Social Security offsets:
Policies public employees love to hate and don’t understand

By Thomas Margenau,
©2007 International Foundation of Employee Benefit Plans

Do you administer a public pension for employees not covered by Social Security? If so, you may be aware of two laws that can offset, or perhaps eliminate, Social Security benefits employees may have earned on the side or may be due from a spouse. Questions are understandable, given the complexity of these laws: the windfall elimination provision and the government pension offset. This article intends to clarify these government offsets.

“I’ve heard through the grapevine that my Social Security will be cut in half because of our pension plan. What’s the deal?”

“A coworker just told me that I won’t get a nickel of my wife’s Social Security because of our pension. That isn’t fair!”

“I understand an offset will prevent me from getting any Social Security. But surely I’ll be covered by Medicare, right?”

The above questions and comments may be heard from those who work in the benefits or payroll department of a public agency not covered by Social Security. Conventional wisdom usually places the blame for these perceived Social Security benefit inequities on a law vaguely referred to as a government offset.

In fact, there are two provisions in Social Security law that may potentially impact employees due to receive a pension from a job not covered by Social Security.

• The first is the windfall elimination provision, which generally reduces a public employee’s own Social Security retirement benefit.
• The second is the government pension offset, which impacts any Social Security spousal benefits employees might be due from a wife or husband’s Social Security record.

Employees may be affected by one or both of these laws.

Download the full article here (from IGFOA 2007 newsletter).