Whenever I write about Social Security, I get irate emails from people who paid into the system but find themselves denied full benefits.
Most are public service employees, such as teachers and firefighters, who in theory are owed two pensions. They earned government pensions for which they paid no Social Security taxes. But they also worked in the private sector, paid into Social Security and qualified for benefits. At retirement, they suddenly learn that they can’t get their pension and their full Social Security, too.
To these workers, the rules seem deeply unfair. But as I see it, if they got full benefits, they’d be treated better than private-sector workers. I’ll tell you why as I explain the two relevant rules approved by Congress.
The Windfall Elimination Provision (WEP) affects how Social Security retirement, spousal or disability benefits are calculated if you also have a government pension. Social Security pays a smaller percentage of your covered earnings than it pays people who worked mostly in the private sector.
Why is that considered fair? WEP is intended to preserve a basic principle of Social Security: People with low earnings should receive a higher percentage of their income, in benefits, than high earners do. Let’s say you spent most of your career in government, where your employment built up a pension but didn’t count toward Social Security. You then worked 10 years in the private sector, where your earnings did count toward Social Security. That short private-sector stint would make you look—wrongly—like a low earner based on Social Security’s usual formula, thus reaping you a relatively large benefit. The WEP ensures that the “bonus” goes only to people who truly are low earners.
Your Social Security retirement benefits, however, can’t be reduced by more than half the size of your government pension. And WEP doesn’t apply to survivor benefits. If you’re married and die, your dependents could get a full Social Security payment—but only if the following rule does not apply.
The Government Pension Offset (GPO) affects you if you earned a government pension and are married to someone covered by Social Security. You can apply for Social Security spousal or survivor benefits based on your mate’s account, but your monthly benefit will be reduced by two-thirds of the amount of your public pension. If your pension is large enough, your Social Security benefit goes to zero, says Larry Kotlikoff of MaximizeMySocialSecurity.com, a website that helps you make claiming decisions.
Why is that considered fair? Private-sector workers covered by Social Security usually cannot receive their own retirement benefit and a spousal (or survivor) benefit simultaneously. The GPO ensures that the same rule applies to government workers.
There are a few exceptions, most based on when you entered the Social Security workforce. Go to ssa.gov and find the WEP and GPO fact sheets for details. Retirees often push to abolish these rules. But expect them to remain, and plan accordingly.