GPO Overview & Formula
The Government Pension Offset impacts individuals who are receiving government pensions and did not pay Social Security taxes. As a result of GPO, these individuals will see their spousal/survivor benefits reduced. The intention of the GPO is to ensure that benefits for government employees who don’t pay Social Security taxes are calculated the same as for workers in the private sector who pay Social Security taxes.
For information on the Windfall Elimination Provision (WEP), which reduces retirement benefits as a result of non-covered pension income within a plan, click here.
When a client is subject to GPO, their spousal or survivor benefits will be reduced by 66% (or two-thirds) of their monthly non-covered pension amount. For example, if a client is receiving $600 per month as a result of a non-covered pension, their spousal benefits will be reduced by $400 ($600 x 66% = $400). If that same client was eligible for a $500 monthly social security benefit based on their spouse’s record, they will receive a $100 monthly benefit instead ($500 - $400 = $100). If two-thirds of the non-covered pension is greater than their total spousal or survivor benefit, the benefit will be completely eliminated.
There are certain situations in which a spousal or survivor benefit will not be reduced due to GPO, which can be found here.
How to Apply GPO to a Financial Plan
RightCapital will apply the GPO reduction to Social Security benefits when there is a non-covered pension income card entered.
1
In the Profile > Income area (or step 2 when creating a client), click Add Income > Pension:
2
Fill out the necessary data fields, and then check the "Non-Covered" box in the bottom left. Once checked, the pension amount will offset any Social Security spousal benefits that the client would otherwise receive:
The GPO reduced Social Security benefit can be tracked in the Retirement > Cash Flow > Summary tab, within the Income Inflows > Social Security column:
