June 27, 2000
By David C. John
I appreciate the opportunity to appear before you today to
discuss Social Security's Government Pension Offset (GPO). This is
an extremely important subject, and I would like to thank the
Chairman for scheduling this hearing. Let me begin by noting that
while I am the Senior Policy Analyst for Social Security at the
Heritage Foundation, the views that I express in this testimony are
my own, and should not be construed as representing any official
position of the Heritage Foundation. In addition, the Heritage
Foundation does not endorse or oppose any legislation.
GPO affects the spouses of workers who held jobs that were not
covered by Social Security. Most of these workers were either state
and local government employees or joined the federal government
prior to 1984. Spouses of Social Security recipients also qualify
for a benefit equal to 50 percent of the worker's benefit. However,
the dual entitlement rule (see below) reduces that benefit dollar
for dollar by any Social Security benefits that the spouse
qualifies for under his or her own earnings record.
Since government workers who were not covered by Social Security
do not have any of their own Social Security benefits,
theoretically, they would qualify to receive the full spousal
benefit. Thus, a person who joined the federal government prior to
1984 would be able to receive both his full Civil Service
Retirement System (CSRS) pension and a Social Security spousal
benefit equal. In order to eliminate this dual benefit, Congress
created the GPO in 1977.
Under this rule, two-thirds2/3rds of the CSRS pension would be
treated as though it were a Social Security benefit, and the
spousal benefit that worker could receive is reduced dollar for
dollar by that amount. Thus, if the CSRS worker had a $1,200 a
month pension, $800 of his or her CSRS pension (2/3) would be
treated as coming from Social Security. If that worker's spouse
also received $1,200 a month from Social Security, that worker
would also be eligible for a Social Security spousal benefit of
$600 (1/2 the spouse's basic retirement benefit). However, it would
be eliminated because the portion of the CSRS pension that is
treated as coming from Social Security under GPO is larger ($800)
than the potential spousal benefit ($600).
As a result of the GPO, the CSRS worker and his or her spouse
have received the same treatment as if both of them were covered by
Social Security. GPO affects about 300,000 retirees, and reduces
Social Security's aggregate benefits by approximately $1 billion
annually. While a major proportion are retired federal workers,
most of the rest were employed by state and local governments which
chose not to participate in the Social Security program. The vast
majority of these workers come from eight states: Alaska,
California, Colorado, Louisiana, Maine, Massachusetts, Nevada, and
It has long been a principle of Social Security that a worker
cannot qualify for full benefits under both his or her earnings
record and that of a spouse. Accordingly, although a married worker
theoretically qualifies for both retirement benefits from his or
her own earnings record and a spousal benefit equal to 50 percent
of the spouse's retirement benefit, this comes under the dual
The dual entitlement rule reduces the spousal benefit dollar for
dollar by the amount of the retirement benefits the worker
qualifies for under his or her own earnings record. Thus, if two
spouses each qualify for $1,200 a month from their own earnings
record, and a spousal benefit of $600 a month (1/2 the basic
retirement benefit), they would still only receive a total benefit
of $1,200. The $600 spousal benefit is eliminated because it is
less than their earned retirement benefit.
On the other hand, if one spouse received $1,200 a month and the
other $400 a month from Social Security, the lower earning spouse
would also qualify for a $200 spousal benefit. In that case, the
$600 spousal benefit from the higher earning spouse would be
reduced by the lower earning spouse's benefit ($600--$400), leaving
a $200 spousal benefit. The dual entitlement rule potentially
affects 96 percent of the work force.
Social Security is the government's most popular program, yet
few Americans know very much about how it operates or why certain
policies were implemented. Although the average American strongly
supports Social Security, only a very, very few have any conception
of how benefits are calculated, what a "'bend point" is, or how the
trust fund relates to the payment of benefits.
GPO is an excellent example of this confusion. To the 4 percent
of the work force, whose benefits could be altered by GPO, it is
patently unfair, and reduces the benefits they or their spouses
paid for with hard-earned money. In addition to federal workers
hired before 1984, most of those people will be located in 8
states. To them, the seemingly arbitrary cut in their spousal
benefits is made even worse by the fact that many only learn of the
provision after they don't receive retirement benefits they had
Those who support eliminating GPO make an emotional case, but
there is also another side to the issue. While GPO's formula is
arbitrary, it is also on the average fair. For government workers
who are not covered by Social Security, GPO is the equivalent of
the dual entitlement rule that affects the other 96 percent of
American workers. Without it, government workers would have an
unfair advantage over those who were part of Social Security for
their entire working life.
Proponents of eliminating GPO or limiting it to cases where the
individual's' retirement income is under $1,200 a month state
correctly state that private pensions have no effect on the amount
of spousal or survivors benefits that an individual can receive.
However, the comparison between private pensions and non-Social
Security government pensions misses the point. Those who receive
private pensions are part of Social Security, and are therefore
subject to the dual entitlement rule. This is also true for those
who have either no retirement income other than Social Security or
those government workers who also participate in Social
It is simply not fair to the remaining 96 percent of the
workforce to give some government workers special treatment. Most
government workers- - and especially teachers- -- perform a
valuable service to society. However, this alone should not justify
eliminating GPO for them, while still retaining the dual
entitlement rule that affects everyone else. If this subcommittee
decides to eliminate or limit GPO, it should also give the same
treatment to those affected by the dual entitlement rule. Doing
both would be fair, but it would also be quite expensive. For that
reason, I am not advocating such a step. However, there may be some
other smaller changes that would benefit the larger group of
beneficiaries that the subcommittee could also include in this
This is not to minimize the shock that an individual, and
especially a recently bereaved spouse, faces when they receive a
much smaller retirement check than they anticipated. However, GPO
has been part of the Social Security program since 1977. It is
neither complex nor complicated. While I would not blame any
individual for not understanding the provision, I would also not
excuse any non-Social Security government retirement program that
does not vigorously work to inform workers that they could be
subject to it. Today's retirees may be stuck in a bad situation,
but there is no reason for those who are still working to face such
an unpleasant surprise.
I am also not making any case that $1,200 a month, much less a
lower figure, is sufficient for a comfortable retirement. Clearly,
it is not. As the son of a teacher, it is truly shocking to me that
all anyone has to show for a lifetime of public service is memories
and such a tiny check.
However, GPO is not the major reason that those pensions are so
low. It may be a contributing factor that further lowers an
extremely low pension, but it is no more than that. For that
reason, altering GPO does little more than making a bad situation
slightly better. The real reason why individuals have such low
pensions is the subject of another debate- - reforming Social
Security and increasing opportunities for individuals to save for
retirement. This subcommittee and its members have taken a leading
role in that debate, and I look forward to continuing to work with
you in the future to truly increase both the security and the
retirement income of American workers.
For today, it is true that the elimination of GPO would increase
the retirement incomes of nearly 300,000 government retirees by an
average of $340 a month. However, those millions of other Social
Security recipients who are subjected to the dual entitlement rule,
and who will not be getting any relief have a valid reason to ask
why their plight has been ignored.
One alternative to eliminating the dual entitlement rule might
be to provide all Social Security recipients with a legal guarantee
to their benefits. One of the consequences of this year's debate on
the future of Social Security is that existing retirees may have
some concern that their full benefits may not be paid. Because of
the Supreme Court rulinged in the case of Flemming v. Nestor
that retirees have no ownership over their benefits and that
Congress could adjust their benefits at will, retirees may not be
willing to simply accept the word of public officials that their
benefits are safe. One low-cost, but effective action would be to
grant existing and future retirees a written property right to
their benefits. Attaching such a simple measure to legislation
dealing with GPO would expand its coverage from benefiting only a
small segment of Social Security recipients to legislation that
benefits everyone who receives Social Security.
John is Senior Policy Analyst, Social Security at The
The Social Security Government Pension Offset
David C. John
Senior Research Fellow in Retirement Security and Financial Institutions
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