Industry News

On February 28, 2024, the Congressional Research Service (CRS) published its updated report, Social Security: The Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO). The report provides an overview of the WEP and the GPO, which are two separate provisions that reduce regular 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. 

The WEP affects Social Security benefits paid to individuals who earn Social Security benefits from Social Security covered employment, but who also earn pension benefits from state or local government employment not covered by Social Security.  In these cases, Social Security benefits are lowered by the WEP.  

Social Security benefits are designed to replace a larger percent of pre-retirement income for lower-paid workers than for higher-paid workers. This is done by: 1) calculating an employee’s average indexed monthly earnings (AIME) from employment covered by Social Security; and 2) calculating the employee’s primary insurance amount (PIA) using a formula that applies a higher replacement percentage to lower earnings than to higher earnings. 

In 2024, the PIA formula is: 

• 90% for the first $1,174 of AIME; plus
• 32% of AIME over $1,174 and through $7,078 (if any); plus
• 15% of AIME over $7,078 (if any).    

Before the WEP was established, for those who split their careers between covered and non-covered Social Security employment, the PIA formula resulted in a higher proportion of covered earnings being subject to the 90% rate. This resulted in what some perceived as a “windfall.” In 1983, Congress passed the WEP to eliminate this perceived advantage by lowering the 90% rate to 40% for those subject to the WEP. As of December 2023, Social Security Administration data indicated that about 2.1 million individuals (or about 3% of all Social Security beneficiaries) were affected by the WEP, with about 2.0 million of those being retired-worker beneficiaries (or about 4% of the entire retired-worker beneficiary population).  

Under the GPO, an individual’s Social Security spousal or survivor’s benefit is reduced (“offset”) by two-thirds of the pension benefits received from federal, state, or local government employment that is not covered by Social Security. According to the report, about 746,000 Social Security beneficiaries (or about 1% of all beneficiaries) had spousal or survivor benefits reduced by the GPO as of December 2023. Of those, 51% were spouses and 49% were widows and widowers, with about 68% of all GPO-affected beneficiaries had their benefits fully offset and about 32% had their benefits partially offset.  

The report is available here.