Windfall Elimination Provision and Government Pension Offset Updated for 2022

The Congressional Research Service (CRS) has updated information concerning the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO), both benefit formulas that reduce Social Security benefits for workers and their eligible family members if the worker receives (or is entitled to) a pension based on earnings from employment not covered by Social Security. And the threshold for the WEP has been set for 2022.

The Windfall Elimination Provision

The WEP was enacted in 1983 as part of major amendments designed to shore up the financing of Social Security. It is a modified benefit formula that reduces the Social Security benefits of certain retired or disabled workers who are also entitled to pension benefits based on earnings from jobs that were not covered by Social Security—and thus not subject to the Social Security payroll tax. 

The purpose of the WEP is to remove an unintended advantage or “windfall” that these workers would otherwise receive as a result of the interaction between the regular Social Security benefit formula and the workers’ relatively short careers in Social Security-covered employment. 

The WEP applies to most people who receive both a pension from noncovered work (including certain foreign pensions) and Social Security benefits based on fewer than 30 years of substantial earnings in covered employment or self-employment. The WEP affects retired- or disabled-worker beneficiaries and their eligible dependents. However, it does not affect survivor beneficiaries.

In December 2021, about 2 million people—approximately 3% of all Social Security beneficiaries—were affected by the WEP. The vast majority—1.9 million—of those people were retired-worker beneficiaries, approximately 4% of all retired worker beneficiaries. The remaining affected persons were disabled-worker beneficiaries and eligible family members of retired- or disabled-worker beneficiaries. 

2022 Levels. For purposes of the WEP, the amount of substantial earnings in covered employment or self-employment needed for a year of coverage (YOC) is adjusted annually by the growth in average earnings in the economy, provided a cost-of-living adjustment is payable. In 2022, the amount of substantial earnings in covered employment or self-employment needed for a YOC is $27,300; that is $750 higher than the 2021 level of $26,550.

For people with 20 or fewer YOCs who become eligible for benefits in 2022, the WEP reduces the first factor from 90% to 40%, resulting in a maximum reduction of $512 (90% of $1,024 minus 40% of $1,024). For each year of substantial earnings in covered employment or self-employment in excess of 20 years, the first factor increases by 5%. For example, the first factor is 45% for those with 21 YOCs. The WEP factor reaches 90% for those with 30 or more YOCs and at that point is phased out.

These levels are higher than those of 2021: 

The Government Pension Offset 

The GPO is intended to replicate the dual entitlement rule for spouses and widow(er)s who receive pensions based on noncovered employment.

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 PIA, and a widow(er) receives up to 100%.

In December 2021, The GPO reduced benefits for 723,970 Social Security beneficiaries—approximately 1% of all beneficiaries. Of those directly affected by the GPO, 52% were spouses and 48% were widow(er)s. The GPO affected 17% of all spouse beneficiaries and 9% of all widow(er) beneficiaries. The GPO fully offset benefits for about 71% of all GPO-affected beneficiaries, and partially offset benefits for approximately 29% of them. These figures were close to those of December 2020.