More! on the windfall elimination provision and government pension offset

On Wednesday, federal retirees who retired under the Civil Service Retirement System, current CSRS employees and a multitude of other state and local public service employees who receive pensions from work not covered by Social Security, applauded when the Senate voted on a motion to invoke cloture.  

The agreement to invoke cloture was on the motion to proceed to H.R. 82. (a bill to amend title II of the Social Security Act to repeal the Government Pension Offset and Windfall Elimination Provisions). The motion was agreed to with 73 yeas and 27 nays which could mean higher Social Security benefits for CSRS retirees if passed before Congress leaves this week. 

If you have never heard of the term, cloture, don’t feel bad, neither had I before Wednesday. The Senate website describes it as thus: The Senate tradition of unlimited debate has allowed for the use of the filibuster, a loosely defined term for action designed to prolong debate and delay or prevent a vote on a bill, resolution, amendment, or other debatable question. Prior to 1917 the Senate rules did not provide for a way to end debate and force a vote on a measure. That year, the Senate adopted a rule to allow a two-thirds majority to end a filibuster, a procedure known as "cloture." In 1975 the Senate reduced the number of votes required for cloture from two-thirds of senators voting to three-fifths of all senators duly chosen and sworn, or 60 of the 100-member Senate.     

The National Active and Retired Federal Employees Association has continually worked toward its goal to remove this reduced formula and restore the earned Social Security benefits to federal retirees who have been affected. Earlier this week John Hatton, NARFE’s staff vice president for policy and programs, told Federal News Network that he hoped “one of these days is next week and the Senate votes on it and passes it. This is something we’ve been working on for 40 years. It’s been penalizing people simply because they’ve earned their government pension and then they earn separately through private sector work, their Social Security benefits. And so, our members who are the CSRS retirees have never understood it. They have always been upset by it. They view it as theft, as do we, and that goes for the firefighters, police officers, the teachers, the municipal workers around the country who are impacted by this as well.” 

If you never heard of the Windfall Elimination Provision and the Government Pension Offset, then they probably don’t apply to you. The late Mike Causey used the phrase “The Evil Twins” to describe the WEP and GPO. The Evil Twins have a negative impact on the earned Social Security retirement benefits as well as the spousal and survivor benefits earned by a spouse that would be paid to those who retired or will retire under the older CSRS.  These are two provisions that have no impact on retirement benefits under the Federal Employees Retirement System (unless there is a CSRS component to the FERS retirement benefit).    

The Windfall Elimination Provision

To qualify for Social Security retirement benefits, you must earn 40 credits of coverage or the equivalent of 10 years of Social Security covered employment. Many CSRS covered employees had enough work or military service* outside of their federal civilian career to qualify for Social Security retirement benefits even though their wages under CSRS were mostly exempt from the FICA tax withholding (some temporary federal service was subject to FICA). 

Employees covered under CSRS Offset retirement coverage pay FICA taxes on their wages, however, most CSRS Offset covered employees have prior federal employment where they were exempt from FICA tax withholding when they were under “pure” CSRS. In 1983, a law changed the formula to reduce the final Social Security retirement benefit calculation so that the earned benefit would be less than the normal calculation for individuals who receive a pension from work not covered by Social Security.    

This impact of the WEP is explained using the following example for someone turning 62 in 2024 who has more than 40 credits but less than 20 years of substantial Social Security covered earnings. The WEP can reduce their Social Security retirement benefit by as much as $587/month if they wait until age 67 to file for their benefit.  

Let’s say that a CSRS retiree who turns 62 this year has earned a Social Security benefit of $1,396/month, payable at age 67 which is their Full Retirement Age.  After the WEP, the benefit would only be $809/month ($1,396 - $587). If they choose to start their benefit this year at age 62, which is their first eligibility year, they will get only 70% of their benefit because they would receive the benefit for an additional 60 months (5 years) before reaching their FRA.  

If they delay claiming their benefit to age 70, they will earn 36 months of delayed retirement credits (8%/year) between age 67 and 70 and the benefit would be 24% greater than the benefit payable at age 67. The benefit payable at age 70 in this example would be $1,003/month ($809 x 124% = $1,003). If the WEP didn’t apply, the benefit at age 70 would have been $1,731. In this example, the WEP was applied only to benefits paid to the worker and does not include future COLA increases. In addition, the WEP reduction may be larger if family members are eligible for benefits on the same record. 

For smaller earned Social Security retirement benefits, the FRA amount benefit won’t be reduced by more than ½ of your CSRS retirement benefit amount for earnings after 1956 on which you didn’t pay Social Security taxes. To learn more about how the WEP might affect your Social Security benefit,  find the year you reached age 62 on the “WEP” chart. If you have a record of your Social Security covered earnings, use the WEP online calculator to see the impact of the WEP on your Social Security benefit. You can use the “Review your full earnings record” option under the “Eligibility and Earnings” tab in your  personal account to access a listing of your lifetime earnings taxed by Social Security. 

Additional information to help understand the WEP can be found on the WEP Fact Sheet. The only full exception to this reduction for CSRS retirees is if you performed 30 or more years of substantial Social Security covered employment (a partial exemption is used for substantial earnings for more than 20 years up to 30). 

The WEP applies to those who reached age 62 after 1985 or developed a qualifying disability after 1985. If the latter applies, you must first have become eligible for a monthly pension based on work where you didn’t pay Social Security taxes after 1985. This rule applies even if you’re still working. This was the WEP and federal employees who have been impacted have been trying to repeal this unfair provision all the way back to when the law was signed in 1983. 

The Government Pension Offset

The GPO reduces and often eliminates the benefits that Social Security pays to spouses and surviving spouses of Social Security covered workers who have a retirement benefit from work where they didn’t pay FICA taxes such as CSRS. These are considered “dependent” benefits. 

These benefits, set up in the 1930s, were to compensate spouses who stayed home to raise a family and were financially dependent on the working spouse. It’s now common for both spouses to work, each earning their own Social Security retirement benefit. The law requires a spouse’s or surviving spouse’s benefit to be offset by the dollar amount of the recipient’s own retirement benefit. 

For example, let’s say someone worked and earned their own $800 monthly Social Security benefit, but was also due a $500 spouse’s benefit on their spouse’s record. Social Security couldn’t pay that spouse’s benefit because their own benefit offsets it. Before enactment the GPO law in 1977, if that person was a government employee who didn’t pay into Social Security and earned an $800 government pension, there was no offset. Social Security would pay them a full spouse’s benefit and their full government pension. If their government work had been subject to Social Security taxes, then the spouse’s or surviving spouse’s benefit would be reduced because of their own Social Security retirement benefit. You can learn more about the GPO in this fact sheet. 

I can still remember once when I was teaching a pre-retirement class at the National Institutes of Health when a woman attending the class came up to me at the break to verify that she heard me correctly when I was explaining that the impact of the GPO would reduce Social Security spousal or widow’s benefit by two-thirds of the CSRS retirement benefit amount. 

This woman was widowed in her mid-40's and had to go to work to support her family.  She landed a job to work for the federal government and was covered by CSRS. She planned to stay for 30 years and was in her mid-70's at the time she attended my class.  She was finally feeling like she could afford to retire. 

She was receiving her late husband’s Social Security benefit as a widow (there is no longer an “earnings limit” once you reach your Social Security FRA) and was now planning to receive her earned CSRS retirement benefit based on 30 years of federal service. She didn’t know until that moment that she would trade the widow’s benefit she had been receiving for her CSRS benefit. The GPO would reduce her Social Security widow’s benefit by 2/3 of her CSRS retirement leaving her with $0 Social Security widow’s benefit. 

She left the classroom in tears knowing that she no longer could afford to retire comfortably. She said that she was told that when she retired from federal employment that her widow’s benefit would be subject to a “slight” offset due to her CSRS benefit, she never thought it could be eliminated.   

By the time you read this column, you may know the results of the vote. Whatever the result, this is the furthest the efforts to repeal these provisions have come, but many CSRS retirees are hoping for an early Christmas present, that they believe is long overdue, from Congress.