The windfall elimination provision (WEP) and the Government Pension Offset (GPO)
There are around a million social security beneficiaries that are impacted by the Windfall Elimination Provision (WEP). This calculated restriction on benefit amounts affects retirees who receive a pension for work not covered by Social Security – mostly feds under CSRS. Basically, because Social Security wasn’t paid into during their work that was contributed to CSRS, any social security income stemming from other employment is cut to a significantly lower number.
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Without getting too technical, normal social security benefits include about $775 (90% of the first $856 dollars of one’s “Average Indexed Monthly Earnings”). The WEP subtracts 40% from the 90% used in the usual formula, meaning that $775 would be reduced to about $430. The statement of benefits received from the Social Security Administration (SSA) doesn’t indicate this possible reduction so the WEP has a tendency to catch some people off guard.
The Government Pension Offset
While the WEP affects those who get a CSRS pension plus social security benefits, the GPO impacts people who get CSRS money and spousal or survivor benefits from social security. The biggest difference is that a WEP cannot wipe out social security benefits, but the GPO can. If 2/3 of the CSRS income is greater than the social security benefit, then the social security does not get paid.
Legislation has been introduced to eliminate the WEP and GPO, but none have passed. Check out a more in-depth analysis with our Social Security handbook – download here.
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**Written by Benjamin Derge, Financial Planner, ChFEBC℠ The information has been obtained from sources considered reliable but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Benjamin Derge and not necessarily those of RJFS or Raymond James. Links are being provided for information purposes only. Expressions of opinion are as of this date and are subject to change without notice. Raymond James is not affiliated with and does not endorse, authorize, or sponsor any of the listed websites or their respective sponsors.
