Planning for Life

Social Security's Government Pension Offsets

Posted by Harry S. Margolis on October 19, 2012

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By Harry S. Margolis

If you work or had worked for a federal, state or city government that was not part of the Social Security system and also are entitled to Social Security spousal benefits based on the work record of your spouse, you are probably aware of Social Security's set off that limits how much you can receive from both pensions. 

Here's the formula: Social Security reduces your monthly benefit by two thirds of your monthly pension amount from the other source. For instance, if you are receiving a $1,200 in a state or local pension, your Social Security will be reduced by $800.  If you're entitled to $500 a month in Social Security spousal benefits, you'll receive nothing.  If you're entitled to $1,000 a month in spousal benefits, you will get $200 ($1,000 - $800 = $200) instead.

This rule may affect what decisions you make with respect to your governmental pension. Retirees often can choose to take a larger monthly payment that they will receive only for their own lives, or a larger benefit payable to them and a surviving spouse. Opting for the smaller but longer benefit can mean receiving a larger spousal Social Security benefit, depending on how all of the numbers work.

This Governmental Pension Offset only applies to benefits you're entitled to as a spouse.  If you worked both for a governmental body that does not participate in the Social Security system and have enough quarters (40 in most instances) working in the private sector to be entitled to benefits in your own right, those will be reduced to some extent based on a different formula. For most people affected by the so-called Windfall Elimination Provision, the reduction totals about $380 a month, with this amount

Both of these rules have certain exceptions which are explained more fully at the following locations on Social Security's excellent website:

Governmental Pension Offset

Windfall Elimination Provision

Topics: social security

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