WEB/GPO Flashcards
Under the dual entitlement provision, there is a dollar-for-dollar reduction. If a person receives a Social Security retirement benefit of $600 based on his or her own work, then $600 is subtracted from any Social Security benefit the person would get as a spouse.
Subtracted from the Social Security benefit
Under the GPO provision, there is a reduction in spousal and survivor benefits equal to two-thirds of the pension that the dependent is receiving. If a person receives a non-covered pension of $600 based on their own work in government, then their Social Security spousal and survivor benefits would be reduced by two-thirds of that pension ($400).
2/3 of the Social Security benefit
Mike, age 62, was a software engineer for the first 18 years of his working career from 1986 through 2003. His employer withheld Social Security payroll taxes from his paycheck during these years. Then Mike became a high school math teacher and taught for 17 years from 2004 through 2020.
For the years between 1986 and 2003, all of his pay was above the substantial earnings levels shown in Figure 1.1. Therefore, with 18 years of substantial earnings, he has less than 20 years which makes his PIA adjustment factor 40%.
For the years between 1986 and 2003, all of his pay was above the substantial earnings levels shown in Figure 1.1. Therefore, with 18 years of substantial earnings, he has less than 20 years, which makes his PIA adjustment factor 40%.
Figure 1.3 below shows how Mike’s PIA will be affected due to the WEP. Based on his earnings, he has an AIME of $7,750.
As you’ll recall, PIA is a calculation of three parts of a person’s AIME, as shown in the top example. (See Module I, Section 2.3.B - Calculating PIA.)
The upper calculation shows how Mike’s PIA is determined without considering the WEP. This is how his benefit is calculated if he is not collecting the non-covered pension. His PIA, the benefit amount at his FRA, is $3,130 per month.
Let’s look at an example that will illustrate how the Government Pension Offset applies to a survivor benefit compared to a similar situation with the dual entitlement provision.
Viola Brown worked for the government and is receiving a non-covered pension of $900. When her husband dies, she is entitled to a Social Security survivor, or widow’s, benefit of $1,400. However, the GPO provision reduces her $1,400 widow’s benefit by two-thirds of her $900 non- covered pension, or $600.
Subtracting the $600 offset from her survivor benefit, leaves her with a $800 adjusted survivor benefit payable in addition to her $900 non-covered pension. Remember, the non-covered pension is separate from the Social Security benefits, and that entire pension will be paid. She receives a total of $1,700 per month as shown in Figure 1.4.
On the other hand, Margaret is receiving a Social Security retirement benefit of $1,000 per month based on her own earnings record. When her husband dies, she is also eligible for a survivor benefit of $1,400.
The entire $1,000 of her retirement benefit is subtracted from her survivor benefit, resulting in an adjusted survivor benefit of $400 under the dual entitlement provision. Therefore, she receives a total of $1,400 per month as shown below in Figure 1.5.
Dual entitlement can be difficult to grasp at first. Remember, a beneficiary will collect in total the equivalent of the highest benefit, whether that is their retirement, disability, spousal, or survivor benefit. Retirement is paid first, then the remaining portion is paid as the other type of benefit.
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Pensions, whether non-covered or covered, are not affected in any way by the WEP and GPO. These rules related to pensions only affect the amount of Social Security benefits
The agreements are called totalization agreements, also sometimes referred to as Social Security agreements.
The US currently has 30 active agreements. There are two main purposes for these international agreements.
The SSA is not always aware of the non-covered pension which a retiree is eligible for, so would not apply the WEP or GPO in those situations. They will learn of the pension through tax documents eventually, so the overpayment can amount to thousands of dollars.
The common cause of this type of overpayment, similarly to Earnings Test Overpayments, is that the retiree is responsible for reporting their non-covered pension to the SSA, but they didn’t know they needed to.
To avoid this, it is critical for clients to know whether their pension is non-covered or covered, and the expected benefit reduction.
If a person collects a Social Security benefit earlier than their pension payment, remember that the WEP and GPO do not apply until the pension is also collected. They must then alert the SSA when the pension is collected so benefits can be adjusted.
The 1979 Advisory Council on Social Security and the 1983 National Commission on Social Security Reform both recommended that some Social Security benefits be included in federal taxable income.
The Social Security Amendments of 1983 were signed into law on April 20, 1983, and became effective in 1984.
Among other changes, the 1983 amendments included up to 50% of Social Security benefits as taxable income for taxpayers whose combined income exceeds $25,000 for a single taxpayer and $32,000 for married taxpayers filing jointly.
Also included in the 1983 legislation was the stipulation that this income from taxation of Social Security benefits was to be deposited back into the Social Security trust funds.
A decade later, in 1993, legislation extended the taxation of benefits. The legislation increased the limitation on the amount of benefits subject to taxation from 50% to 85% for single taxpayers with incomes over $34,000 and for taxpayers filing jointly with incomes over $44,000.
Married couples who have a combined income of less than $32,000 will not have any of their Social Security benefits taxed. If they have a combined income between $32,000 and $44,000, up to 50% of their benefit may be taxed. Once a married couple’s combined income exceeds $44,000, up to 85% of their benefit may be taxed.
Similarly, for singles with combined income amounts of less than $25,000, there is no tax on their Social Security benefit. If their combined income is between $25,000 and $34,000, up to 50% of their benefit may be taxed and if combined income exceeds $34,000 for single taxpayers, up to 85% of their benefit may be taxed.
Remember the calculation of combined income, as shown in Figure 2.2. Note that Social Security benefits are given a tax preference with only 50% of the benefit amount being counted in the combined income formula while 100% of all other income is included.
the common forms of retirement income, such as wages, tax-exempt interest, qualified dividends, individual retirement accounts (IRAs), pensions, and annuities are all included in AGI.
the common forms of retirement income, such as wages, tax-exempt interest, qualified dividends, individual retirement accounts (IRAs), pensions, and annuities are all included in AGI.
Once combined income and taxation thresholds have been evaluated to determine if a retiree’s Social Security income may be taxed, a three-part test is used to determine the actual amount of income that is subject to tax. Below is the 3-part test. The lowest of these 3 tests is the amount of Social Security subject to taxation:
The ten states which tax Social Security benefits in 2025 are:
Of all the definitions of disability used by government, industry, and private disability insurance programs. Social Security’s is probably the strictest. There is little, or no, provision for partial or temporary disability as there are in other types of disability insurance plans. The Social Security Administration defines disability as follows:
The inability to engage in any Substantial Gainful Activity by reason of any medically determinable physical or mental impairment which can be expected to result in death, or which has lasted or can be expected
to last for a continuous period of not less than 12 months.
Disability Work Requirements
The work requirement consists of two different earnings tests, both of which are dependent on the worker’s age at the onset of the disability.
First, a disabled worker must have enough substantial lifetime work to be insured. Second, they must meet the criteria for recent work in covered employment prior to onset of the disability.
The substantial disability lifetime work standard requires that the worker have from 1 % to 10 years of work paying into Social Security and is measured by quarters of coverage. Quarters of Coverage, or credits, required for disability benefits vary with age, but are the same 40 credits as are required for retirement benefits if the worker is over age 62.
Younger workers may qualify with fewer credits. Workers ages 24 to 31 qualify if they have credit for working % of the time between age 21 and the time they became disabled. Therefore, if the disability occurred before age 24, the worker may qualify if 6 credits were earned in the 3- year period ending when disability starts.
Family of a Disabled Worker Benefits
The spouse of a disabled worker is eligible to receive spousal benefits if they either:
1. have a child under age 16 or a disabled child in his or her care, or
2. they are at least 62 years old.
In some situations, (Disability) a divorced spouse may also qualify for benefits based on the disabled ex-spouse’s earnings if he or she was married to the worker
for at least 10 years, is not currently married, and is at least age 62.
As with Social Security retirement auxiliary benefits, dependent children covered by disability auxiliary benefits include:
*
Although each family member may be eligible for a monthly benefit of up to 50% of the worker’s disability benefit, a family maximum benefit applies to the amount collected by the disabled worker, their spouse, and qualifying dependent children.
Biological children,
* Legally adopted children, and
* Stepchildren of the worker.
To be eligible, the child must be unmarried and under the age of 18. If still in high school, the child is eligible until they graduate or two months after turning age 19, whichever comes first. Although each family member may be eligible for a monthly benefit of up to 50% of the worker’s disability benefit, a family maximum benefit applies to the amount collected by the disabled worker, their spouse, and qualifying dependent children.
Disabled Family Maximum Benefit Case Example
The family maximum benefit for disabled workers is 85% of the worker’s averaged indexed monthly earnings (AIME). However, the family maximum cannot be less than the worker’s PIA, or more than 150% of the worker’s PIA. Each family member may be eligible for a monthly benefit of up to 50% of the worker’s disability benefit, up to the family maximum benefit amount.
Steve has an AIME of $6,500 and is 55 years old. He became disabled in 2024, thus his PIA bend points are those from 2024 ($1,174 and $7,078). His PIA is $2,761. His disabled family maximum benefit is calculated based on these three criteria as shown below:
a. 85% of his AIME of $6,500 = $5,525
b. not less than his PIA = $2,761
c. or more than 150% of the PIA = $4,141
Therefore, in Steve’s case, his disabled worker family maximum benefit is $4,141. He will receive his PIA, and other dependents will receive up to 50% of his PIA, limited by this family maximum disabled worker limit.
C. Disabled Adult Children (DAC)
If a person was disabled before the age of 22, they qualify for benefits on their parent’s work record once their parent has filed for retirement benefits. They also must be unmarried to qualify, with some exceptions. Therefore, this benefit is called a children’s benefit, even though there is no upper age limit for eligibility.
The application for disabled adult child (DAC) benefits should be completed shortly before the child’s 18th birthday if they were already collecting children’s benefits.
Among other changes, the 1983 amendments included up to 50% of Social Security benefits as taxable income for taxpayers whose combined income exceeds $25,000 for a single taxpayer and $32,000 for married taxpayers filing jointly.
What happened in 1993?
In 1993, legislation extended the taxation of benefits. The legislation increased the limitation on the amount of benefits subject to taxation from 50% to 85% for single taxpayers with incomes over $34,000 and for taxpayers filing jointly with incomes over $44,000.
The legislation also included the taxation money to be deposited. Where is it to be deposited?
The 1983 legislation also included the stipulation that this income from the taxation of Social Security benefits was to be deposited back into the Social Security trust funds.
