Factor 7: Government Pension Offset and Windfall Elimination Provision

If you spent part of your career working for a state or local government entity that did not participate in the Social Security system—such as certain public school systems, police departments, or fire departments—two obscure rules may drastically reduce your benefits. These rules apply because you did not pay payroll taxes during that employment.

The Windfall Elimination Provision alters the standard benefit formula if you earned a pension from non-covered work but also worked long enough in the private sector to qualify for your own Social Security benefit. The WEP can reduce your earned benefit by hundreds of dollars per month, though it cannot completely zero it out.

The Government Pension Offset affects spousal and survivor benefits. If you receive a pension from a non-covered government job, the GPO reduces any spousal or survivor benefit you might claim by two-thirds of your government pension amount. For example, if you receive a $3,000 monthly teacher’s pension, the GPO will reduce your potential spousal benefit by $2,000. In many cases, this two-thirds reduction completely eliminates the spousal or survivor check.