Retirement 2.0blog

Now entering: Pension offset zone, a Social Security nightmare

Retirement payout from non-covered work can wipe out a spousal or survivor benefit

Mar 26, 2013 @ 11:58 am

By Mary Beth Franklin

I received a question from a reader the other day wondering why his ex-spouse was denied Social Security benefits. She collects a pension based on her years as a public school teacher in Rhode Island, where employees in some local jurisdictions do not pay into the Social Security system.

He said they were married for 15 years, so he figured she should be able to collect benefits on his earnings record as an ex-spouse.

Although their marriage lasted long enough for her to qualify for Social Security benefits as an ex-spouse and at age 62, she was old enough to collect a reduced spousal benefit, her pension from work not covered by Social Security wiped out her potential benefit.

Welcome to the Government Pension Offset (GPO) zone—one of the most confusing rules in the Social Security benefits system.

If you receive a pension from a federal, state or local government—including some public school systems—for work where you did not pay Social Security taxes, your spouse's or widow's or widower's benefits may be reduced or even eliminated. The GPO rule applies only to Social Security benefits as a spouse or survivor.

There is a separate rule—the Windfall Elimination Provision—that applies to retirement benefits when an individual worked in both the private sector, where they paid Social Security payroll taxes, and in a public sector or job in another country, where they did not. I'll tackle the WEP rule in a separate column.

How the GPO works

If you receive a pension from work not covered by Social Security and are also entitled to Social Security benefits based on your spouse's, ex-spouse's or late spouse's work record, those spousal or survivor benefits may be reduced or totally eliminated.

Normally, Social Security spousal benefits are equal to half of the worker's benefit if claimed at the spouse's normal retirement age; less, if claimed earlier. Survivor benefits are worth 100% of the worker's benefit if claimed at the survivor's normal retirement age; less if claimed earlier. Spousal benefits can be collected as early as age 62; survivor benefits as early as age 60.

But if you are subject to GPO rules, your Social Security benefits will be reduced by two-thirds of your government pension. For example, if you get a monthly civil service pension of $600, two-thirds of that amount—or $400—will be deducted from your Social Security benefits.

Let's say you're eligible for a $500 spouse's or widow's benefits from Social Security. The $400 government pension offset would be deducted from your Social Security benefit so you would receive just $100 per month in Social Security benefits.

And don't think you can skirt the GPO rule by electing a lump sum annuity payment of your government pension. Social Security will calculate the reduction as if you chose to get a monthly benefit from your government work.


The GPO rule can come as a nasty surprise to individuals and their financial advisers who don't realize that spousal or survivor benefits could be reduced or even wiped out until they apply for Social Security benefits.

Even individuals who dutifully review their latest Social Security estimated benefits statements can be caught off guard because their records don't indicate they may be subject to the offset. Remember, the Social Security Administration no longer mails annual benefit estimates to workers. You now must set up an online account ( to retrieve that data.

If your SS statement lists $0 for years you worked in a public sector job, that's your first hint that you might be subject to offset rules for your retirement or dependent benefits. If you're not sure, contact your current or former employer to ask how your work may affect your Social Security benefits.

You can also use the GPO Calculator ( to estimate how your non-covered work could affect your Social Security benefits.

Although most current federal works are covered by Social Security, public-sector employees in 15 states are not. Those states include Alaska, California, Colorado, Connecticut, Illinois, Louisiana, Maine, Massachusetts, Missouri, Nevada, Ohio and Texas, as well as certain local governments in Georgia, Kentucky, and Rhode Island.


What do you think?

View comments

Recommended for you

Upcoming Event

Jul 10


Women Adviser Summit

The arjuna-design Women Adviser Summit, a one-day workshop now held in four cities due to popular demand, is uniquely designed for the sophisticated female adviser who wants to take her personal and professional self to the next level.... Learn more

Laura Pierson from Carson Group discusses how the old topic of 'Human Capital' is hot again because of millennials.

Video Spotlight

Recommended Video


Latest news & opinion

Best- and worst-performing sector funds and ETFs this year

A rising tide may lift all ships, but a bull market doesn't lift all stock sectors. Here are the best- and worst-performing sectors this year, with the top and bottom fund in each sector.

Betterment slapped with $400,000 fine from Finra

Robo-adviser cited for violating customer protection rule and not maintaining its books and records correctly.

Supreme Court ruling on SEC judges unlikely to upend advice industry

But it could give rise to new hearings for some advisers who are already in litigation with the agency such as Dawn Bennett.

It's official: DOL fiduciary rule is dead

The 5th Circuit Court of Appeals issued a mandate Thursday making its March 15 decision to strike down the regulation effective.

Advisor Group acquires Signator Investors and plans on folding it into Royal Alliance

Advisor Group takes 'orphan' broker-dealer off the hands of John Hancock Financial Services.


Hi! Glad you're here and we hope you like all the great work we do here at arjuna-design. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting It'll help us continue to serve you.

Yes, show me how to whitelist

Ad blocker detected. Please whitelist us or give premium a try.


Subscribe and Save 60%

Last News

merrill edge vs merrill lynch social security taxable earnings vanguard small cap growth fund 401k mandatory distribution table federated international leaders fund sep ira vanguard vs fidelity vcaix jpmorgan tax free bond fund vanguard retirement 2025 personal loan tax exemption maine 529 plan etf municipal bonds tax free fidelity large cap core enhanced index fund reits in rising interest rate environment john hancock long term care rate increase term life insurance vs cash value information on reverse mortgages for seniors converting a roth ira to a traditional ira rental property tax deduction income limits erring on the side of caution closed end bond funds rising interest rates penalty free 401k withdrawal at 55 vanguard 529 college savings plan nevada bloomberg terminal free alternative how much does it cost to become a plumber allied interstate collection agency for student loans is taxable income gross or net chase investment services phone number rollover from 401k to ira what is social security wages on w2 what is an insured deposit account with td ameritrade maximum income for ssi should i do roth 401k how to surrender life insurance policy