Government Pension Offset (GPO)

[PERSonalTime]

Anyone out there impacted by the GPO? If so, how and is there anything that can be done to get around it? What's your story?


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[Mulligan]

I haven't been impacted but it is another reason why there is no economic benefit for me to remarry as I would get zilch from GPO due to my pension. Its evil twin sister, the WEP, however, is gonna kick me in the privates pretty hard.


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[Chuckanut]

For the uninitiated, can somebody give a one paragraph description of the GPO?

 

[rothlev]

GPO takes away or limits severely collecting a spousal social security benefit if you have a government pension from which you did not pay social security taxes.
WEP limits social security pensions under your own account when you have a government pension from which you did not pay social security taxes.

 

[Sue J]

My DH gets a pension that's much larger than my future SS will be (I was a stay at home Mom for many years) so he will get nothing from SS as my spouse. I've never read of a way to get around the GPO.

As for the WEP, he could get a small amount of SS after the WEP deduction but he needs to earn 4 more credits. Sounds easy enough but he likes his unencumbered retirement lifestyle and hasn't gotten around to finishing his SS credits. Right now we don't need the additional income but it would be nice in the future, especially if I die first.

 

[Lakewood90712]

I am subject to the wep, reduction of 30% unless I return to the private sector for 4 more years. Not having to pay social security payroll taxes for close to 13 of my highest earning years , in return for a 30% reduction is a good deal when I run the numbers.

 

[Mulligan]

My DH gets a pension that's much larger than my future SS will be (I was a stay at home Mom for many years) so he will get nothing from SS as my spouse. I've never read of a way to get around the GPO.

As for the WEP, he could get a small amount of SS after the WEP deduction but he needs to earn 4 more credits. Sounds easy enough but he likes his unencumbered retirement lifestyle and hasn't gotten around to finishing his SS credits. Right now we don't need the additional income but it would be nice in the future, especially if I die first.

Well, you control that Sue....A simple choice of working for 4 credits or you running away with half the assets in divorce would get an immediate application into Lowes or McDonalds.


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[Telly]

Anyone out there impacted by the GPO? If so, how and is there anything that can be done to get around it? What's your story?

Well, a "get around" is possible, but the piper will be paid!

D/W does not have enough SS credits on her own record to get a benefit from it.
However, she pays pre-tax into a pension. In the future, with GPO, she will effectively get 1/2 of my SS FRA amount claiming on my record, plus 1/3 of her pension amount monthly. I say "effectively", because her pension entity will pay out 100% benefit monthly, and then the SSA pays out the rest according to the SSA GPO formula.

Work around - If she so chooses, right before she takes her pension, she can request it be paid out to her in a lump-sum instead. BUT, that lump sum is what she paid in, and all of it will be taxable, added on to that years income. AND, her SS on my record will be reduced/eliminated for a while by the amount of the lump sum, I don't remember all the details, looked them up once. It was no deal!

The piper WILL be paid...

 

[Lakewood90712]

Well, you control that Sue....A simple choice of working for 4 credits or you running away with half the assets in divorce would get an immediate application into Lowes or McDonalds.


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If I understand correctly , it's not just working a quarter , how much income is needed in the quarter matters too. The threshold for "Substantial Earnings" is $21,750 for 2014. A minimum wage job might not get to that.

 

[Andre1969]

There's a woman at work who got hit with the WEP. She was in the government for years under the old CSRS system, enough to get a nice pension. But because of that, she fell under the WEP and gets no social security. I remember her saying at the time the SS benefit would have been about $587 per month.

She would always harp about it, and was very bitter. She retired from the gov't, back in 2004 and came back as a contractor, part time. She was still paying into SS, so it must have been a smack in the face to her, continuing to pay into it knowing she would never get anything out of it.

I know I'd be a bit miffed...sounds like means testing to me.

My Mom, who was also in the federal gov't, doesn't get SS either, but that's because she never got enough quarters in, going into the gov't when she was 20.

 

[Chuckanut]

As a public employee who has paid into both my current pension (20+ years) and the SS system (40+ years), I do not like the idea of people 'getting around' GPO. After 40+ years of paying into the SS system, I want it to preserve cash for my future benefits.

I feel the same way about people who find loopholes and use them to 'spike' their pension benefits.

 

[Mulligan]

If I understand correctly , it's not just working a quarter , how much income is needed in the quarter matters too. The threshold for "Substantial Earnings" is $21,750 for 2014. A minimum wage job might not get to that.

$1200 will get quarter of credit according to SS. I was the king of chump change quarters over the years. I am vested but since my SS quarters accumulated are not "substantial" and not long term, the WEP whacks it's good. So if I understand correctly working at McDonalds or anywhere will get you over the top, but if previous years earned income mirrors that SS payout will be low. If I understand correctly "substantial earnings" and amount of them is a term more to avoid getting whacked on WEP (GPO I don't know). For example I know if I had 30 years of "substantial earnings" separate from my non SS pension, I could draw both at full max. But for me, that isn't going to happen.


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[PERSonalTime]

I haven't been impacted but it is another reason why there is no economic benefit for me to remarry as I would get zilch from GPO due to my pension. Its evil twin sister, the WEP, however, is gonna kick me in the privates pretty hard.


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Whether it's the GPO or the WEP, don't you suffer the same negative result?


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[Lakewood90712]

Links to ssa . gov GPO and WEP info sheets

Retirement Planner: Government Pension Offset (GPO)

Retirement Planner: Windfall Elimination Provision (WEP)

 

[2B]

My wife has a $419/mo pension or a $24,000 lump sum. Taking the pension would reduce her spousal SS from $1,095 to $815 but with the pension it would take her close to forever to break even with the $139/mo increase in the pension.

She's still several years away from collecting SS so we're looking at rolling the lump sum over to her IRA. I haven't seen any "look back" on taking lump sums. Does anyone know if I'm missing something.

 

[utrecht]

I dont get it. Why would anyone expect to collect SS if they didnt pay into it?

 

[2B]

I dont get it. Why would anyone expect to collect SS if they didnt pay into it?

They might want their spousal benefit or they might have paid into SS but also have a non-SS based pension.

There were too many goverment workers retiring with a government or military pension that then worked a job with SS taken out. These were the classic double dippers. The other group is people that had government pensions that also qualified for spousal benefits. Up until a few years ago, collecting both ways was allowed. The current law is meant to reduce the benefits from two ways to collect a pension.

In my wife's case, she loses 70% of the value of her pension if she would collect her spousal benefit.

 

[molly]

"I don't get it. Why would anyone expect to collect SS if they didnt pay into it?"

Not so........I was a public school teacher fulltime for 8 years in a state that paid SS. I also subbed for a few years and worked at a hospital for 4 years. Moved to LA - where teachers don't pay into SS (never had heard of such a thing and didn't realize it until it was too late). I get slammed really hard. I would have been better off working at WalMart than working for the LA school system.

Add to this all the trouble that it causes me for what amounts to $160 extra after all the SS GPO. I recently got a $7 cola from LA --- had to report that to SS and they deducted 2/3 of $7 and of course got everything screwed up again. I am sure that the govt. spent at least $100 worth of man hours trying to get their $4.60 deduction per month.

All the SS I paid in other states only served to give me a giant penalty.

 

[Mulligan]

"I don't get it. Why would anyone expect to collect SS if they didnt pay into it?"

Not so........I was a public school teacher fulltime for 8 years in a state that paid SS. I also subbed for a few years and worked at a hospital for 4 years. Moved to LA - where teachers don't pay into SS (never had heard of such a thing and didn't realize it until it was too late). I get slammed really hard. I would have been better off working at WalMart than working for the LA school system.

Add to this all the trouble that it causes me for what amounts to $160 extra after all the SS GPO. I recently got a $7 cola from LA --- had to report that to SS and they deducted 2/3 of $7 and of course got everything screwed up again. I am sure that the govt. spent at least $100 worth of man hours trying to get their $4.60 deduction per month.

All the SS I paid in other states only served to give me a giant penalty.

Molly, your situation of crossing state boundaries from SS to non SS is an unfortunate situation where the set up is tone deaf. Many in your situation never even know about it until it's way to late. WEP was created to snag people like me, who worked menial SS hours for menial pay over an extended period of time and yet still receiving a non SS contributed pension. The mechanism of SS payouts favoring lower paying income workers is the reason why it was set up to snag people like me. It looks like we were low wage earners our whole life, when in reality that was not true.


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[Tadpole]

I'd like to suggest people read the following paper by Peter Diamond and Peter Orszag for perspective on GPO/WEP which came out of a recommendation made by the Greenspan Commission in the 80's. It was an attempt to correct a benefit that was overly generous to wage cohorts that didn't pay into SS as long (ie ROI) as their SS wage cohorts and who, additionally, received an alternative source of retirement income. For two people with the same earnings, having that 6-12+% (depending on how you believe SS affects wage) for most of their careers is a windfall for investment in retirement accounts or savings (or, admittedly, life style if they actually collect the money).

http://www.brookings.edu/~/media/research/files/opinions/2003/11/03saving diamond/20031103.pdf

 

[Mulligan]

I'd like to suggest people read the following paper by Peter Diamond and Peter Orszag for perspective on GPO/WEP which came out of a recommendation made by the Greenspan Commission in the 80's. It was an attempt to correct a benefit that was overly generous to wage cohorts that didn't pay into SS as long (ie ROI) as their SS wage cohorts and who, additionally, received an alternative source of retirement income. For two people with the same earnings, having that 6-12+% (depending on how you believe SS affects wage) for most of their careers is a windfall for investment in retirement accounts or savings (or, admittedly, life style if they actually collect the money).

http://www.brookings.edu/~/media/research/files/opinions/2003/11/03saving diamond/20031103.pdf

Lack of understanding of the process and the mechanism of SS earnings favoring lower income workers confuses many people. Our professional retirement association parrots yearly about their goal to get WEP/GPO eliminated to restore the "rightful benefits". So people affected generally feel like they are being ripped off, but they do not understand entire process. A friend of mine with a non SS pension was barely affected by WEP because he had over 20 years of substantial SS earnings prior to a career change.


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[Chuckanut]

Tadpole, that is heavy reading, but it explains very well why not doing the WEP or GPO offset is very unfair to those who have paid into SS for most of their life. Thanks.

 

[LitGal]

"I don't get it. Why would anyone expect to collect SS if they didnt pay into it?"

Not so........I was a public school teacher fulltime for 8 years in a state that paid SS. I also subbed for a few years and worked at a hospital for 4 years. Moved to LA - where teachers don't pay into SS (never had heard of such a thing and didn't realize it until it was too late). I get slammed really hard. I would have been better off working at WalMart than working for the LA school system.


I learned about GPO back in the 80's while still teaching in CA, so tried to plan accordingly. (Which meant saying, "LitGal, you better prepare yourself. 2/3 of anything you get from STRS will be subtracted from your SS.") So, even though I'd worked through college and, after moving to OH, taught 12+ yrs. in a private school that paid into SS from my paycheck, my SS will be $0. Yes, I have the 40 Qtrs., but the SS benefit will be less than the 2/3 subtracted from my CA STRS.

Depending on the day, or the weather, I've looked at the many years of SS payments in several ways:

1. While the SS deductions have been "money down the drain" for me personally, I can pat myself on the back that I've done some civic duty by "supporting the system."

2. If I become widowed and wait until FRA or later, my 2/3 STRS can be subtracted from DH's SS. So, then, I'd get about $1,000/mo. as his survivor.

3. The benefits in #2 can be enjoyed guilt free, due to #1.



So, the piper will have been paid; but I'm hoping I might be, too.