Chris Stein, CFP®
Social Security Survivorship Benefits and Government Pension Clarification
A reader from Massachusetts asks about survivorship benefits, his spouse’s pension and his Social Security retirement benefit.
“My wife is 69. She is a state worker who did not contribute to Social Security while working in the public sector. As a result, she will get a pension. I am also 69 and will submit my claim for Social Security benefits when I turn 70. I am named beneficiary on her pension plan. If my wife predeceases me, will the Government Pension Offset reduce my Social Security benefit because I receive her pension benefits?”
You have turned the situation around, and it’s an excellent question.
Couples are typically worried if the wife has a government pension. They want to know how her survivor benefit from her husband’s Social Security retirement will be affected if he predeceases her. How will the Government Pension Offset, or GPO, affect her survivor benefit?
First, let’s look at the GPO. GPO is a Social Security rule that affects a worker who has a government pension that did not come from the Social Security system. (It’s called a “non-covered pension.”) For our purposes here, it’s enough to know that the rule grew out of the formula Social Security uses to calculate benefits for participants in its system.
When a public sector pension and a private sector retirement benefit come together, it results in a form of “double-dipping.” So when a public sector worker claims against a benefit earned by their private sector spouse, the Social Security portion is reduced to remove the duplication.
Back to your situation. In your case, there’s nothing but good news. No, there’s no GPO. You will receive the full survivorship benefit from that pension without any reduction anywhere.
It seems counterintuitive, but you won’t be punished since you didn’t participate in the non-covered pension. And the pension doesn’t care that you’re also receiving Social Security; it’s just paying out.
Social Security is the entity that applies the GPO, and they can’t apply it against you if you weren’t the one participating in the non-covered pension. So if your wife predeceases you, you will receive your full Social Security benefit without being affected as the beneficiary of a non-covered pension.
That will not be the case the other way around. If your wife is the survivor, she is subject to GPO, and her Social Security survivor benefit will be reduced by $2 for every $3 of her non-covered pension. And if the size of her pension is significant, it could easily wipe out her Social Security spousal survivor benefit completely. (Or there might be some left.)
But with you as the survivor, there will be no reduction at all.