One of the more complicated provisions of Social Security relates to the impact of a government pension on the spousal, widow or widower benefit. Generally speaking, Social Security spousal benefits equal 50 percent of a retired or disabled worker’s benefit, and the survivor benefit 100 percent of a deceased worker’s benefit.
Understanding the GPO
According to Joseph Roseman Jr., managing partner of wealth management firm O’Dell, Winkfield, Roseman & Shipp, however, if an individual receives a pension from a federal, state or local government job at which they did not pay Social Security taxes, some or all of the spouse, widow or widower benefits may be decreased by the pension. Officially known as the Government Pension Offset (GPO) provision, it reduces spousal, widow or widower benefits by two-thirds of the pension from non-covered government employment.
The GPO applies to those who qualify for spousal benefits based on their partner’s work history in Social Security-covered employment and their own government pensions from work in government employment that was not covered by Social Security.
“If your [client’s] monthly government pension is $1,200, two-thirds – or $800 – would be deducted from [his or her] Social Security spousal benefit,” Roseman says. “If this same individual is eligible for a $1,000 spousal, widow, or widower benefit, the actual Social Security benefit would be $200 [$1,000 minus $800].”
The dual entitlement rule
Spousal benefits started in the 1930s in an effort to provide for women who were financially dependent on their husbands. Today, it’s more likely that the husband and wife are both working, and Social Security provisions have changed accordingly.