There are different types of benefit reductions designed to prevent workers from collecting benefits greater than they are entitled to collect. The Windfall Elimination Provision directly affects your retirement benefits, while the Government Pension Offset affects spousal benefits available to your spouse.
Windfall Elimination Provision
Before 1983, people whose primary job was not covered by Social Security had their benefits calculated as if they were long-term, low-wage workers. They had the advantage of receiving a Social Security benefit representing a higher percentage of their earnings, plus a pension from a job for which they did not pay Social Security taxes. Congress passed the Windfall Elimination Provision to remove the advantage.
This provision can affect you when you earn a pension from an employer who did not withhold Social Security taxes and you qualify for Social Security retirement or disability benefits from work in which you did pay taxes. This affects how your retirement or disability benefits are calculated. If you receive a pension from an employer who does not withhold Social Security taxes from your salary, then receiving a pension may reduce your Social Security benefits.
THE WINDFALL ELIMINATION PROVISION CAN APPLY IF:
- You reached 62 after 1985; or
- You became disabled after 1985; and
- You first became eligible for a monthly pension based on work where you did not pay Social Security taxes after 1985. This rule applies even if you continue to work.
THERE ARE SOME EXCEPTIONS.
THE WINDFALL ELIMINATION PROVISION DOES NOT APPLY IF:
- You are a federal worker first hired after December 31, 1983.
- You were employed on December 31, 1983 by a nonprofit organization, which did not withhold Social Security taxes from your pay at first, but then began withholding Social Security taxes.
- Your only pension is for railroad employment.
- You did not pay Social Security taxes for work before 1957.
- You have 30+ years of substantial earnings under Social Security.
- You receive survivor benefits.
For more information, refer to the Windfall Elimination Provision.pdf on the Social Security Administration website.
Government Pension Offset
The Government Pension Offset ensures that the benefits of government employees who do not pay Social Security taxes are calculated in the same manner as those of workers in the private sector who pay Social Security taxes.
If you did not contribute towards Social Security, but you receive a pension from a federal, state or local government, then your spouse, widow or widower benefit may be significantly reduced.
- Your Social Security benefits as a spouse, widow or widower will be reduced by two-thirds of your government pension.
- If you elect to take your government pension annuity in a lump sum, Social Security will calculate the reduction as if you chose to get monthly pension benefit payments.
For more information, refer to the Government Pension Offset.pdf on the Social Security Administration website.