Social Security Rules Could Result in Pension-Eligible Recipients Having Benefits Taken Back — How To Plan for Overpayments
Written by
Vance Cariaga
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Americans who receive pensions have a complicated relationship with the Social Security system due to a couple of federal rules designed to reduce excessive Social Security payouts: the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO). Both restrict Social Security benefits for public-sector pensioners — and in some cases, people have even had benefits taken away.
That was the case with Joyce Debnam, an 80-year-old Maryland woman who received $1,400 a month in Social Security survivor benefits following the death of her husband.
As CNBC recently reported, when Debnam retired from the U.S. Postal Service after 40 years there, her Social Security check was suddenly slashed to $174 a month — and she was told by the Social Security Administration that she owed $5,000 in overpaid benefits.
The reason all this happened is because Debnam receives a government pension from her USPS career. Many government workers are not covered by Social Security because they don’t pay Social Security payroll taxes on their earnings or get credit for that work when the SSA calculates their benefits.
The WEP and GPO provisions outline how Social Security deals with retirees who receive pensions. Under the WEP, Social Security benefits are reduced if you receive a pension from work, did not pay into Social Security, and had fewer than 30 years of “substantial” employment or covered employment, CNBC noted.
The Congressional Research Service estimates that as of December 2022, about 2 million people, or 3% of all Social Security beneficiaries, were affected by the WEP.
The Government Pension Offset affects spouses, widows and widowers who receive government pensions and in some cases reduces their Social Security benefits, according to the SSA. If you receive a pension from a government job but didn’t pay Social Security taxes while you had the job, the SSA will reduce your Social Security spouse, widow or widower benefits by two-thirds of the amount of your government pension.
As of December 2022, nearly 735,000 Social Security beneficiaries, or roughly 1% of all beneficiaries, had their benefits reduced by the GPO. Of those directly affected by the GPO, 52% were spouses and 48% were widow(er)s, according to the Congressional Research Service. About 70% of all GPO-affected beneficiaries had their benefits fully offset, while 30% had their benefits partially offset.
To address the problem, lawmakers earlier this year reintroduced the bipartisan Social Security Fairness Act, which aims to repeal the WEP and GPO. The bill has “broad bipartisan support among 300 lawmakers” in the U.S. House, according to Reps. Abigail Spanbeger (D-Va.) and Garret Graves (R-La.), who are leading efforts to get the Act passed.
In the meantime, pensioners can take steps to prepare for the possibility of Social Security overpayments.
As CNBC noted, the SSA provides a supplemental fact sheet about the WEP and GPO rules to workers with five or more years of noncovered earnings. The agency doesn’t calculate the altered retirement benefit to adjust for that income, but you can do it yourself using WEP and GPO online calculators.
In addition, the SSA recommends reviewing your Social Security statement at least once a year to find information about the WEP and GPO. To learn more about how to get a Social Security statement, visit this SSA site.
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