Retirement & Financial Planning Report

An audit has criticized the Social Security Administration for failing to fully explain how the government pension offset will reduce the benefits of some beneficiaries, resulting in some of them losing benefits they otherwise could receive.

The offset, commonly known as the GPO, reduces Social Security spousal or survivor benefits by $2 for each $3 the beneficiary receives in an annuity from a retirement system that does not include Social Security. That is an issue for many CSRS retirees—as well as to current CSRS employees on their eventual retirement—since that system does not include Social Security. In many cases, the effect of the GPO is to eliminate a spousal or survivor Social Security benefit through a spouse’s Social Security-covered employment.

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A report from the inspector general’s office at the SSA focused on applicants for survivor benefits, when “SSA must determine whether they are receiving, or expect to receive, a pension based on earnings not covered by Social Security. To identify beneficiaries who may be subject to GPO, SSA primarily relies on applicants to report entitlement to current or future pensions from employment not covered by Social Security. For retired federal employees, SSA receives monthly pension notifications from the Office of Personnel Management.”

“SSA employees must explain the advantages and disadvantages of filing an application so claimants can make an informed filing decision. SSA employees must discuss and document any filing decisions that may adversely affect the claimant’s current or future benefits, such as filing an application for widow(er)’s benefits when it is in his/her best interest to delay the application,” it said.

For example, while survivor benefits are payable as young as age 60 (50 if disabled), by waiting to apply for those benefits until full retirement age (currently 66 and two months) or later, the Social Security benefit would be increased. In some cases that could make the difference between that benefit being entirely offset and some being paid.

“For example, if a beneficiary receives a $1,500 government pension and is entitled to a $900 reduced widower’s monthly benefit at age 60, SSA imposes GPO and withholds up to $1,000 (2/3 x $1,500) from the widower. Therefore, the widower would not receive the $900 payment. Had the widower delayed filing the application, he would have been eligible for a $1,200 monthly benefit at FRA and receive a $200 payment. Although the beneficiary applied for widower’s benefits before FRA, he could withdraw his application and reapply for widower’s benefits at FRA to receive a $200 monthly benefit,” it said.

It said that in a sample of 200 persons who lost their entire survivor benefit to the GPO, the SSA did not inform 71 of the option to delay receipt of the benefit and that 18 would have been eligible for some Social Security benefit had they delayed.

“We found insufficient evidence that SSA had properly informed the claimants of their option to delay, or withdraw and resubmit, their application for widow(er)’s benefits, as required. In addition, SSA did not have systems controls in place to alert its employees when they should inform widow(er)s of the option to delay their application for widow(er)’s benefits,” the report said.

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