Expert's View

Last week I wrote about the Windfall Elimination Provision and how it affects the Social Security benefit of anyone who is covered by CSRS or CSRS Offset. This time I want to discuss the Government Pension Offset. The GPO is a provision of law that only affects those covered by CSRS. It doesn’t affect CSRS Offset or FERS employees.

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The GPO applies if you receive a CSRS annuity and your spouse will eligible for a Social Security benefit. In most cases, the Social Security spousal/survivor benefit to which you would be entitled will be reduced or eliminated. That’s because the GPO will reduce your Social Security spousal/survivor benefit by $2 for every $3 you receive in your CSRS annuity.

For example, if you are eligible for a monthly CSRS annuity of $2,100, two-thirds of that – $1,400 – will be used to offset your monthly Social Security benefit. If that benefit was $1,500, you would receive only $100 a month from Social Security. That’s because $1,400 subtracted from $1,500 leaves a positive balance of $100.

The larger your CSRS annuity, the less you’ll receive from your spousal benefit, until you reach a point where you won’t get a penny. For example, if your monthly CSRS annuity was $2,400 and the monthly spousal/survivor benefit was $1,200, you wouldn’t get anything from Social Security. Two-thirds of $2,400 is $1,600. Subtracting that from $1,200 would leave you with a big fat goose egg. Because CSRS annuities are often much greater than Social Security spousal/survivor annuity benefits, the GPO usually wipes out the latter benefit.

On first blush, the GPO seems grossly unfair. I’ve known CSRS employees and retirees who have blown a gasket when I explained it to them. However, there is a rational explanation for why it was made law. That explanation is provided by the Social Security Administration:

"Benefits we pay to wives, husbands, widows and widowers are "dependent’s" benefits. These benefits were established in the 1930s to compensate spouses who stayed home to raise a family and who were financially dependent on the working spouse. But as it has become more common for both spouses in a married couple to work, each earned his or her own Social Security retirement benefit. The law has always required that a person’s benefit as a spouse, widow or widower be offset dollar for dollar by the amount of his or her own retirement benefit.

"In other words, if a woman worked and earned her own $800 monthly Social Security retirement benefit, but she also was due a $500 wife’s benefit on her husband’s Social Security record, we could not pay that wife’s benefit because her own Social Security benefit offset it. But, before enactment of the Government Pension Offset provision, if that same woman was a government employee who did not pay into Social Security, and who earned an $800 government pension, there was no offset, and we were required to pay her a full wife’s benefit in addition to her government pension.

"If this government employee’s work had instead been subject to Social Security taxes, any Social Security benefit payable as a spouse, widow or widower would have been reduced by the person’s own Social Security retirement benefit. In enacting the Government Pension Offset provision, Congress intended to ensure that when determining the amount of spousal benefit, government employees who do not pay Social Security taxes would be treated in a similar manner to those who work in the private sector and do pay Social Security taxes."

Just as is true of the Windfall Elimination Provision, there have been moves in Congress for nearly 20 years to eliminate or modify the GPO. However, nothing has happened to date. Of course, there’s always a chance that it will…but I wouldn’t hold my breath if I were you.