A Close, and Updated, Look at the Government Pension Offset

The Congressional Research Service (CRS) has updated its report on the government pension offset (GPO), a formula intended to replicate the dual entitlement rule for spouses and widow(er)s who receive pensions based on noncovered employment. 

About the GPO

The GPO reduces the Social Security spouse’s or widow(er)’s benefits of most people who also receive a pension based on federal, state, or local government employment not covered by Social Security. It provides benefits to the spouses and widow(er)s of insured workers, because immediate family members are presumed to be dependent on a worker for their financial support and thus are presumed to be in need of such benefits when the family experiences a loss of income due to the worker’s retirement, disability or death. In general, a spouse receives up to 50% of the worker’s primary insurance amount, and a widow(er) receives up to 100%.

The Dual Entitlement Rule and the GPO 

The GPO is intended to approximate Social Security’s dual entitlement rule. Both are intended to reduce the Social Security benefits of spouses or widow(er)s who are not financially dependent on their spouses because they receive retirement or disability benefits based on their own work records. 

Without the dual entitlement rule, a couple with two earners covered by Social Security would receive two full primary benefits as well as two full spousal or widow(er)’s benefits. The dual entitlement rule requires that a beneficiary effectively receive the higher of the Social Security worker’s benefit or the spousal or widow(er)’s benefit, but not both. 

The reduction to Social Security spousal or widow(er)’s benefits is smaller under the GPO than it is under the dual entitlement rule. Those under dual entitlement face a 100% offset to spousal or widow(er)’s benefits for every dollar received from a Social Security retired-worker benefit, whereas those under the GPO face an offset to spousal and widow(er)’s benefits equal to two-thirds of a non–Social Security–covered pension. 

Applying the GPO to Government Versus Private Pensions 

The CRS notes that some question why the GPO does not apply to the spousal or widow(er)’s benefits received by private-sector workers’ spouses, who may receive private, employer-sponsored pensions (defined benefit or defined contribution) in addition to Social Security benefits. 

Generally, the private-sector employment on which the private pension is based would be covered by Social Security. Therefore, the dual entitlement rule (which the GPO is meant to replicate) would instead reduce any Social Security spousal or widow(er)’s benefits for which a beneficiary might be eligible. In many cases, says the CRS, the dual entitlement rule would produce a larger reduction in spousal or widow(er)’s benefits than does the GPO.

By the Numbers 

In December 2021, the GPO reduced benefits for 723,970 Social Security beneficiaries—approximately 1% of all beneficiaries. The GPO fully offset benefits for about 71% of all GPO-affected beneficiaries, and partially offset benefits for approximately 29% of them. 

Following is a look at how many Social Security beneficiaries the GPO affects overall, as well as spouses and windows/widowers among them, and a look at the effects of the GPO in December 2021.

Total Beneficiaries the GPO Affects

Group	December 2020	December 2021	Change, Dec.2020-Dec. 2021
Social Security beneficiaries	716,662	723,970	+7,308
% of all GPO-affected beneficiaries for whom the GPO fully offset benefits	71%	71%	---
% of all GPO-affected beneficiaries for whom the GPO partially offset benefits	29%	29%	---

 
Spouse Beneficiaries the GPO Affects

 
Widower Beneficiaries the GPO Affects

Effects of the GPO, December 2021

Measure	Amount	Amount, Men	Amount, Women
Average noncovered government pension amount for persons affected by the GPO	$2,598	$2,363	$3,691
Average pre-offset Social Security spousal benefit	$973	$631	$1,046
Average reduction caused by the GPO	$761	$610	$793
Average Social Security spousal benefit component after applying the GPO	$212	$21	$253

 

Controversy 

There is some difference of opinion regarding the merits of the GPO. 

Some argue that the original purpose of the GPO was to prevent higher-paid workers from reaping overly generous spousal or widow(er)’s benefits. Its supporters contend that it helps ensure that only financially dependent spouses receive the Social Security spousal or widow(er)’s benefit, while curtailing what otherwise would be an unfair advantage for government workers who are not covered by Social Security. 

The GPO’s detractors argue that it is not well understood and that it harms lower-wage workers. They contend that it hurts lower- and middle-wage workers, such as teachers, and in some circumstances throws these workers into poverty. Opponents also say that the GPO is especially disadvantageous for surviving spouses. Some contest this, however, saying that the GPO was never targeted to a particular income group.

Critics further say that many affected by the GPO are unprepared for a smaller Social Security benefit than they had assumed they would receive in making their retirement plans. GPO supporters counter that the GPO has existed since 1977 and that people have had ample time to adjust their retirement plans. 

The majority of state and local government workers, and federal employees hired since 1984, are covered by Social Security. Some argue that eliminating the GPO would be unfair to government employees in Social Security–covered positions, who would continue to be subject to the dual entitlement provision.