A close and updated look at the state pension equalization
A close and updated look at the state pension equalization

A close and updated look at the state pension equalization

Congressional Research Service (CRS) has updated its report the government’s pension adjustment (GPO), a formula designed to repeat rule double eligibility for spouses and widows receiving pensions based on non-covered employment.

About the GPO

The GPO reduces the social security spouse’s or widow’s benefits for most people who also receive a pension based on federal, state, or local government employment that is not covered by social security. It provides benefits to the spouses and widows of insured workers because the immediate family members are presumed to be dependent on a worker for their financial support and therefore are presumed to need such benefits when the family experiences a loss of income due to the worker’s retirement, disability or death. Generally, a spouse receives up to 50% of the worker’s primary insurance amount, and a widow / widower receives up to 100%.

The Dual Entitlement rule and the GPO

The GPO is intended to approximate the social security rule of double entitlement. Both are intended to reduce social security benefits for spouses or widows who are not financially dependent on their spouses because they receive pension or disability benefits based on their own work records.

Without the double entitlement rule, a couple with two employees covered by social security would receive two full primary benefits as well as two full spouse or widow benefits. The double entitlement rule requires that a beneficiary actually receives the highest of the social security worker’s benefit or the spouse’s or widow’s benefit, but not both.

The reduction for social security spouse or widow benefits is less under the GPO than it is under the double entitlement rule. Those who are double entitled face a 100% set-off against spousal or widow’s benefits for every dollar received from a social security pensioned worker benefit, while those under the GPO face a set-off against spousal and widow’s benefits equal to two-thirds of a pension, there is no social security cover.

Applying the GPO to government versus private pensions

CRS notes that some question why the GPO does not apply to the benefits of the spouse or widow received by the spouses of private sector workers, who may also receive private, employer-sponsored pensions (defined benefit or defined contribution) to social benefits.

Generally, the employment in the private sector, the private pension is based, must be covered by social security. Therefore, the rule of dual eligibility (which GPO is designed to copy) instead reduce any social security-spouse’s or widow’s benefits as a beneficiary may be entitled. In many cases, says CRS would rule double justification provide a greater reduction of a spouse and widow benefits than GPO’en do.

By the numbers

In December 2021, GPO reduced benefits for 723,970 social security beneficiaries – approx. 1% of all beneficiaries. The GPO fully offset the benefits for about 71% of all GPO-affected recipients and partially offset the benefits for about 29% of them.

The following is a look at how many Social Security beneficiaries the GPO affects in general, as well as spouses and windows / widowers among them, and a look at the effects of the GPO in December 2021.

Total beneficiaries affected by the GPO

Group December 2020 December 2021 Change, Dec.2020-Dec. 2021
Social security recipients 716,662 723,970 +7.308
% of all GPO-affected recipients for whom the GPO fully offset benefits 71% 71%
% of all GPO-affected recipients for whom the GPO partially offset benefits 29% 29%

Spouse beneficiaries affected by the GPO

Group December 2020 December 2021 Change, Dec.2020-Dec. 2021
Social security recipients who were spouses 379,831 346,765 -2,066
% Of all the social security recipients who were spouses 53% 52% -1 percentage point
% of all spouses affected by GPO 16% 17% +1 percentage point

Widower recipients affected by the GPO

Group December 2020 December 2021 Change, Dec.2020-Dec. 2021
Social security recipients who were widowers 336,831 346,205 +9,374
% of all affected social security beneficiaries who were widowers 47% 48% +1 percentage point
% of all widower beneficiaries affected by the GPO 9% 9%

The effects of the GPO, December 2021

Measure Amount Amount, Men Amount, women
Average uncovered state pension amount for persons affected by GPO $ 2,598 $ 2,363 $ 3,691
Average pre-offset social security spouse benefit $ 973 $ 631 $ 1,046
Average reduction caused by the GPO $ 761 $ 610 $ 793
Average Social Security Spouse Benefit Component After Using GPO $ 212 21 USD $ 253

Controversy

There is some disagreement about the benefits of the GPO.

Some argue that the original purpose of the GPO was to prevent higher paid workers from reaping too generous spouse or widow benefits. Its proponents argue that it helps ensure that only financially dependent spouses receive the social security spouse or widow benefit, while limiting what would otherwise be an unfair benefit to government employees who are not covered by social security.

GPO opponents argue that it is not well understood and that it harms low-paid workers. They claim that it harms low- and middle-paid workers, such as teachers, and in some cases, throws these workers into poverty. Opponents also say the GPO is particularly disadvantageous for surviving spouses. Some, however, dispute this, saying that the GPO was never aimed at a particular income group.

Critics further say that many affected by the GPO are unprepared for a smaller social security benefit than they had assumed they would receive by making their pension schemes. GPO supporters counter that the GPO has been around since 1977 and that people have had plenty of time to adjust their pension plans.

The majority of state and local government workers and federal employees employed since 1984 are covered by social security. Some argue that it would be unfair to remove the GPO vis-à-vis government employees in social security-covered positions, which would continue to be subject to the dual entitlement provision.

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