June 9, 2006If you receive a pension under the Civil Service Retirement System, based on income from which Social Security taxes were not withheld, the Social Security benefits that you may be entitled to receive from your spouse (or former spouse) may be reduced due to the effects of what's known as the Government Pension Offset. Let's take a look at how the GPO works and its implications for your retirement planning.
Born in the '30s
In the 1930s, when Social Security was born, the assumption was that many women did not work outside the home and were financially dependent on their husbands. To provide for them, Social Security allocated up to 50 percent of a worker's Social Security benefit to his dependent wife. If the worker died, his widow could get as much as 100 percent of his benefit.
At first, only women were eligible for such benefits. In 1977, the Supreme Court ruled in Califano v. Goldfarb that men could claim spousal benefits if they were dependent on their wives.
If you are divorced (even if you have remarried), your ex-spouse may qualify for benefits on your record if you are 62 or older. In some situations, he or she may get benefits even if you're not receiving them yet. To qualify, your ex-spouse must:
The Government Pension Offset, created in 1977, is designed to replicate the dual-entitlement provision of the Social Security program. That provision, which has applied since 1940, requires that Social Security benefits payable to a person as a spouse or surviving spouse be reduced by the amount of the person's own Social Security worker's benefit. Let's look at an example. Suppose Sally is eligible for Social Security retirement benefits of $800 per month based on her own employment, and also would be in line for a dependent benefit (earned by her husband) of $500. As long as her husband was alive, she would only receive the $800, since it's bigger than the $500 she would've received based on her husband's employment.
If Sally's husband dies before she does, she theoretically would be entitled to a $1,000 per month widow's benefit. But under the dual-entitlement provision, she would receive $1,000 minus $800 -- that is, $200 -- plus her own $800.
Before enactment of the Government Pension Offset provision, if Sally was a government employee who did not pay into Social Security, and who earned an $800 government pension, she would be entitled to the full spousal benefit in addition to her pension.
Now let's look at the example of Jane, who retired under CSRS and was expecting to receive a widow's benefit from her deceased husband's Social Security when she reached 60 years old. The GPO law mandates a reduction in that benefit of two-thirds of her CSRS benefit:
Currently, more than 250,000 government retirees (about two-thirds of them women) have had their Social Security spousal benefits fully or partially offset due to the effects of the GPO. Are there any exceptions? Generally, your Social Security benefits as a spouse, widow or widower will not be reduced if you:
June 9, 2006