Are you a government worker or married to one? Three Capita Social Security planners unravel the complicated knot of government social security penalties, such as the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO). These penalties mostly apply to those who work in uncovered jobs (not paying Social Security taxes) for a time. Learn about when these penalties apply, where they came from and ways to avoid or work around them. These penalties can take years to understand, but you can get an overall idea in less than 40 minutes, here.
Key Talking Points – Episode #24
- Windfall Elimination Provision (WEP) & Government Pension Offset (GPO)
- What is WEP? A penalty that applies to those who have not been participating fully in Social Security their entire working career, or paying FICA taxes.
- This commonly applies to workers of employers who have a pension instead of paying Social Security taxes.
- This penalty began in 1984. Zacc explains the history on this penalty.
- Mike and Zacc explain how the WEP is calculated.
- The WEP can be applied if you receive a one-time pension payment as well as a monthly pension payment.
- Everything talked about today can be done online rather than in the social security office.
- Only when you hit 30 years of substantial earnings do you not get affected by the WEP.
- Every year you work reduces your WEP by approximately $46/month.
- If you accidentally opted out without obtaining 30 years of covered work, you can earn your way out of the WEP penalty by completing 30 years of covered employment. This would include self-employment.
- Some employers allow the worker to opt in or out which creates planning opportunities.
- What is the GPO? This applies to spousal and survivor benefits
- Spousal benefit will be reduced by 2/3rds of the pension amount.
- There are strategies and planning required to accommodate for the GPO.
- You can’t earn your way out of the GPO like you can the WEP.
- What if you have a dual-income household?
- Financial planners can help you plan when to transition and at what time, to get the most out of your benefits.
- Everyone should set up a social security account online at ssa.gov. This can help you know how much you earned/paid. You can send this statement into us with a number and get a few pointers for what you should do.