The Complex Rules of Social Security Benefits for Public Servants
When Joyce Debnam’s husband passed away, she began receiving $1,400 a month in Social Security survivor benefits. Eight months later, that income unexpectedly changed as she retired from her job at the United States Postal Service, triggering a cut in her Social Security benefits to just $174 a month. Additionally, she had to return $5,000 in overpaid benefits. Debnam’s reaction was that she almost hit the floor, as she was surprised by these changes, despite contacting the Social Security Administration before her retirement to confirm the impact of retirement on her monthly checks.
Debnam, 80, of Suitland, Maryland, now relies almost exclusively on her postal pension to pay bills, precluding her from other retirement goals such as traveling or making home improvements. Unfortunately, she is not alone. Millions of workers are affected by Social Security rules related to public workers and the reductions in benefits they are eligible to receive.
How rules affecting public employees work
The Windfall Elimination Provision (WEP) reduces benefits for people who receive a pension from work where they did not pay into Social Security and had fewer than 30 years of substantial employment. As of December 2022, about two million people, or 3% of Social Security beneficiaries, were affected by the WEP, according to the Congressional Research Service.
Another rule, the Government Pension Offset (GPO), reduces spousal, widow, or widower’s benefits for people who also receive pensions from non-Social Security covered government work. About 734,601 Social Security beneficiaries were affected by the GPO as of December 2022.
Many pension-eligible workers are unaware of rules
Many workers are taken by surprise when they receive reduced benefits intended for retirement income. Rep. Mike Carey, R-Ohio, indicated that most people are unaware of being subject to WEP or GPO until their spouses retire, prompting them to return to work, adjust spending habits, or change their standard of living.
Congress is considering the Social Security Fairness Act, which aims to eliminate both the WEP and GPO. Professional organizations and others support the change, however, it will be challenging to find a solution that equally compensates workers who pay into Social Security and those who work for pension-paying employers.
How beneficiaries can estimate retirement income
One way for affected beneficiaries to understand the impact of these rules on their retirement income is to review their Social Security Statement and use online calculators for the WEP and GPO. Nonetheless, it is recommended that people review their Social Security Statement annually as mistakes can occur.
Regardless, it can be unsettling for beneficiaries to receive an overpayment notice and negotiate repayment or forgiveness options. Mark Warshawsky, senior fellow at the American Enterprise Institute, emphasized the importance of prompt and accurate data delivery from state and local governments to prevent future occurrences.
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