Social Security: The Government Pension Offset (GPO)







Prepared for Members and Committees of Congress



A worker is “covered” by Social Security if he or she pays into Social Security through the Old-
Age, Survivors, and Disability Insurance (OASDI) payroll tax. Currently 96% of all workers are
covered by Social Security. The majority of non-covered positions are held by federal, state, and
local government employees.
Generally, Social Security benefits are payable to the spouses of retired, disabled, or deceased
workers covered by Social Security. Spousal benefits are intended for individuals who are
financially dependent on spouses who work in Social Security-covered positions. Individuals who
qualify for both a Social Security worker benefit (retirement or disability) based on their own
work history and a Social Security spousal benefit based on their spouse’s work history are
“dually-entitled” and are subject to the dual-entitlement rule. The Social Security dual-entitlement
rule requires that 100% of a Social Security retirement or disability benefit earned as a worker
(based on one’s own Social Security-covered earnings) be subtracted from any Social Security
spousal benefit one is eligible to receive (based on their spouse’s Social Security-covered
earnings), and only the difference, if any, is paid as a spousal benefit.
Individuals who qualify for both a government pension based on non-Social Security-covered
employment and a Social Security spousal benefit are subject to the Government Pension Offset
(GPO) provision. The GPO provision reduces Social Security benefits that a person receives as a
spouse if he or she also has a federal, state or local government pension based on work that was
not covered by Social Security. The GPO reduction in Social Security spousal benefits is equal to
two-thirds of the government pension.
The intent of the dual-entitlement rule and the GPO is the same—to reduce the Social Security
spousal benefits of individuals who are not financially dependent on their spouse because they
receive their own benefits. The GPO attempts to replicate Social Security’s “dual-entitlement”
rule, by removing an advantage these workers would otherwise receive if they could receive both
a government pension and full Social Security spousal benefits. Opponents contend that the
provision is basically imprecise and often unfair while defenders argue it is the best method
currently available for eliminating an unfair advantage for non-covered government workers.
Five bills have been introduced in the 110th Congress to modify or repeal the GPO (H.R. 82, H.R.

1090, H.R. 2988, S. 206, and S. 1254). The last bill passed that modified the GPO, H.R. 743 from th


the 108 Congress, eliminated a controversial exemption from the GPO (known as the “last-day
rule”) and was passed into law (P.L. 108-203) on March 2, 2004.
This report will be updated periodically.






Backgr ound ..................................................................................................................................... 1
Social Security-Covered and Non-Covered Work....................................................................1
Dual-Entitlement Rule..............................................................................................................2
Government Pension Offset Formula........................................................................................2
Rationale and Legislative History...................................................................................................3
Why a Two-Thirds Reduction?.................................................................................................5
Who Is Affected by the GPO?.........................................................................................................5
Issues ............................................................................................................................................... 8
Arguments Against the GPO.....................................................................................................8
Arguments for the GPO.............................................................................................................9
The “Last Day” Rule................................................................................................................11
How Does the New Law Affect Exemption from the GPO?.............................................11
Recent Legislation.........................................................................................................................12
Proposed Changes to the GPO Formula..................................................................................12
Table 1. Regular Dual-Entitlement Formula...................................................................................2
Table 2. GPO Formula.....................................................................................................................3
Table 3. Mary’s Spousal Benefit, Before and After GPO Enactment..............................................4
Table 4. Number of Social Security Beneficiaries Affected by the GPO, by State and Type
of Benefit, June 2007...................................................................................................................6
Author Contact Information..........................................................................................................13






Generally, Social Security benefits are payable to the spouses of retired, disabled, or deceased
workers covered by Social Security. Spousal benefits are intended for individuals who are
financially dependent on spouses who work in Social Security-covered positions. The spousal
benefit is equal to 50% of the retired or disabled worker’s benefit and 100% of the deceased
worker’s benefit. Individuals who qualify for both a Social Security worker benefit (retirement or
disability) based on their own work history and a Social Security spousal benefit based on their
spouse’s work history are “dually-entitled” and are subject to the dual-entitlement rule.
Individuals who qualify for both a non-Social Security-covered government pension and a Social 1
Security spousal benefit are subject to the Government Pension Offset (GPO) provision. The
intent of the dual-entitlement rule and the GPO is the same—to reduce the Social Security
spousal benefits of individuals who are not financially dependent on their spouse because they
receive their own benefits. The key difference is what is used to determine financial
dependence—benefits based on Social Security-covered work or benefits based on non-Social 2
Security-covered work.
A worker is “covered” by Social Security if he or she pays into Social Security through the Old-
Age, Survivors, and Disability Insurance (OASDI) payroll tax. Approximately 96% of all workers
are covered. The majority of non-covered positions are held by government employees: most
federal employees hired before 1984 and some state and local government employees. 3
Nationwide, approximately 71% of state and local government employees are covered. However,
coverage varies from state to state. For example, approximately 97% of state and local employees
in New York are covered by Social Security, while only 3% of state and local employees in Ohio 4
are covered.
This disparity in coverage occurs because, while Social Security originally did not cover any state
and local government workers, over time the law has changed. Most state and local government
employees became covered by Social Security through voluntary agreements between the Social 5
Security Administration and individual states. Beginning in July 1991, state and local employees
who were not members of a public retirement system were mandatorily covered by Social
Security. Those public employees who were already members of a public retirement system
through their employment were not mandatorily covered because their state pensions already
fulfilled the social insurance functions of Social Security.

1 The GPO is often confused with the Windfall Elimination Provision (WEP), which reduces Social Security benefits
that a person receives as a worker if he or she also has a government pension based on work that was not covered by
Social Security. For additional information in the Windfall Elimination Provision (WEP), please refer to CRS Report
98-35, Social Security: The Windfall Elimination Provision (WEP), by Laura Haltzel.
2 42 U.S.C. § 402(b)(4).
3 Social Security Administration, Estimated Social Security Coverage of Workers with State and Local Government
Employment, 2005.
4 Ibid.
5 These agreements are known as “Section 218 agreements” because they are authorized by Section 218 of the Social
Security Act.





The Social Security dual-entitlement rule requires that 100% of a Social Security retirement or
disability benefit earned as a worker (based on one’s own Social Security-covered earnings) be
subtracted from any Social Security spousal benefit one is eligible to receive (based on their
spouse’s Social Security-covered earnings), and only the difference, if any, is paid as a spousal
benefit. In other words, the dual-entitled worker will receive the higher of his or her own
retirement benefit or the spousal benefit, but not both. The rationale is that a Social Security
spousal benefit is based on the concept of “dependency,” and someone who receives his or her
own Social Security benefit as a retired worker is assumed to be financially independent of his or
her spouse. Because most workers are in Social Security-covered employment, the dual-
entitlement scenario is the most common among two-earner couples. In 2005, approximately 6.3
million out of 30.5 million Social Security retired worker beneficiaries, or about 20%, were
dually-entitled (not including those whose spousal benefit was completely offset by their retired 6
worker benefit). Table 1 demonstrates how the Social Security dual-entitlement rule is applied.
Table 1. Regular Dual-Entitlement Formula
John Mary
Social Security retirement benefit (based on worker’s earnings record) $900.00 $400.00
Maximum Social Security spousal benefit eligible to receive (based on spouse’s earnings record),
equal to 50% of the spouse’s Social Security retirement benefit $200.00 $450.00
Reduction in spousal benefit due to dual-entitlement rule (equal to worker’s own retirement
benefit) $900.00 $400.00
Actual Social Security SPOUSAL benefit paid (subtract worker benefit from spousal benefit) $0.00 $50.00
Source: Illustrative example provided by Congressional Research Service (CRS).
In this example, both John and Mary have worked enough years in Social Security-covered
positions (i.e., paid into Social Security) to qualify for Social Security retirement benefits. John
has earned a Social Security benefit equal to $900. His wife Mary has earned a Social Security
benefit equal to $400. Mary is also eligible for a Social Security spousal benefit of up to 50% of
John’s retirement benefit, or $450. However, under the dual-entitlement rule, Mary’s worker
benefit of $400 must be subtracted from her potential $450 spousal benefit, and only the
difference of $50 is paid as a spousal benefit. In total, Mary will receive $450—$400 as a Social
Security worker benefit and $50 as a Social Security spousal benefit. John is also eligible to
receive a Social Security spousal benefit of up to 50% of Mary’s retirement benefit, or $200.
However, in this application of the dual-entitlement rule, John would not be paid a spousal benefit
because his $900 retirement benefit based on his own earnings is higher and more than offsets the
potential $200 spousal benefit.
The Social Security spousal benefit of a person who receives a pension from government
employment (federal, state, or local) that was based on work not covered by Social Security is
reduced by a provision in the law known as the GPO. The GPO reduction in Social Security

6 Social Security Administration, Annual Statistical Supplement 2006, Table 5.G2.





spousal benefits is equal to two-thirds of the government pension. In June 2007, approximately
464,537 Social Security beneficiaries, or about 1% of all retired worker beneficiaries, had spousal
benefits reduced by the GPO (not counting those who were eligible for spousal benefits but were 7
deterred from filing for them because of the GPO). Table 2 provides an example of how the
GPO is applied.
Table 2. GPO Formula
John Mary
Social Security retirement benefit (based on worker’s earnings record) $900.00 $0.00
Non-Social Security-covered government pension $0.00 $400.00
Maximum Social Security spousal benefit eligible to receive (based on spouse’s earnings
record), equal to 50% of the spouse’s Social Security retirement benefit $0.00 $450.00
Reduction in Social Security spousal benefit due to GPO (equals 2/3 of non-Social Security-
covered pension) $0.00 $266.67
Actual Social Security spousal benefit paid (subtract 2/3 of non-Social Security-covered
worker’s pension from Social Security spousal benefit) $0.00 $183.33
Source: Illustrative example provided by CRS.
In this example, John worked enough years in Social Security-covered employment to qualify for
Social Security retirement benefits. He has earned a Social Security benefit of $900. His wife,
Mary, is not eligible for a Social Security worker benefit on her own record because she worked
in a non-Social Security-covered government position and did not contribute to Social Security.
However, Mary is still eligible for a Social Security spousal benefit of up to $450 based on John’s
work history. Mary is also eligible for a $400 government pension based on her work in a non-
Social Security-covered position. Under the GPO, Mary’s potential Social Security spousal
benefit is reduced by an amount equal to two-thirds of her non-Social Security-covered
government pension, or $266.67, and only the difference of $183.33 is paid to her as a spousal
benefit. In total, Mary will receive $583.33—$400 from her non-covered pension and $183.33 as
a Social Security spousal benefit. In this example, John is not eligible for a Social Security
spousal benefit because Mary did not qualify on her own earnings history for a Social Security
worker benefit.

The GPO is intended to place annuitants whose government employment was not covered by
Social Security and who are eligible for a Social Security spousal benefit in approximately the
same position as workers whose jobs were covered by Social Security and are also eligible for a
Social Security spousal benefit. Before the GPO was enacted in 1977, workers who received
pensions from a government job not covered by Social Security could also receive full Social
Security spousal benefits even though they were not financially dependent on their spouse.
Because the Social Security Administration (SSA) does not have complete earnings records of
those who work in non-Social Security-covered positions, SSA is forced to rely on the
government pension as a measure of those uncovered earnings. Essentially, it is assumed that

7 Social Security Administration, Office of Research Evaluation and Statistics, Unpublished Table A, August 28, 2007.





two-thirds of the government pension is basically equivalent to the Social Security retirement or
disability benefit the spouse would have earned as a worker if his or her job had been covered by
Social Security. Thus, the GPO attempts to replicate the Social Security dual-entitlement rule by
requiring that an amount equal to two-thirds of the worker’s non-covered government pension be
subtracted from the Social Security spousal benefit. The scenarios below demonstrate why the
law was changed.
Table 3 shows how the spousal benefit of the same individual, Mary, would vary under three
scenarios: (1) as a dually-entitled recipient of Social Security retirement and spousal benefits; (2)
as the recipient of a non-covered government pension and Social Security spousal benefits before
the GPO was enacted; and (3) as the recipient of a non-covered government pension and Social
Security spousal benefits after the GPO was enacted. In each case, Mary’s earnings (and thus the
Social Security retirement benefit or non-covered government pension) and the maximum spousal
benefit she is eligible to receive are identical.
Under the first scenario (as a dually-entitled retiree), 100% of Mary’s own Social Security
retirement benefit of $400 is used to offset the $450 Social Security spousal benefit that she is
eligible for, leaving her with a net spousal benefit of $50. Under the second scenario (where Mary
receives a non-covered government pension instead of a Social Security retirement benefit),
before the GPO was enacted, Mary’s Social Security spousal benefits are not reduced at all and
she receives a full Social Security spousal benefit of $450. Under the third scenario (when the
GPO is put into effect), Mary’s Social Security spousal benefit is reduced by two-thirds of her
$400 non-covered government pension, leaving her with a net spousal benefit of $183.33.
Therefore, with the GPO in place, Mary’s earnings and resulting retirement benefit are used to
offset her Social Security spousal benefit just as they were under the dual-entitlement scenario.
Table 3 also shows how, given equal Social Security retirement benefits or non-covered
government pension amounts of $400, individuals under the GPO actually receive a lesser
reduction in Social Security spousal benefits compared to those covered by Social Security and
subject to the dual-entitlement rule. Those under dual-entitlement face a 100% offset and receive
only a $50 spousal benefit while those under the GPO face a 66.6% offset and receive $183.33 as
a spousal benefit. If those non-Social Security-covered workers had been covered by Social
Security, they would have been subject to the dual-entitlement rule and their spousal benefits
would be lower than what they receive under the GPO.
Table 3. Mary’s Spousal Benefit, Before and After GPO Enactment
Dually Before After
Entitled GPO GPO
Social Security retirement benefit (based on own earnings record) $400.00 $0.00 $0.00
Non-Social Security-covered pension $0.00 $400.00 $400.00
Maximum Social Security spousal benefit eligible to receive (based on
spouse’s earnings record), equal to 50% of the spouse’s Social Security
retirement benefit $450.00 $450.00 $450.00
Reduction in spousal benefit due to dual-entitlement rule (equal to
worker’s retirement benefit) $400.00 ——— ———





Dually Before After
Entitled GPO GPO
Reduction in Social Security spousal benefit due to GPO (equals 2/3 of
non-Social Security-covered pension) ——— ——— $266.67
Actual Social Security spousal benefit paid (subtract worker benefit from
spousal benefit) $50.00 $450.00 $183.33
Source: Illustrative example provided by CRS.
Note: Dashes are used to represent scenarios in which either the dual-entitlement rule or the GPO are not
applicable. For example, in the dual-entitlement scenario, Mary does not receive a non-covered government
pension and, thus, the GPO does not apply.
Using two-thirds of the government pension as the equivalent of a Social Security benefit was
established by the Social Security Amendments of 1983 (P.L. 98-21). The original 1977 law
provided that 100% of the government pension be subtracted from the Social Security spousal
benefit. If the original legislation had been left intact, the treatment of individuals affected by the
dual-entitlement rule and the GPO would in fact have been identical because the Social Security
spousal benefit would have been offset by 100% of the retirement benefit in both cases. In 1983,
Congress passed P.L. 98-21, which made a number of amendments to Social Security in an
attempt to strengthen the system’s finances. One section of the House version of this law
proposed that the amount used in calculating the offset be one-third of the government pension.
The Senate version contained no such provision. The conferees adopted the House bill except that
the offset would be two-thirds of the government pension.

Government workers not paying into Social Security are potentially affected by the GPO.
Generally, employees of the federal government hired before 1984 are covered by the Civil
Service Retirement System (CSRS) and are not covered by Social Security; therefore, they are
subject to the GPO upon retirement. Most federal workers first hired into federal service after

1983 are covered by the Federal Employees’ Retirement System (FERS), which includes Social 8


Security coverage; thus, although FERS retirees are not subject to the GPO, they, like all covered
workers in the private sector, are subject to the Social Security dual-entitlement rule upon
retirement. As of September 2005, approximately 645,000 federal workers (26% of the federal
workforce) participate in CSRS and are potentially subject to the GPO, whereas 1.9 million 9
(74%) participate in FERS and are subject to the dual-entitlement rule.
Some state and local government workers do not pay into Social Security and are potentially
subject to the GPO upon retirement. Social Security coverage varies by state. In 2005,
approximately 6.8 million state and local workers (29% of all state and local workers) were in
non-Social Security-covered positions and are subject to the GPO. At the same time,

8 Workers who switch from CSRS to FERS must work for five years under FERS in order to be exempt from the GPO.
9 Federal Retirement Thrift Investment Board, September 2005.





approximately 16.9 million state and local workers (71%) were in covered employment and are 10
subject to the dual-entitlement rule upon retirement.
As of June 2007, approximately 464,537 Social Security beneficiaries, or less than 1% of all
beneficiaries, had spousal benefits reduced by the GPO (not counting those who were eligible for
spousal benefits but were deterred from filing for them because of the GPO). Of these 57% were 11
spouses; 43% were widows and widowers. About 77% of all affected were women. Table 4
below provides a breakdown of the affected beneficiaries by state and type of benefit.
Table 4. Number of Social Security Beneficiaries Affected by the GPO, by State and
Type of Benefit, June 2007
State Total Spouses Widow(er)s
Alabama 3,920 1,876 2,044
Alaska 1,772 1,070 702
Arizona 5,905 3,195 2,710
Arkansas 2,674 1,466 1,208
California 68,297 42,940 25,357
Colorado 15,434 9,564 5,870
Connecticut 5,747 3,655 2,092
Delaware 415 179 236
District of Columbia 2,616 794 1,822
Florida 19,766 10,982 8,784
Georgia 11,891 6,245 5,646
Hawaii 1,804 1,039 765
Idaho 1,239 694 545
Illinois 31,495 19,060 12,435
Indiana 3,760 1,764 1,996
Iowa 1,677 850 827
Kansas 1,909 853 1,056
Kentucky 7,170 4,453 2,717
Louisiana 21,929 11,822 10,107
Maine 4,585 2,684 1,901
Maryland 8,043 3,154,889
Massachusetts 22,436 13,446 8,990
Michigan 4,691 2,262 2,429
Minnesota 5,657 3,273 2,384

10 Social Security Administration, Estimated Social Security Coverage of Workers with State and Local Government
Employment, 2005.
11 Social Security Administration, Office of Research Evaluation and Statistics, Unpublished Table DE01, February 27,
2007.





State Total Spouses Widow(er)s
Mississippi 2,369 1,144 1,225
Missouri 9,847 5,868 3,979
Montana 940 487 453
Nebraska 1,106 560 546
Nevada 5,569 3,209 2,360
New Hampshire 1,565 882 683
New Jersey 4,212 1,877 2,235
New Mexico 2,790 1,610 1,180
New York 7,732 3,420 4,312
North Carolina 5,621 2,814 2,807
North Dakota 437 218 219
Ohio 64,808 38,275 26,533
Oklahoma 3,360 1,542 1,818
Oregon 3,559 1,936 1,623
Pennsylvania 7,386 3,343 4,04
Rhode Island 1,345 765 580
South Carolina 3,484 1,740 1,744
South Dakota 764 391 373
Tennessee 4,617 2,385 2,232
Texas 51,826 31,466 20,360
Utah 2,031 1,050 981
Vermont 545 311 234
Virginia 7,250 3,066 4,184
Washington 4,707 2,288 2,419
West Virginia 1,104 518 586
Wisconsin 2,947 1,595 1,379
Wyoming 430 222 208
Outlying areas and
foreign countries 6,057 4,416 2,611
Total 464,537 265,018 199,519
Source: Social Security Administration, Office of Research Evaluation and Statistics, August 28, 2007.
In August 2006, the average monthly non-covered government pension amount was $1,709 12
($1,508 for women and $2,384 for men). The average pre-offset Social Security spousal benefits 13
at that time were $560 per month overall ($625 for women, and $345 for men). In August 2006,

12 Ibid., Table G209, February 27, 2007. Data is limited to those beneficiaries for whom the offset amount is available.
More recent data was unavailable from the Social Security Administration at the time of publication.
13 Ibid., Table G309, February 27, 2007. Data is limited to those beneficiaries for whom the offset amount is available.
(continued...)





the average offset caused by the GPO was $459 ($494 a month for women and $340 for men).14
For 75% of those with spousal benefits reduced by the GPO, the GPO reduction was large enough
to fully offset any potential spousal benefit either because the non-covered pension was large or 15
the potential Social Security spousal benefits were small. In August 2006, the average resulting
Social Security spousal benefit was $102 per month ($131 a month for women and $4 a month 16
for men).
By contrast, in December 2005 approximately 6.3 million beneficiaries were affected by the dual-1718
entitlement rule. Of these, 43% were spouses and 57% were widow(er)s. About 6.2 million 1920
(98%) of all affected were women. The average retired worker benefit was $498 overall. The 21
average spousal benefit (after being reduced for dual-entitlement) was $403. The average 22
combined Social Security retired worker benefit plus reduced spousal benefit was $902. It is
impossible to know from the administrative records how many individuals subject to the dual-
entitlement rule have their spousal benefits completely offset, because those individuals would
then not be counted among the dually-entitled population.

Critics of the GPO say that it is not well understood and that many affected by it are unprepared
for a smaller Social Security benefit than they had assumed in making retirement plans. They also
argue that the provision especially hurts low-income workers such as teachers, and in some
circumstances is sufficient to throw these workers into poverty. Opponents maintain that the
original purpose of the GPO was to prevent higher-paid workers from reaping windfall benefits,
and it was not intended to have such a negative effect on lower-paid workers. They question why
the provision applies only to government workers and not to workers in the private sector who
also receive pensions from their employers. They also point out that whatever the rationale,
reducing everyone’s spousal benefit by two-thirds of their government pension is an imprecise

(...continued)
More recent data was unavailable from the Social Security Administration at the time of publication.
14 Ibid., Table G609, February 27, 2007. Data is limited to those beneficiaries for whom the offset amount is available.
More recent data was unavailable from the Social Security Administration at the time of publication.
15 Ibid., Table G105, February 27, 2007.
16 Ibid., Table G509, February 27, 2007. Data is limited to those beneficiaries for whom the offset amount is available.
More recent data was unavailable from the Social Security Administration at the time of publication.
17 Social Security Administration, Social Security Bulletin, Annual Statistical Supplement, 2006, Table 5.G1. More
recent data was unavailable from the Social Security Administration at the time of publication.
18 Ibid., 2006, Table 5.G3. More recent data was unavailable from the Social Security Administration at the time of
publication.
19 Ibid., Table 5.G1. More recent data was unavailable from the Social Security Administration at the time of
publication.
20 Ibid., Table 5.G3. More recent data was unavailable from the Social Security Administration at the time of
publication.
21 Ibid.
22 Ibid.





way to estimate what the spousal benefit would be had the government job been covered by
Social Security. They say this procedure has uneven results and that it is especially
disadvantageous for surviving spouses and low-paid workers. Ideally, opponents argue, the way
to compute the offset to replicate the dual-entitlement rule would be to apply the Social Security
benefit formula to an individual’s total earnings, including the non-covered portion, and reduce
the resulting Social Security benefit by the proportion of total earnings attributable to non-
covered earnings.
Defenders of the GPO maintain that it is an effective method to curtail what otherwise would be
an unfair advantage for non-Social Security-covered government workers. The provision was
phased in over six years and now has been in the law for 30 years; therefore, they say, there has
been ample time for people to adjust their retirement plans. P.L. 108-203, passed in 2004,
included a provision that seeks to ensure that SSA and government employers notify potentially
affected individuals about the effect of the GPO.
Others maintain that it is not true that the measure was intended to apply particularly to higher-
paid workers, nor does analysis support the position that the measure disproportionately affects
lower-paid workers. Last year, CRS completed an analysis of the benefit reductions under the
GPO relative to those under the dual-entitlement rule to determine how well two-thirds of the
government pension amounts serve as a proxy for the Social Security worker benefits that
individuals would receive if they had worked in covered employment. If two-thirds of the
government pension were in fact a good proxy for Social Security retirement benefits, the overall
increase or decrease in the offset amount under the dual-entitlement rule on the basis of the Social
Security benefit formula would be zero. However, the estimates show that there is great variation
in outcomes. Some individuals, including lower earners, would have a much larger offset amount
under the dual-entitlement rule, while others, including higher earners, would have a somewhat
smaller offset amount. This finding suggests that the common criticism that the GPO penalizes
lower earners more than higher earners may not be accurate.
Other evidence of the effect of the GPO on low earners comes from statistics produced by the
Social Security Administration. While 75% of those affected by the GPO have their benefits fully
offset, only 39% of those with non-covered pensions of less than $1,000 per month had their
benefits fully offset compared with 88% of those with non-covered pensions between $1,000 and 23
$1,999 and nearly 100% of individuals with non-covered pensions over that amount. Of the

75% of individuals affected by the GPO whose benefits were fully offset as a result of the GPO, 24


only 17% had a non-covered pension amount of less than $1,000 per month. Thus, if the non-
covered pension amount is a reflection of the earnings levels of individuals affected by the GPO,
a greater percentage of those with lower earnings receive at least a partial Social Security benefit
relative to the overall GPO-affected population.

23 CRS calculations based on Table I, “Estimated Number of Beneficiaries Affected by the GPO by Current Offset
Status and the Non-Covered Government Pension Amount, Limited to Those Beneficiaries For Which the Offset
Amount is Available, August 26, 2006,” produced by the Social Security Administration’s Office of Research,
Evaluation and Statistics, February 27, 2007. More recent data was unavailable from the Social Security Administration
at the time of publication.
24 Ibid.





Regarding concerns about pushing those affected by the GPO into poverty, in 2001, the poverty
rate among those affected by the GPO was approximately 6.0%, whereas the poverty rate for 25
those affected by the dual-entitlement rule was approximately 8.9%. The poverty rate for all
Social Security beneficiaries age 65 and older was about 8.5%. For comparison purposes, the
poverty rate for the general population at that time was approximately 11.3%.
On average, private sector workers, who are affected by the dual-entitlement rule, earn less than
their counterparts in state and local government who are affected by the GPO. June 2006 data
from the Bureau of Labor Statistics indicate that state and local government workers earned on
average $23.99 per hour compared with the national average of $19.29 per hour and the private 26
sector average of $18.56 per hour. Some point out that, if these government workers had been
covered by Social Security, in many cases Social Security’s dual-entitlement rule would produce
a higher reduction in spousal benefits than does the GPO. Thus, they say, to weaken or eliminate
the GPO would be unfair to other workers, including the majority of government workers whose
jobs are covered by Social Security and therefore are subject to Social Security’s dual-entitlement
rule. Defenders of the provision maintain that the fact that the GPO does not apply to private
sector pensions is irrelevant, because the employment on which the private pension is based
would be covered by Social Security, and thus Social Security’s dual-entitlement rule (which the
GPO is meant to replicate) would reduce any spousal benefits for which the workers would be
eligible.
Some also argue that weakening or eliminating the GPO would be costly at a time when neither
Social Security nor the federal budget is in sound financial condition. The Social Security 27
Administration has projected the 10-year cost of repealing the GPO to be about $42 billion.
Such a move could lead to demands of repeal of the dual-entitlement rule to ensure parallel
treatment for those working in Social Security-covered employment. By comparison, eliminating 28
the dual-entitlement rule would cost approximately $500 billion over a five-year period.
Finally, because administrative considerations have precluded applying the Social Security
benefit computation rules to government employment, the GPO is defended as a practical way to
prevent undue Social Security benefits from going to government annuitants.

25 Poverty rates were calculated by David Weaver of the Social Security Administration’s Office of Retirement Policy
using the March 2001 Current Population Survey (CPS). Poverty status is taken directly from the CPS and is thus
subject to errors in the reporting of income. The sample for the GPO and dually-entitled poverty rates only includes
persons for whom SSA administrative records could be matched. The sample size for the GPO poverty rate is relatively
small (130 cases). The poverty rates for the Social Security beneficiary population age 65 and over and for the general
population do not require matched data and are based completely on CPS data.
26 U.S. Department of Labor, Bureau of Labor Statistics, National Compensation Survey: Occupational Wages in the
United States, June 2006, June 2007.
27 Social Security Administration, Memorandum from Bert M. Kestenbaum and Tim Zayatz of the Office of the Chief
Actuary,Estimated Additional OASDI Benefit Payments Resulting From Several Proposals to Modify the Windfall
Elimination Provision and the Government Pension OffsetINFORMATION, October 26, 2007.
28 Social Security Administration, Memorandum from Bert Kestenbaum of the Office of the Chief Actuary,Estimated
Additional OASDI Benefit Payments from Proposals to Eliminate or Change the Dual-Entitlement Offset Provision—
INFORMATION,April 17, 2003.





A burgeoning controversy arose in the 108th Congress with the revelation that a growing number
of state and local government workers had been making use of a little-known provision of the law
that allowed them to escape the application of the GPO if they switched jobs at the end of their
government careers. These workers could do this because, until recently, the law granted an
exception to the GPO if, on the last day of one’s government service, he or she worked in a Social
Security-covered position. On August 15, 2002, the Government Accountability Office (GAO,
formerly the General Accounting Office) released a report that found that, as of June 2002, 4,819
individuals in Texas and Georgia had switched to Social Security-covered positions to avoid the
application of the GPO to their Social Security spousal benefits. The GAO projected that the cost
to the program for these cases could be about $450 million. The GAO stated that possible
remedies to these potential abuses of the last-day exception clause could be to lengthen the time
period to qualify for the exemption or to prorate the reduction in benefits to the proportion of time
spent in the non-covered job compared to the covered one.
On February 11, 2004, the House of Representatives agreed to Senate amendments and passed 29
H.R. 743, the Social Security Protection Act of 2003, which became P.L. 108-203. As discussed
below, P.L. 108-203 eliminated the last-day exception clause by requiring those workers
switching from non-covered positions to Social Security-covered positions to work in the covered 30
position for at least 60 months (five years) before being exempt from the GPO. The new GPO
provision became effective for Social Security spousal benefit applications filed after March 31,

2004.


Any current Social Security beneficiary who is receiving spousal benefits and is exempt from the
GPO because they retired from their non-covered position in government under the “last-day”
rule would continue to be exempt from the GPO. Individuals may still be exempt from the GPO
if:
• They applied for Social Security spousal benefits before April 1, 2004, and work
their last day in a Social Security-covered position within the same retirement
system. In this case, the individual could continue to work in a non-covered
position and still make use of the “last-day” rule when he or she retires from
government employment, regardless of how far in the future the retirement
occurs.
• Their last day of government service occurred before July 1, 2004, and they
worked their last day in a Social Security-covered position within the same
retirement system. In other words, if a worker switched from non-covered
government work to Social Security-covered work for their last day of work
within the same retirement system, they are exempt from the GPO, even if they
file for Social Security benefits at a later date. However, if a worker returns to

29 For more information on H.R. 743, see CRS Report RS21448, The Social Security Protection Act of 2003 (H.R. 743),
by Dawn Nuschler.
30 This five year period for GPO exemption is consistent with that required of federal employees converting from CSRS
to FERS.





work in a non-covered position in the same retirement system that they
previously retired from and new contributions are made by either the employee
or employer to the non-covered pension system, his or her “last-day” exemption
from the GPO will be revoked and they will be subject to the new 60-month
requirement for exemption from the GPO.
• Their last day of government service occurs on or after July 1, 2004, and before
March 2, 2009, and they work a total of 60 months in a Social Security-covered
position within the same retirement system. The required 60-month period of
Social Security covered employment would be reduced by the number of months
the worker performed in Social Security covered employment under the same
retirement system prior to March 2, 2004. However, in no case can the 60-month
requirement be reduced to less than one month. For example, a teacher who is
currently working in a non-covered position but who previously worked for 12
months in a Social Security-covered position under the same retirement system
would have the 60-month requirement reduced to 48 months. The remaining
months to be worked (in this case 48 months), must be worked consecutively and
after March 2, 2004. Thus, if she switched to a covered position in the same
retirement system as her prior government work for at least the final 48-month
period of her employment and her last day of employment was before March 2,

2009, she would be exempt from the GPO.


• Their last day of government service occurs after March 3, 2009, and they work
their last 60 consecutive months in a Social Security covered position within the
same retirement system. In this case, the entire 60-month period must be worked
after March 2, 2004.
All other individuals receiving government pensions based on non-covered employment would be
subject to reductions in Social Security spousal benefits under the GPO.

In the 110th Congress, five bills have been introduced that would alter the GPO. Representative
Berman and Senator Feinstein introduced H.R. 82 and S. 206, the Social Security Fairness Act of
2007. These identical bills would eliminate the GPO for Social Security benefits payable after
December 2007. According to estimates provided by Social Security actuaries, elimination of the 31
GPO would cost $41.7 billion over 10 years, and in the long run would cost 0.06% of taxable 32
payroll, which would increase Social Security’s long-range deficit by about 3%.

31 Social Security Administration, Memorandum from Bert M. Kestenbaum and Tim Zayats, Office of the Chief
Actuary,Estimated Additional OASDI Benefit Payments Resulting From Several Proposals to Modify the Windfall
Elimination Provision and the Government Pension OffsetINFORMATION, October 26, 2007. All 10-year cost
estimates are taken from this document.
32 Social Security Administration, Office of the Chief Actuary, Memorandum from Eugene Yang and Chris Chaplain to
Stephen C. Goss, Chief Actuary, Estimated Long-Range OASDI Financial Effects from Several Proposals to Modify
the Windfall Elimination Provision and the Government Pension OffsetINFORMATION, October 26, 2007. All
long-term cost estimates are taken from this document.





H.R. 1090, introduced by Representative Ron Lewis, would, among other things, reduce the
offset to one-third of the government pension. The Social Security actuaries estimate that
reducing the offset from two-thirds to one-third of the government pension would cost
approximately $11.0 billion over 10 years.
Representative Wynn and Senator Mikulski introduced H.R. 2988 and S. 1254, the Government
Pension Offset Reform Act. These bills would eliminate the application of the GPO to those
whose monthly combination of Social Security spousal benefits and non Social Security-covered
pension was $1,200 or less. For those whose monthly combination of Social Security spousal
benefits and non-Social Security-covered pension was more than $1,200, the reduction in their
spousal benefit would be equal to the lesser of (1) two-thirds of the amount by which the
combined benefit exceeded $1,200 or (2) two-thirds of the government pension. In future years,
the $1,200 threshold would rise in proportion to the rate of inflation. The Social Security
actuaries estimate that enactment of H.R. 2988/S. 1254, would cost $6.1 billion over 10 years,
and in the long run would cost less than 0.005% of taxable payroll.
On May 1, 2003, the Social Security Subcommittee of the House Committee on Ways and Means
held a hearing on the GPO, in which Members and witnesses discussed approaches to modifying
the provision. The SSA testified that if any action were taken affecting the GPO, it should be done
in the context of overall reform of the Social Security system.
Laura Haltzel
Specialist in Income Security
lhaltzel@crs.loc.gov, 7-4895