If you receive a pension from the government and you are eligible for social security benefits as a widow, widower or spouse, the benefits may be less than half of the normal amounts for retirement. If the pension is from work where social security was paid through a payroll deduction, the benefits may not be affected.
If the pension was not covered through social security, benefits from the working spouse’s record may be reduced. This reduction is known as the Government Pension Offset (GPO) designed to manage dual entitlement. The GPO reduces the amount of the benefit payable to a spouse, using their social security benefits record.
For example, a wife reaches retirement age and is eligible to receive social security benefits of $900 and she qualifies for dependent’s benefit from her husband’s earnings of $500. While the husband is living, the wife would only receive the $900 since it is larger than $500 she would receive from the husband’s earnings.
If you receive a government pension there is a different method of calculation used to determine the social security benefits. Here’s how it works, social security uses three percentage tiers for calculating. The first tier for a person turning 62; the first $761 is multiplied by 90 percent, the second tier goes up to $4,586 is multiplied by 32 percent and any amount over $4,586 is multiplied by 15 percent.
When you combine the government pension, it falls under the “windfall elimination provision (WEP)” and the formula changes to 40 percent on the first tier. If the worker paid into social security over a 30 years period the first tier may fall between 45- 80 percent instead of the 90 percent.