This course serves as a reminder that Public Law 108-203 requires State and local government employers to disclose the effect of the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO) to employees hired after January 1, 2005.  WEP and GPO are also explained.

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    1. What is Section 419(c) of Public Law 108-203?
    2. What is the Form SSA-1945?
    3. What are the responsibilities of the employer regarding the Form SSA-1945?
    4. Where can I get a copy of the Form SSA-1945?
    5. What is the Windfall Elimination Provision (WEP)?
    6. When will my benefits be affected by WEP?
    7. How does WEP Work?
    8. Can I calculate the effect of WEP on benefits?
    9. What is the Government Pension Offset (GPO)?
    10. Why will my Social Security benefits be reduced by GPO?
    11. When won’t my Social Security benefits be reduced by GPO?
    12. Can I calculate the effect of GPO on benefits?
    13. I recall there being a provision that would allow for GPO exemption. Does this exist?

 

One of the basic responsibilities of the State Social Security Administrator is to communicate and provide outreach to the State’s respective political subdivisions (including those that do not have Section 218 coverage agreements). This entails making contact at least once annually to secure current contact and mailing information including: current legal status, possible subdivision name changes, address changes, telephone and fax numbers, email address, and EIN(s). In addition, the state administrator should be aware and knowledgeable of Section 419(c) of Public Law 108-203.


1.  What is Section 419(c) of Public Law 108-203?

Section 419(c) of Public Law 108-203, the Social Security Protection Act of 2004, requires State and local government employers to disclose the effect of the Windfall Elimination Provision and the Government Pension Offset to employees hired on or after January 1, 2005, in jobs not covered by Social Security. The law requires newly hired public employees to sign a statement (Form SSA-1945) that they are aware of a possible reduction in their future Social Security benefit entitlement.


2.  What is the Form SSA-1945?

Form SSA-1945, Statement Concerning Your Employment in a Job Not Covered by Social Security, is the document that employers should use to meet the requirements of the law. The SSA-1945 explains the potential effects of two provisions in the Social Security law for workers who also receive a pension based on their work in a job not covered by Social Security. The Windfall Elimination Provision can affect the amount of a worker’s Social Security retirement or disability benefit. The Government Pension Offset Provision can affect a Social Security benefit received as a spouse or an ex-spouse.


3.  What are the responsibilities of the employer regarding the Form SSA-1945?

Employers must:

  • Give the statement to the employee prior to the start of employment,
  • Get the employee’s signature on the form, and
  • Submit a copy of the signed form to the pension paying agency.

4.  Where can I get a copy of the Form SSA-1945?

Copies of the SSA-1945 are available online at the Social Security website, www.socialsecurity.gov/form1945. Paper copies can be requested by email at oplm.oswm.rqct.orders@ssa.gov or by fax at 410-965-2037. The request must include the name, complete address and telephone number of the employer. Forms will not be sent to a post office box. Also, if appropriate, include the name of the person to whom the forms are to be delivered. The forms are available in packages of 25. Please refer to Inventory Control Number (ICN) 276950 when ordering.


5.  What is the Windfall Elimination Provision (WEP)?

The Windfall Elimination Provision affects how the amount of your retirement or disability benefit is calculated if you receive a pension from work where Social Security taxes were not taken out of your pay. A modified formula is used to calculate your benefit amount, resulting in a lower Social Security benefit than you otherwise would receive.


6.  When will my benefits be affected by WEP?

The Windfall Elimination Provision primarily affects you if you earned a pension in any job where you did not pay Social Security taxes and you also worked in other jobs long enough to qualify for a retirement or disability benefit.

For example, this provision affects Social Security ­benefits when any part of a person’s federal service after 1956 is covered under the Civil Service Retirement System (CSRS). However, federal service where Social Security taxes are withheld (Federal Employees’ Retirement System or CSRS Offset) will not reduce your Social Security benefit amounts.

The Windfall Elimination Provision may apply if:

  • You reached 62 after 1985; or
  • You became disabled after 1985, and
  • You first became eligible for a monthly pension based on work where you did not pay Social Security taxes after 1985, even if you are still working.

7.  How does WEP Work?

Social Security benefits are based on the worker’s average monthly earnings adjusted for inflation. We separate your average earnings into three amounts and multiply the amounts using three factors. For example, for a worker who turns 62 in 2011, the first $749 of average monthly earnings is multiplied by 90 percent; the next $3,768 by 32 ­percent; and the remainder by 15 percent. The sum of the three amounts equals the total monthly payment amount.

The 90 percent factor is reduced in the modified formula and phased in for workers who reached age 62 or became disabled between 1986 and 1989. For those who reach 62 or became disabled in 1990 or later, the 90 percent factor is reduced to 40 percent.

There are exceptions to this rule. For example, the 90 percent factor is not reduced if you have 30 or more years of “substantial” earnings in a job where you paid Social Security taxes. See the table below for a list of the amount of substantial earnings for each year.

Year

Substantial Earnings

1937-54

$900

1955-58

$1,050

1959-65

$1,200

1966-67

$1,650

1968-71

$1,950

1972

$2,250

1973

$2,700

1974

$3,300

1975

$3,525

1976

$3,825

1977

$4,125

1978

$4,425

1979

$4,725

1980

$5,100

1981

$5,550

1982

$6,075

1983

$6,675

1984

$7,050

1985

$7,425

1986

$7,875

1987

$8,175

1988

$8,400

1989

$8,925

1990

$9,525

1991

$9,900

1992

$10,350

1993

$10,725

1994

$11,250

1995

$11,325

1996

$11,625

1997

$12,150

1998

$12,675

1999

$13,425

2000

$14,175

2001

$14,925

2002

$15,750

2003

$16,125

2004

$16,275

2005

$16,725

2006

$17,475

2007

$18,150

2008

$18,975

2009 - 2011

$19,800

2012

$20,475

2013

$21,075

2014

$21,750

2015-2016

$22,050

2017

$23,625

2018

$23,850

2019

$24,675

The next table shows the percentage used depending on the number of years of substantial earnings. If you have 21 to 29 years of substantial earnings, the 90 percent factor is reduced to between 45 and 85 percent.

Years of Substantial Earnings

Percentage

30 or more

90 percent

29

85 percent

28

80 percent

27

75 percent

26 70 percent
25 65 percent
24 60 percent
23 55 percent
22 50 percent
21 45 percent
20 or less 40 percent

To see the maximum amount your benefit could be reduced, visit www.socialsecurity.gov/retire2/wep-chart.htm.


8.  Can I calculate the effect of WEP on benefits?

Use the WEP Online Calculator to calculate your estimated retirement or disability benefits if you are affected by the WEP


9.  What is the Government Pension Offset (GPO)?

If you receive a pension from a federal, state or local government based on work where you did not pay Social Security taxes, your Social Security spouse’s or widow’s or widower’s benefits may be reduced.


10.  Why will my Social Security benefits be reduced by GPO?

Benefits we pay to wives, husbands, widows and widowers are dependent’s benefits. These benefits were established in the 1930s to compensate spouses who stayed home to raise a family and who were financially dependent on the working spouse. But as it has become more common for both spouses in a married couple to work, each earned his or her own Social Security retirement benefit. The law has always required that a person’s benefit as a spouse, widow, or widower be offset dollar for dollar by the amount of his or her own retirement benefit.

In other words, if a woman worked and earned her own $800 monthly Social Security retirement benefit, but she was also due a $500 wife’s benefit on her husband’s Social Security record, we could not pay that wife’s benefit because her own Social Security benefit offset it. But, before enactment of the Government Pension Offset provision if that same woman was a government employee who did not pay into Social Security, and who earned an $800 government pension, there was no offset and we were required to pay her a full wife’s benefit in addition to her government pension.

If this government employee’s work had instead been subject to Social Security taxes, any Social Security benefit payable as a spouse, widow or widower would have been reduced by the person’s own Social Security retirement benefit. In enacting the Government Pension Offset provision, Congress intended to ensure that when determining the amount of spousal benefit, government employees who do not pay Social Security taxes would be treated in a similar manner to those who work in the private sector and do pay Social Security taxes.


11.  When won’t my Social Security benefits be reduced by GPO?

Generally, your Social Security benefits as a spouse, widow or widower will not be reduced if you:

  • Are receiving a government pension that is not based on your earnings;
  • Are a State or local employee whose government pension is based on a job where you were paying Social Security taxes
    • on the last day of employment and your last day was before July 1, 2004;
    • during the last five years of employment and your last day of employment was July 1, 2004, or later (Under certain conditions, fewer than five years may be required for people whose last day of employment falls between July 1, 2004, and March 2, 2009.);
  • Are a federal employee, including Civil Service Offset employee, who pays Social Security taxes on your earnings (A Civil Service Offset employee is a federal employee who was rehired after December 31, 1983, following a break in service of more than 365 days and had five years of prior civil service retirement system coverage.);
  • Are a federal employee who elected to switch from the Civil Service Retirement System to the Federal Employees’ Retirement System (FERS) on or before June 30, 1988. If you switched after that date, including during the open season from July 1, 1998, through December 31, 1998, you need five years under FERS to be exempt from the Government Pension Offset;
  • Received or were eligible to receive a government pension before December 1982 and meet all the requirements for Social Security spouse’s benefits in effect in January 1977; or
  • Received or were eligible to receive a Federal, State or local government pension before July 1, 1983, and were receiving one-half support from your spouse.

12.  Can I calculate the effect of GPO on benefits?

To estimate your future spouse's, widow's or widower's benefits under the GPO, you need two things:

  1. The estimated "gross" monthly amount of your pension from your government job not covered by Social Security.
  2. The estimated monthly amount of your Social Security benefit as a spouse, widow or widower before the effect of GPO.

You can then refer to the GPO Online Calculator.


13.  I recall there being a provision that would allow for GPO exemption. Does this exist?

H.R. 743, the “Social Security Protection Act of 2004,” was passed by Congress on February 11, 2004 and signed into law by the President on March 2, 2004. (P.L. 108-203).

The law contains a provision that eliminates the “last day covered employment exemption” to the government pension offset (GPO). The GPO provision reduces the amount of a spouse’s or surviving spouse’s benefit by two-thirds of the amount of that person’s government pension if the person was employed by the government and the employment was not covered by Social Security. Previously, an individual was exempt from the GPO if his or her last day of government employment was in a job covered by both Social Security and the government pension system. 

The law requires that the last 60 months of a person’s government employment before retirement be covered by Social Security and the pension system in order to avoid reduction under the GPO