The Windfall Elimination Provision and the Government Pension Offset, explained.
By Hannah Sammut
There were two Social Security policies that impacted a select number of earners who benefit from a public pension that is based on work that was not covered under Social Security: The Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO). These provisions only affected about 3% of households, but significantly reduced the amount of Social Security benefits one was able to receive.
Windfall Elimination Provision (WEP)
The WEP, enacted in 1983, was a reform that was intended to even the Social Security playing field. In 2024, it was repealed by the Social Security Fairness Act. The Social Security benefit computation formula is intended to favor lower-income workers. Prior to the enactment of the WEP, earners who had worked in both covered and non-covered positions within their careers could be considered lower earners. As a result, the individual received a high replacement rate, earning more benefits. In essence, an individual who may have received a high government salary also received the same benefits as a low-income worker.
The Windfall Elimination Provision prevented career uncovered workers (with minimal covered work in addition) from taking advantage of such circumstances. In 2022, the maximum reduction of Social Security benefits from those who receive a public pension in addition to Social Security was $512 a month (but couldn’t be more than 50% of your pension). An employee who worked for under 20 years at a substantial earnings level would see the maximum reduction in their monthly benefit, although the reduction decreased with additional years of work paying into the Social Security system. This chart from the Social Security Administration highlights the reductions for each year of work, with over 30 years of covered work resulting in a zero reduction.
Kurt Czarnowski of Czarnowski Consulting, a retirement planning firm, gives an example using a Massachusetts schoolteacher who receives a public pension. When the WEP was active, the teacher could apply for and receive a full, unreduced Social Security benefit until they retire and draw from their pension, which would then trigger the WEP. At this point, he says, the benefit would be recalculated since a pension was also being received.
Government Pension Offset (GPO)
The Government Pension Offset, or GPO, was another provision that can significantly reduce Social Security benefits. GPO also applied to individuals who get a public pension, based on work not covered under the Social Security program, but was specifically for those collecting benefits as a spouse, divorced spouse, widow or widower.
Under GPO, any spousal, divorced spousal or survivor benefit was reduced by 2/3 of the amount of the public pension. Similar to the previous example, if a Massachusetts teacher is a widow and receiving a survivor benefit but has not retired, they should expect to receive full Social Security benefit. However, once the teacher retires and begins to draw their public pension, their Social Security survivor benefit will be reduced by two-thirds of the amount of the pension. An important takeaway is that the WEP impacted benefits based on the individual’s own work record, while GPO impacted benefits based on the work and earnings of a spouse, ex-spouse or deceased spouse.
Both provisions are not mutually exclusive, Czarnowski says, meaning that it was possible to be impacted by one policy and not the other, or one could have been affected by both at the same time. Additionally, he adds that the WEP and GPO provisions could not have been circumvented by withdrawing funds as a lump sum, instead of receiving a recurring pension.
President Biden signed the Social Security Fairness Act of 2023 into law on Jan. 5, 2024. This repealed both the WEP and GPO. The Social Security Fairness Act is retroactive to January 2024. Learn more about what this means for you here.
