Certain public sector employees who work in jobs where they don’t pay Social Security taxes are likely to find their Social Security benefits reduced or eliminated. If you are entitled to a ‘non-covered’ pension, you need to be aware of this impact. The impact of a non-covered pension is not shown on your Social Security statement because the Social Security department does not know that you have one. The Windfall Elimination Provision (WEP) reduces your Social Security pension (if any), and reduces your dependents’ benefits, but it does not completely eliminate them. If you have 10 years of work where you paid Social Security tax (‘covered’ work), then you will get a reduced Social Security pension. The more covered work you have, the lower the reduction. If you have 30 years of substantial covered earnings, then a non-covered pension does not reduce your Social Security benefits at all. Note that WEP does not reduce the survivor’s benefit for your widow(er).
The Government Pension Offset (GPO) reduces your Social Security dependent benefits (if any), meaning the benefits you would normally be entitled to as the spouse or widow(er) of a worker entitled to a Social Security pension. Your dependent Social Security benefit is reduced by 2/3 of your public pension. Note that this applies even if you take your public pension as a lump sum. This reduction could easily reduce your Social Security dependent benefit to zero.
What can you do?
First check your Social Security statement available from www.SSA.gov . Two important notes – the benefit listed ignores any of your non-covered pension benefits, and assumes that you will continue to work at your last covered salary until your full retirement age.
You can use the WEP and GPO calculators on the government website to see the impact your non-covered pension would have on your Social Security benefits.
If you do not qualify for a Social Security pension (10 years of covered work), consider getting work credits to qualify (summers, after you leave the public sector, etc). That will entitle you to a modest Social Security pension. That will also qualify you for free Medicare. You may already qualify for Medicare if you have been paying Medicare taxes, or you are married to a Medicare-qualified spouse.
Consider taking a reduced public pension earlier, because that would also reduce your WEP and GPO reductions.
This area of Social Security is very complex, so you should consult with your local Social Security office to understand how your particular situation is affected.