The Government Pension Offset
Social Security issues are complicated and jargon-filled ventures seemingly designed to confuse the average retiree. However, Social Security provisions can have an enormous, negative impact on your retirement, and most people who fall victim to these issues are unaware of the consequences until it’s too late. So even though terms like “non-SS-covered employment” may make you want to pull your hair out, they are certainly worth learning about.
A prominent issue that Texas retired teachers face is the Government Pension Offset.
The Government Pension Offset, or GPO, is a Social Security provision that reduces government employees’ spousal or survivor benefits. These benefits are commonly related to a spouse receiving their partner’s Social Security income when their partner passes away.
Specifically, the GPO most often applies to the benefits retired Texas teachers can expect to receive as a widow or widower.
The GPO reduces the SS income of survivors by two-thirds the amount of their TRS annuity. In most cases, this completely eliminates the spousal Social Security benefit you can expect as a widow or widower.
Here’s how the math works:
Jane is a retired Texas teacher. She paid into the Teacher Retirement System of Texas for 30 years, and she receives an $1,800 per month annuity. Her husband, Jim, worked in the public sector, and he paid into Social Security for his entire adult life. Jim receives $1,300 per month from Social Security.
Now normally Jane could expect to receive that $1,300 in the case that Jim passes away. However since Jane paid into a government pension without contributing to Social Security, she is subject to the GPO.
Here’s where the formula comes in: the Social Security Administration will reduce Jane’s survivor income by two-thirds the amount of her annuity. Two-thirds of $1,800 is $1,200. If you subtract that $1,200 penalty from $1,300, you get Jane’s GPO-based survivor income of only $100.
Now if that sounds like a drastic reduction in retirement income, that’s because it is! Congress designed the GPO to eliminate spouses from receiving double Social Security income. However, the formula that was installed is completely arbitrary. The benefit reduction is two-thirds regardless if you receive $5,000 per month from your annuity or if you receive $1,000 per month.
With the exception of military spouses, all this formula does is check to see if you fall into the category of having paid into a government pension without having paid into Social Security.
Ninety-five percent of Texas school districts do not pay into Social Security. Overwhelmingly, the GPO affects Texas career teachers.
Now if you’re still working, you do have the potential to avoid the GPO. If your final five years of work history before retirement show you have paid into Social Security, it may be possible to escape the GPO.
If you’re already retired and are feeling the effects of the GPO, you need to join our fight.
TRTA is dedicated to reforming the GPO and helping our members receive the benefits they are owed.