If you earned a public pension, be careful how it affects your Social Security benefits in retirement – The Boston Globe

That meant she had about $3,100 a month to live on: survivor benefits, plus her public pension.

It was enough for her to cover her expenses, with a small cushion. But then the Social Security Administration, apparently after a routine review, determined it had been paying him incorrectly for more than a year. It reduced the survivor benefit from about $1,300 a month to about $100 a month.

Additionally, the Social Security Administration requested that Cocks pay more than $16,000 to offset the overpayment.

The rooster was destroyed.

“That letter was a total shock,” Cocks, now 68, told me. “It forced me to go back to part-time work. And I don’t know how I’m going to pay $16,000.

The reason Cocks’ survivor benefit was destroyed to almost nothing is something called Government Pension Compensation. The Cocks had never heard of it before the Social Security Administration foisted it on her. Had she known about this before retirement, she might have stayed on as her secretary a little longer to improve her long-term financial position.

Cocks has asked the Social Security Administration for a waiver of her back pay (or at least a payment plan), saying it would create a financial hardship, and has a hearing scheduled for next week. She also says she gave the Social Security Administration all the information it asked for after retirement and that the miscalculation was to blame, not her.

For those who work for municipal or state governments and expect to receive a public pension one day, it’s important to know about the Government Pension Offset, as well as something called the Windfall Elimination Provision, which can also reduce benefits. social security for them. who began to receive a public pension.

Here’s what you need to know:

What is Government Pension Compensation?

It’s a law passed 40 years ago that primarily affects state and local government employees, such as teachers, police officers and firefighters. These workers receive a pension based on earnings that are exempt from Social Security payroll taxes. By contrast, private sector workers pay 6.2 percent of wages in social security taxes, an amount matched by their employers. Congress in 1983 enacted the GPO to address the apparent preferential treatment of those public sector employees who do not pay into the Social Security system.

Two years ago, Venera Cocks, a recently retired Falmouth Public School secretary, received a letter from the Social Security Administration, informing her that she had mistakenly paid her survivor benefits for more than a year and was asking him to return over $16,000.John Tlumacki/ Globe Staff

What was the rationale for the GPO?

It’s complicated, but, in essence, Congress concluded that people who receive both a public pension and some form of Social Security benefits (as a spouse, widow or widower) were treated more generously than those who only worked privately. sector. It aimed to eliminate an unintentional but visible inequality. Debate continues in Congress to this day as to whether the GPO goes too far (or not far enough) and should be fixed.

How does it work?

If you are receiving a Social Security survivor benefit and start receiving a public pension, the Social Security Administration will reduce your Social Security benefits by an amount equal to two-thirds of the amount you receive in your new pension public.

How did it affect Venera Cocks?

After retirement, in round numbers, Cocks began receiving $1,800 a month in pension. This caused the GPO (unbeknownst to Cocks). This meant that the survivor’s benefit of $1,300 a month had to be reduced by two-thirds of her pension amount. Two-thirds of $1,800 (the amount of her monthly pension) is $1,200. Thus, her Social Security benefit of $1,300 per month was reduced by $1,200 per month, leaving her with $100 per month.

What happens if two-thirds of a retiree’s pension is more than the survivor benefits?

Their survivor benefit is reduced to zero.

Does the GPO only affect survivors, ie widows and widowers, who receive Social Security benefits?

No, there is another category of people who may be affected by the GPO – those married people who may be eligible to collect up to 50 percent of their spouse’s Social Security benefits.

How many people does the GPO affect?

As of 2023, the GPO reduced benefits for almost 745,000 Social Security beneficiaries, roughly 1 percent of all beneficiaries, according to the American Society of Pension Professionals and Actuaries.

Of these, about half were married and half were widows or widowers. In about two-thirds of cases, the GPO eliminated benefits entirely, the pension company says.

Why was Cocks caught unaware of the GPO?

Cocks says she provided all the information the Social Security Administration requested after retirement. She also had a pre-retirement discussion with the Falmouth Pension Board, which manages her pension. But she says no one mentioned the GPO and how it would affect her.

Should the local pension board have discussed it with Cocks?

The director of the Falmouth Retirement Board told me he is “not qualified” to advise his members on Social Security law. He said those approaching retirement are “routinely advised” to consult with the Social Security Administration. He also pointed to a Social Security tab on the Falmouth retirement board’s website that says the GPO “may reduce and in some cases eliminate” benefits and provides a link to the Social Security Administration’s website that details the GPO.

Venera Cocks, a retired Falmouth Public School secretary. John Tlumacki/ Globe Staff

What is the Windfall Elimination Provision?

WEP comes into play when you start receiving a public pension while still receiving your ‘earned’ Social Security benefits. To qualify for basic Social Security retirement benefits, you must have worked in the private sector (paying Social Security taxes) for a minimum of 10 years, although they do not have to be consecutive years (you need 40 ¼ , so 40 three-month periods). If you qualify and start receiving earned Social Security benefits, those benefits will be reduced when you start receiving your pension.

What was the rationale for WEP?

The formulas are complicated, but suffice it to say that the system tries to provide a safety net, especially for long-term low wage earners. The way it does this is by counting 90 percent of your first $1,174 per month in earnings toward your benefits. As income increases, the percentage used to calculate your benefits decreases on a sliding scale. An unintended consequence of this sliding scale calculation is that it gives an economic advantage – a “windfall” to those retirees who have worked in the private sector long enough to qualify for benefits before going to work in the public sector and to earn a pension there. WEP was intended to eliminate that advantage. Like the GPO, it remains controversial and subject to ongoing political debate.

How much does WEP reduce my Social Security benefits when I start receiving a public pension?

WEP cuts your Social Security benefits by a percentage based on how many years you’ve had substantial earnings in the private sector; the more years you had (and therefore the more you paid into the system), the higher the percentage of your Social Security benefits you were allowed to keep. The Social Security Administration offers an online WEP calculator.

In the end? Do your homework before retirement to avoid what happened to Cocks.

I have a problem? Send your customer issue to sean.murphy@globe.com. Follow him @spmurphyboston.

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