News & Information

CCH® UNEMPLOYMENT INSURANCE — 3/19/08

CRS report studies the Government Pension Offset

A recent report by the Congressional Research Service (CRS) addresses the ongoing debate about retention of the Government Pension Offset (GPO) provision of the Social Security Act. Currently, five bills are pending in Congress to modify or repeal the GPO.

What is the GPO?

Individuals who qualify for both a government pension based on non-Social Security-covered employment and a Social Security spousal benefit are subject to the Government Pension Offset provision. The GPO provision, SSA §202(b)(4), reduces Social Security benefits that a person receives as a spouse if he or she also has a federal, state or local government pension based on work that was not covered by Social Security. The GPO reduction in Social Security spousal benefits is equal to two-thirds of the government pension. (A collorary provision, which is not the subject of this report, the Windfall Elimination Provision —WEP, reduces Social Security benefits that a person receives as a worker if he or she also has a government pension based on work that was not covered by Social Security.) Generally, the GPO was intended to replicate the Social Security Act's “dual-entitlement” rule.

Dual-entitlement rule

The Social Security dual-entitlement rule requires that 100% of a Social Security retirement or disability benefit earned as a worker (based on an individual's own Social Security-covered earnings) be subtracted from any Social Security spousal benefit an individual is eligible to receive (based on their spouse's Social Security-covered earnings), and only the difference, if any, be paid as a spousal benefit. The theory behind this rule is that spousal benefits are intended for individuals who are financially dependent on spouses who work in Social Security-covered positions. The rule reduces the Social Security spousal benefits of individuals who are not financially dependent on their spouse because they receive their own benefits. The intent of the GPO is to remove an advantage held by workers who receive a government pension by preventing them from receiving both a government pension and a full Social Security spousal benefit. The GPO reduces the spousal benefit by an amount equal to two-thirds of the government pension.

What are the issues vis-a-vis the GPO?

As of June 2007, approximately 465,000 beneficiaries, less than one percent of all beneficiaries, had their spousal benefits reduced as a result of the GPO. About 775 of those affected were women. However, millions more could potentially be affected in future years. Critics of the GPO charge that it is not well understood, hurts low-income workers such as teachers, and is inequitable in that it applies only to government workers and not to workers in the private sector who also receive pensions from their employers. They also claim that the current reduction is imprecisely calculated.

Supporters of the GPO claim that it is an effective method to curtail what otherwise would be an unfair adavantage for non-Social-Security-covered government workers. Since the provision has been in effect for 30 years, they claim that there has been ample time for people to become familiar with the program and adjust their retirement plans. Supporters also claim that it would be costly to reduce the GPO —$42 billion over 10 years —at a time when the Social Security program is not in sound financial condition (CRS Order Code RS32453, 1/11/2008).

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