Pension Offset & Windfall Explained

SEPTEMBER 2002
- How They Originated And Work Today - For the benefit of our newer members (and perhaps as a refresher for
all of us) here's an explanation of the Government Pension Offset (GPO)
and Windfall Elimination Provision (WEP), in a nutshell. First, let's
take a look at how these laws originated.

President
Reagan is frequently blamed for the passage of the GPO and the WEP
legislation. However, the truth is that there was strong bipartisan
support for both laws.

The
GPO was a provision in the 1977 Social Security Amendments signed into
law by President Jimmy Carter, at a time when the Democrats controlled
both the House and Senate. The provision originated in the Senate
Finance Committee, then chaired by Sen. Russell Long (D-LA). House Ways
and Means Committee Chairman Al Ullman (D-OR) pushed through an
amendment in the House to provide a five-year transition period so that
the GPO was not effective until 1982. Subsequent amendments changed the
effective date to 1983, and applied the $1-for-$1 offset against
two-thirds of the pension, instead of the entire pension used as the
offset in the original provision.

The
WEP was enacted as part of the 1983 Social Security Refinancing Act,
designed to shore up the financing of the Social Security Trust Fund.
That Act was signed into law by President Ronald Reagan, after being
adopted by the Democratic-controlled House where Rep. Dan Rostenkowski
(D-IL) chaired the House Ways and Means Committee and the
Republican-controlled Senate, where Sen. Robert Dole (R-KS) chaired the
Senate Finance Committee.

How Laws Work

As
for the GPO, it affects members who apply for SS spousal benefits,
based upon their husband's or wife's work record under the program, and
fail to satisfy two exceptions. Members must either be eligible for
their public pension before December 1, 1982 and meet all requirements
for SS spousal benefits in effect in January 1977, or be eligible for
their pension before July 1, 1983 and receiving one-half support from
his or her spouse.

Unless a member
satisfies one of these two exceptions, then the amount of their SS
spousal benefits will be reduced by two-thirds of their public pension.
For example, if your pension is $9,000 and you're eligible for $6,000
in SS spousal benefits, two-thirds of your pension ($6,000) would
unfortunately reduce your SS benefits to zero. Note: Even if you do not
receive actual benefits, you can still be covered by Medicare.

As
for the WEP, this law affects members who apply for their own (not
spousal) SS benefits and fail to satisfy certain exceptions. Principal
among the exceptions is that members, who were eligible for their
public pension before January 1, 1986 (i.e., 20/more years of service
under age 55, or 10/more years over 55) or have at least 30 years of
substantial coverage under Social Security, are exempt from the WEP.
(There is some relief for those with 20-30 years of SS coverage.)

If
a member doesn't satisfy the exceptions, then they are subject to the
WEP, meaning that their SS benefits will be calculated using a
different formula. Under that different formula, instead of receiving
90% of the first $592, which the member earned on the average each
month (in this case, $533), the member would receive only 40% of their
first $592 ($237) - some 55% less in benefits!

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