Colorado PERA members who are counting on future Social Security benefits to supplement their PERA benefits are often surprised to learn that their expected Social Security benefits may be reduced because of their PERA membership.
PERA benefits are never reduced when the PERA retiree is also receiving a Social Security benefit.
Social Security has two reductions that apply to PERA members—the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO).
What is WEP?
The WEP applies to PERA retirees who also receive a Social Security earned benefit, which is paid to a worker who earned enough credits under Social Security-covered employment to qualify for a benefit. The WEP reduction to the Social Security benefit varies based on a variety of factors, so be sure to review the Social Security Administration WEP fact sheet.
According to the Social Security Administration, prior to 1983, PERA members who were not covered by Social Security had their Social Security benefits calculated as if they were earned as long-term, low-wage workers. They had an advantage of receiving a Social Security benefit that represented a higher percentage of their Social Security earnings, plus a PERA benefit from a job where they did not pay Social Security taxes. The Windfall Elimination Provision was passed by Congress to remove that advantage.
The WEP reduces the earned Social Security benefit using a formula that’s based on earnings and payroll tax contributions to the Social Security system.
The WEP does not apply to PERA retirees who:
- Qualified for PERA retirement before 1986.
- Have 30 or more years of “substantial” Social Security earnings (see the WEP fact sheet for the annual amounts that Social Security considers substantial).
- Pay Social Security tax on PERA-covered employment (applies to some local government retirees covered by both PERA and Social Security).
What is GPO?
The GPO applies to PERA retirees who also receive a Social Security spousal or widow(er) benefit. The GPO reduces the spousal Social Security benefit by two-thirds of the PERA benefit and may completely eliminate the Social Security benefit.
As the Social Security Administration explains, a person’s Social Security benefit as a spouse, widow or widower has always been offset dollar for dollar by the amount of his or her own 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 pay Social Security taxes.
The GPO does not apply to PERA retirees who:
- Are not receiving or will not receive a Social Security spousal or widow(er) benefit.
- Qualified for a PERA retirement benefit before June 30, 1983.
- Received a PERA benefit based on work that was also covered by Social Security on the last day of employment and the last day was before July 1, 2004 (may apply to some local government retirees who are covered by both PERA and Social Security).
- Will receive a PERA benefit based on work that is also covered by Social Security during the last five years of employment and the last day of employment was July 1, 2004, or later.
WEP and GPO Calculators
Social Security’s website has a WEP calculator and a GPO calculator that can be used to get a general idea about how benefits under Social Security may be impacted by these reductions.