The Unjustifiable Effects of the Government Pension Offset

The Government Pension Offset (GPO) reduces or eliminates spousal or survivor benefits by two-thirds of the amount of a public employee’s pension. The current penalty was enacted as a political compromise in 1984 and intended to reduce what was seen as an unfair advantage for employees who also had a public pension. The bill’s provisions were not based on any statistical information or demographic studies. Its unanticipated effects often undermine the purpose of the original Social Security legislation meant to prevent poverty among retired workers.

The GPO currently affects 745,679 retirees, 83% of whom are women. Sixty-eight percent of those affected lose ALL the earned Social Security spousal or survivor benefits fully paid for over the years by their spouse. Below are some of the law’s key flaws:

The GPO uses one formula nationwide despite differing pension requirements from state to state.

Because state and local governmental agency pensions are earned, paid for, and taxed differently across the different states, using one federal formula to reduce the amount of a retiree’s Social Security benefits produces skewed and unfair results. The amount U.S. teachers contribute to their pensions varies by state from 3% to more than 17% across the country.* With the GPO, those who pay more of their own earnings into their pension lose more in Social Security benefits when they retire.

The GPO often eliminates all expected support for eligible dependent spouses.

Although the spousal/survivor benefit in the Social Security Act was designed to compensate non-earning spouses who were married 10 years or more, the Government Pension Offset usually eliminates all of that benefit. A homemaker or parent who becomes a teacher or other government employee later in life and earns even a partial pension is likely to lose all the earned spousal benefits that other dependent spouses receive.

There is no limit to the dollar amount of the GPO penalty.

The Windfall Elimination Provision (WEP), a companion provision, has a monthly penalty limit of $587 per month this year. By contrast, the GPO has no monthly limit. It reduces an earned Social Security benefit by a fixed percentage (2/3) of the amount of the public pension. For example, a retiree whose public pension is $30,000 per year can lose as much as $20,000 each year of their earned spousal or survivor Social Security benefit. A retiree with a pension of only $15,000 loses as much as $10,000 in Social Security benefits every year. This is a shocking blow to a retired public worker.

The GPO is based on a flawed assumption about retiree earnings.

The March 2024 Congressional Research Report states, “The GPO’s defenders maintain that it helps ensure that only financially dependent spouses receive the Social Security spousal or widow(er)’s benefit” (p.10) The error in this position is that the GPO contains no mechanism to ascertain the actual financial dependency of the person affected by the GPO. Although the Social Security Administration has the dates of a couple’s marriage, both spouses’ FICA earnings, and the ability to ascertain pension earnings, a spouse’s actual financial dependence is not considered. The GPO often deprives partial public career spouses of all their otherwise fully-earned Social Security benefits.

The GPO penalty leaves many in dire economic circumstances.

The loss of earned Social Security benefits is especially painful for individuals with lower incomes and smaller pensions. It leaves many retirees dependent on government-based benefit programs such as SNAP, subsidized housing, and other assistance. This not only puts additional strain on these public programs, but deprives deserving retired public servants of some of their earned financial independence.

In addition:

• The GPO formula hurts women more than it does men. Among the 32% of retirees who still receive some Social Security benefit after the GPO cut, women lose an average of $873 per month, and men lose an average of $699 per month. (p.10)

• Many women (and some men) are affected by BOTH the WEP and the GPO. People who have had a public career as well as a FICA-earning career can lose part of their own earned retirement benefits as well as all earned spousal/survivor benefits.

• The GPO penalty increases over the years. Those affected by the GPO who continue to get spousal benefits lose two dollars of spousal Social Security for every three dollars of any increase in their yearly public pension. If there is a $30 local pension raise, the GPO cuts $20 from their SS spousal benefit. While other retirees get $30, they net only $10.

The GPO penalties are untenable in a society that values women and others who work for the common good. Our country needs the public employees whom the GPO penalizes. It is time to repeal this unjustifiable punishment of American workers in their retirement years!

The Government Pension Offset discriminates against American families!

*  “How much teachers contribute to their retirement…” reason.org (7/23/2024)