Posted on Saturday, 13th February 2016 by

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Recently one of our newsletter subscribers asked me to explain how the Government Pension Offset (GPO) impacts a married couple, one retiring under CSRS and the other under FERS.  The husband will retire under CSRS and his wife is a FERS employee. He also wanted to know if his wife’s social security will be penalized due to his CSRS annuity.

Under the Social Security system you apply for benefits based on your work history or for a spouses, widows, or widowers benefit if it would be greater than what you would receive based on your work history.  It’s important to note that you can’t apply for a spouses benefit until they start collecting their Social Security benefits.

GPO only applies if you receive a pension from a federal, state, or local government based on work for which you didn’t pay Social Security taxes and then apply for a spouses, widows or widowers benefit.  FERS annuitants paid into the Social Security system and are not subject to GPO.

If you are a CSRS retiree and then apply for a spouses, widows, or widowers benefit GPO reduces your Social Security benefit by two-thirds of your government pension.  For example, if your monthly civil service pension is $900, two-thirds of that, or $600, must be deducted from your spouses, widows, or widowers Social Security benefit. If you’re eligible for a $800 spouses, widows or widowers Social Security benefit you will get $200 monthly from Social Security ($800 – $600 = $200). If you retired with a CSRS federal pension of $1,200 a month in this scenario two-thirds, $800, will be deducted from your benefit and you would receive no Social Security benefits ($800-$800 = $0).  If you are CSRS you can apply for Social Security Benefits under your work history if you meet the basic eligibility requirements as mentioned in this article.

The offset applies to a spouses, widows, or widowers Social Security benefit. However, they may reduce your own Social Security benefit because of the Windfall Elimination Provision (WEP). Social Security is earned by each worker and their benefits are independent of each others. For example, my wife worked in the private sector and earned a benefit that she applied for when she turned 62. When my wife reached full retirement age, 66, I filed for Social Security and immediately suspended my benefit so that my wife could collect a spousal benefit based on my higher earnings.  Since my wife worked in the private sector she paid into the Social Security system and was not subject to GPO. Had she been a federal worker in the CSRS system GPO would have been applied.

Social Security combined her original benefit with the spouses benefit so that her check increased by 50%. I won’t collect until age 70 and my benefit will increase 8% a year until then. Only my wife’s spousal benefit was reduced by WEP not her primary benefit based on her work history.  She receives a combination of the benefit that she was collecting and then an additional amount of her spouses benefit. Because I have less than 30 years of substantial earnings her spousal benefit portion of her monthly check was reduced by WEP.

Typically a CSRS retiree’s Social Security benefit is considerably smaller than a spouse’s Social Security benefit when the spouse retires under the FERS system or from the private sector.  CSRS employees do not contribute to Social Security and they must work a minimum of 40 quarters, 10 years, in a job where they paid into the Social Security system to collect a benefit on their work history. Since most CSRS employees have less than 20 substantial years of private sector earnings their benefit was reduced by $413 if they retired in 2015.

In this case, where the husband is retiring in the CSRS system and his wife is FERS, more than likely her Social Security benefit will be substantially more than her husband’s spousal benefit.  She would apply under her work history.

There is a lot to consider and it is best to review your personal situation carefully before applying for Social Security.  Social Security provides WEP and GPO calculators to help you determine the impact, if any, on your benefits.

Request a Retirement Benefits Summary & Analysis. Includes projected annuity payments, income verses expenses, FEGLI, and TSP projections.

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Disclaimer: Opinions expressed herein by the author are not an investment or benefit recommendation and are not meant to be relied upon in investment or benefit decisions. The author is not acting in an investment, tax, legal, benefit, or any other advisory capacity. This is not an investment or benefit research report. The author’s opinions expressed herein address only select aspects of various federal benefits and potential investment in securities of the TSP and companies mentioned and cannot be a substitute for comprehensive investment analysis. Any analysis presented herein is illustrative in nature, limited in scope, based on an incomplete set of information, and has limitations to its accuracy. The author recommends that retirees, potential and existing investors conduct thorough investment and benefit research of their own, including detailed review of OPM guidance for benefit issues and for investments the companies’ SEC filings, and consult a qualified investment advisor. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore, the author cannot guarantee its accuracy. Any opinions or estimates constitute the author’s best judgment as of the date of publication, and are subject to change without notice. The author explicitly disclaims any liability that may arise from the use of this material.

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