousal and survivor benefit will be severely reduced or completely eliminated.
Unfortunately, the survivor benefit reduction/elimination often comes as a surprise when a spouse dies. The culprit? A fairly well-known but poorly understood rule called the Government Pension Offset.
The Government Pension Offset
The Government Pension Offset (GPO) was enacted as part of the 1977 Social Security Amendments. It was meant to keep public sector employees from receiving both a Social Security benefit and a pension from work where they did not pay into the Social Security system. This intent was to stop a worker from so-called “double dipping.” The results are that it’s often overly punitive to those who can’t afford a reduction in Social Security benefits.
This rule is often confused with the Windfall Elimination Provision, another rule that covers public sector workers. It’s important to understand the differences between these two rules.
The Windfall Elimination Provision: This rule applies to individuals who are entitled to a Social Security benefit based on their own work history AND have a pension from work where they did not pay Social Security tax.
The Government Pension Offset: Only applies to individuals who are entitled to a Social Security benefit as a survivor or spouse AND have a pension from work where they did not pay Social Security tax.
The mechanics of the Government Pension Offset (GPO) are really pretty simple. If you have a pension from non-covered employment (no Social Security tax paid), your survivor’s or spousal benefit from Social Security will be reduced by an amount equal to two-thirds of your pension.
For example, let’s consider the case of Ann. She worked as a teacher for 30 years and her husband was an accountant. For most of her career, she taught in Louisiana, one of the 15 states where teachers are not covered by Social Security. When she retired, she began receiving her Louisiana teachers retirement pension of $3,000 per month. Her husband also retired and filed for his Social Security benefits of $2,200 per month. Sadly, her husband died 3 years later.
She was devastated by his death and it didn’t help to find out that she would not continue to receive his full Social Security benefit. Instead, the Government Pension Offset kicked in and reduced the survivor’s benefit down to a measly $200 per month.
Some would say that’s not necessarily fair. I think they have a valid point. Why? The GPO only applies because of Ann’s chosen profession! This is effectively a penalty for public service. If she would have worked as an accountant instead, she would have been eligible to receive the full $2,200 per month.
One thing is for sure. If you may be subject to the GPO, you need to have a strategic Social Security filing plan. If I can help, please don’t hesitate to contact me.