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Retired Military Finances 201: Buh-Bye GPO and WEP Thumbnail

Retired Military Finances 201: Buh-Bye GPO and WEP

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I'll start this blog post by saying that this change in most cases won't apply to the retired military member. But...it could apply to your spouse (and if you've been a reservist for a long time, it could apply to you too). What am I exactly talking about? Figuring out Social Security benefits is pretty complicated. But apparently it wasn't complicated enough. There were two provisions to Social Security that complicated benefit calculations quite a bit. They were the Government Pension Offset (GPO) and the Windfall Elimination Provision (WEP). Legislation recently signed into law, eliminated these two changes to Social Security benefits. It's probably still worth it to understand these provisions at least at the top level, to see if the changes could help you out.

What Does Elimination of the GPO Mean for Me?

The GPO applied to those who are married, did not pay into Social Security while employed and did not earn their own Social Security benefits. Who would that be? Many states opted out of Social Security for their government employees. So, if your spouse worked as a state employee (as a teacher for example) in a state where employees didn't pay into Social Security, he or she may have been subject to the GPO. Another situation might be where a military spouse worked as a Civil Servant (GS, etc.) and was covered by the Civil Service Retirement System (CSRS...the old retirement system). GS employees covered by CSRS didn't pay into Social Security so the GPO would have also applied to them.

The GPO reduced spousal and survivor benefits by a percentage of the government pension. In many cases, this reduction eliminated spousal and survivor benefits for a spouse. With the GPO eliminated, spouses will now receive full spousal and/or survivor benefits.

How Does Elimination of the WEP Affect Me?

The WEP affects your earned Social Security benefits. It also applies to those who had a job where they didn't pay into Social Security while employed for a portion of their career but have enough quarters to qualify for their own Social Security benefits. WEP was put into place to eliminate a perceived windfall due to the way benefits are calculated. In essence Social Security pays out better on lower wages. To illustrate, Social Security will replace about 90% of the first $1,000 of average monthly income but only 15% of average monthly wages over about $7,000 (if you'd like more details on benefit calculations, see the links below). If someone has only the minimum number of years to qualify for Social Security their average monthly wages will be low and a greater percent of those wages than if the income where Social Security was not paid was included.

There was a formula to calculate the reduction, but now that the WEP is eliminated we don't need to worry about this and for those who had income on which they never paid Social Security their benefits will be calculated as if the Social Security covered wages are the only wages.

This change could apply to those who were covered by CSRS and also served as a drilling reservist. Or it could apply to someone who served for around 10 years and then went to work for a state that didn't pay into Social Security.

Was Eliminating the GPO and WEP a Good Idea?

I have mixed feelings about this. I think eliminating the GPO was a good move. If you think about it, a spouse who never earns income and never pays into Social Security has spousal and survivor. benefits. A spouse that works for a governmental entity that doesn't pay into Social Security and has a pension didn't receive spousal and/or survivor benefits. Even though neither of them paid into Social Security.

I'm a little less fond of the WEP elimination. In this case the retiree gets a greater percentage of their wages replaced by Social Security than they would if all income was covered by Social Security on top of their government pension. Not sure I like that.

Military Finances are Different

The elimination of the GPO and WEP applies to all Americans. I do think there is a slightly greater chance that GPO could apply to a military spouse than to a civilian spouse. That's not the only difference between military members and civilians. Just like your career is different than a civilian's, your finances are too. That's why we think Active and Retired Senior Military Officers and NCOs should work with your unique issues each and every day. If you'd like to find out how we work with people just like you, use the button below to schedule a free, initial consultation.

If you found this article useful, you might like the following blog posts:

Retired Military Finances 101: What You Need to Know About Social Security


Retired Military Finances 101: Social Security and Retirement Earnings


Military Finances 201: Take Social Security Early and Invest It?


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