If you’re like most people, you’ve worked hard all your life and want a comfortable retirement income. You may be counting on Social Security benefits to supplement other retirement income. But beware of two provisions of Title II of the Social Security Act entitled The Windfall Elimination Provision and the Government Pension Plans Offset. They can significantly reduce Social Security benefit you may be counting on.
These provisions reduce the social security that certain employees and their spouses can get because of employment at non-Social Security paying government agencies. Here’s more detail.
Employees – The Windfall Elimination Provision:
Some employees of federal, state, and local governments and non-profit organizations are eligible for payments from pension plans. If you have worked for an employer who isn’t required to pay into Social Security, but pays into one or more pension plans, your Social Security benefits may be affected because of the windfall elimination provision.
This provision primarily affects people who earned contributions into a pension plan while working for a government agency and/or jobs that didn’t require the payment of Social Security taxes, but had other jobs too that did require the payment of Social Security taxes.
In that case, if you are eligible for pension plan and Social Security benefits, your Social Security benefits will be reduced because of the windfall elimination provision. If you fall into this category, the formula used to figure your Social Security is modified to prevent a windfall from provisions aimed at low-income workers.
Spouses – The Government Pension Plan Offset (GPO)
If you are eligible to receive payments from one or more pension plans from work not covered by Social Security, any Social Security benefits you might be eligible to receive as a spouse or widow/widower on someone else’s record could be reduced because of the government pension offset ruling. This offset will reduce your spousal or widow/widower’s benefit by two-thirds of the amount of your non-Social Security pension plan.
As an example, if your non-Social Security pension plan benefit is $600, two-thirds, or $400 will be used to offset your spousal or widow/widower’s benefits. In other words, your Social Security benefit from your spouse’s record will be reduced by $400.
To estimate your future spouse’s, widow’s or widower’s benefits under GPO, the Social Security Administration has provided a GPO Calculator at www.ssa.gov/retire2/gpo-calc.htm
Legislation under the name “Social Security Fairness Act of 2007″ had been introduced to eliminate these provisions but it never became law.
