I recently was explaining the difference to a client between the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO).
I realize that it is a distinction that many probably don’t understand and thought I would explain for those who are curious and are impacted by it.
Both the WEP and the GPO impact the same person… someone who earned a non-covered pension. Non-covered means that it was earned in a job in which you were not paying Social Security taxes and were part of a different pension system. This could be as a teacher with CalSTRS, as a public servant with CalPERS, or with a city or county job as examples.
The WEP impacts the worker benefit of Social Security. In other words it impacts your own Social Security if you have a non-covered pension. The reduction to your own Social Security maxes out at around $400/mo.
The longer you work inside the Social Security system, the less of a reduction you will experience. Once you’ve reached 30 years of Social Security covered work, the WEP goes away. If you are below 20 years of Social Security covered work the maximum reduction applies. If you are between 20 years and 30 years of Social Security covered work the reduction is prorated.*
The GPO also impacts the individual with a non-covered pension. The difference is the GPO impacts the spousal and survivor benefit of that individual. Also the reduction is much more severe than the WEP.
The GPO reduction is equal to 2/3 of the non-covered pension being received. For example, an individual who receives a non-covered CalPERS pension of $3,000 per month would receive a $2,000 reduction of their own spousal or survivor Social Security benefit. In many cases this can completely eliminate the benefit altogether.
If you have questions about how or if the WEP and GPO impact please contact me.
*You can find a WEP calculator at https://www.ssa.gov/planners/retire/wep-chart.html
