Questions about the Windfall Elimination Provision and the Government Pension Offset never end. The WEP and GPO continue to be hot topics of interest among employees and retirees who are (or were) covered by the Civil Service Retirement System (CSRS). For them it’s a big deal, although many of them are a little hazy about why. In this article, I’ll try to explain what they are and how they might affect you.
The Windfall Elimination Provision
The WEP reduces – but doesn’t eliminate – the Social Security benefit of anyone who is receiving an annuity – in whole or part – from a retirement system where he or she didn’t pay Social Security taxes, such as CSRS. And it only affects them if they don’t have at least 30 years of substantial earnings under Social Security.
The term “substantial earnings” is important because the level of earnings needed to meet that standard are higher than those required to earn a Social Security credit. For example to qualify for one Social Security credit in 2016, you’d only have to earn $1,260. For your earnings in that quarter to be considered substantial, you’d have to earn $5,512.50.
For those with less than 30 years of substantial earnings, the reduction is phased in; the maximum reduction, for those with 20 years or less, works out to about $430 a month.
In case you’re wondering, the WEP doesn’t apply to a survivor annuity. It only applies to the Social Security benefit of someone who receives an annuity from a retirement system where he or she didn’t pay Social Security taxes. Therefore, a spouse who is entitled to a Social Security benefit on his or her own work record will get that full benefit, plus any survivor annuity benefit you provide for him or her.
The Government Pension Offset
The GPO reduces, and potentially eliminates, the spousal Social Security benefit of anyone who is receiving an annuity from a retirement system where he or she didn’t pay Social Security taxes—again, such as CSRS. The GPO reduces the Social Security benefit by $1 for every $3 in his or her CSRS annuity.
In many cases, that benefit is wiped out.
What Does the Future Hold?
Bills have been introduced in Congress nearly every year to either modify or eliminate the WEP and the GPO. In this session of Congress, Representative Rodney Davis, R-Ill., introduced HR-973, The Social Security Fairness Act, and Senator Sherrod Brown, D-Ohio, introduced the companion bill, S-1651. In keeping with tradition, neither of them is expected to get out of committee.
In fact, the only piece of legislation on either subject that has made its way into law is Public Law 108-203. In 2004 it eliminated a loophole in the GPO that had been enjoyed by many state and local employees. Under the “last day of covered employment” exemption, an employee could transfer from a retirement system where Social Security taxes weren’t paid into a position covered by Social Security for one day and avoid the GPO.
While the outlook for WEP and GPO reform isn’t good, it isn’t hopeless either. If you are (or have been) affected by either, you need to let your members of Congress know that you’d appreciate their help in changing these laws.