Q & A: Social Security's Government Pension Offset (for members in jobs not covered by Social Security)
Q. What is the Government Pension Offset (GPO)?
A. The GPO is a federal law that applies to nearly everyone receiving a public pension from work not covered by Social Security.* If the public pensioner is also eligible for a Social Security spouse or widow's benefit, the law requires that the benefit be offset by an amount equal to 2/3 of the public pension.
Q. How many people are affected by the GPO?
A. Nearly half a million retired federal, state and local government employees have already been affected by the GPO. For the great majority, the GPO totally eliminates the Social Security spouse/widow benefit. The rest experience a dramatic benefit reduction. Thousands more will be affected in the future.
Q. How does the GPO work?
A. Here's an example. Let's say Ann Jones was employed by the city parks department for 20 years. She retires with an average-size pension of $900 a month. Her husband Ben, a trucker, retires with a Social Security benefit of $1,200 a month. Normally, Ann would be entitled to a Social Security spouse benefit of her own, equivalent to an extra 50% of Ben's: $600. But due to the GPO, Ann is forced to subtract $600 (2/3 of her $900 public pension check), completely eliminating her Social Security benefit. If Ann becomes widowed in the future, the same offset will apply to her Social Security widow's benefit.
Q. Why did Congress enact the two-thirds offset?
A. According to law, retirees cannot receive a Social Security benefit based on their own work record and a full Social Security spouse/widow benefit. They receive the larger of the two. This is known as the dual entitlement rule. For the purpose of the GPO, Congress made a determination in 1983 to equate 2/3 of a public pension (from work not covered by Social Security) with a Social Security earned benefit. The GPO essentially applies the dual entitlement rule to this portion of the public pension and assumes that the remaining 1/3 portion is equivalent to a private pension benefit and not subject to the rule.
The reasoning is faulty, however, and has resulted in an unfair penalty for public pensioners. First, Congress ignored the large contributions made to public pension plans by both workers and their employers. In state and local jurisdictions not covered by Social Security, the average worker pays over 8% of pay into the pension plan and the public employer pays over 13%. This is a combined contribution of 21% -- much higher than the combined employee/employer contribution under Social Security: 12.4%.
Also, in the private sector, most pension plans require no employee contribution. The employer underwrites the entire plan. As a result, workers covered by Social Security and a private pension can claim both benefits, with no offset, at a lower contribution rate than public employees, who must also endure the GPO.
In addition, the entire public pension benefit is subject to federal taxation (both the part deemed to be Social Security-equivalent and the part equated with a private pension), while most Social Security benefits are tax free.
Q. Can't the GPO be repealed?
A. Yes -- Sen. Dianne Feinstein (D-CA) and Rep. Howard Berman (D-CA) are sponsoring legislation in the 111th Congress that would totally repeal the GPO (along with the WEP - the Windfall Elimination Provision). AFSCME supports the repeal bills (S.484/H.R.235) and is lobbying hard to bring relief to members who are affected by the GPO.
*Important Note: The GPO affects only those public pensioners who were not covered by Social Security as public employees. In the federal sector, this includes current retirees and most employees hired before 1983, when all new hires were required to join Social Security. In state and local government, approximately 25% of employees and retirees (including teachers, police and fire employees, and general employees) are in non-Social Security jurisdictions, while 75% fully participate in the Social Security system and, therefore, are not affected by the GPO.