Social Security benefits may be reduced for workers with pensions

  • Benefits for workers who receive pensions and Social Security may be reduced based on current rules.
  • This may come as a surprise to some workers and their families.
  • Here’s what beneficiaries need to know about the risks of overpayments and how they can measure their income in retirement.

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When Joyce Debnam’s husband died, she began receiving $1,400 a month from Social Security survivor benefits.

Eight months later, that income changed unexpectedly. The catalyst: Debnam retired from her job with the United States Postal Service in 2013 after four decades of service.

This life change reduced Debnam’s Social Security benefits to just $174 a month. Furthermore, the Social Security Administration informed her that she must return $5,000 in benefits she overpaid.

“When I got that message, I almost fell to the ground,” Debnam said.

She was especially surprised because before she retired, Debnam called the Social Security Administration to let them know she was retiring and asked if it would affect her monthly checks.

“They told me no, I’m eligible to retire and I’ll get my money,” Debnam said.

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the Provides the elimination of windfallsor WEP, reduces benefits for people who receive a pension from work where they did not pay into Social Security and also had less than 30 years of significant or covered employment.

About 2 million people, or 3% of Social Security beneficiaries, were affected by the Women’s Empowerment Program as of December 2022, according to Congressional Research Service.

Often times, people don’t realize they are subject to a WEP or GPO until their spouse retires.

Rep. Mike Carey

R-Ohio

Another rule, Government pension compensationor GPO, reduces spousal, widower, or widower benefits for people who also receive pensions from government employment that are not covered by Social Security.

About 734,601 Social Security beneficiaries were affected by the GPO program as of December 2022.

Like Debnam, many workers are surprised to find that their benefits decline when they rely on that income.

“These policies make it difficult for affected workers and their families to plan for retirement,” Ohio Republican Rep. Mike Carey said during a recent meeting. Ways and Means Subcommittee Hearing Concerning bases in Baton Rouge, Louisiana.

“A lot of times, people don’t realize they’re subject to a WEP or GPO until their spouse retires,” Carey said.

He pointed out that this prompts some to return to work, while others adjust their spending habits or change their standard of living.

“Even for public employees who are aware of these policies, the complexities of these formulas make it difficult to determine which Social Security benefits they will ultimately receive,” Carey said.

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Congress is studying ways to address these rules. One proposal, the Social Security Fairness Act, calls for eliminating both the WEP and GPO altogether. The bicameral, bipartisan bill has the support of a majority of lawmakers in the House, with 300 co-sponsors.

Professional organizations, such as the American Postal Workers Union, and others representing police, firefighters and teachers, support this change.

Experts say it will be difficult to come up with a solution that compensates workers who pay into Social Security throughout their careers, and those who also work jobs where they pay into a pension, equally.

Currently, affected workers must navigate complex rules to plan for their retirement.

Furthermore, they may be affected by benefit overpayments, where beneficiaries receive more money than they are entitled to because the Social Security Administration has incorrect or incomplete information.

It would be nice if state and local governments provided the agency with data on retirement benefits and retirement benefits, but they don’t.

Mark Warshawski

Senior Fellow at the American Enterprise Institute

In those cases, the agency asks the beneficiaries to repay the money.

Retirement benefit overpayments mostly affect state and local government beneficiaries who receive uncovered pensions, says Mark Warshawski, a senior fellow at the American Enterprise Institute and former deputy commissioner for retirement and disability policy at the Social Security Administration. he wrote in a recent op-ed.

The agency may discover a pension that you did not know existed or an amount of pension income that was not previously reported.

“In general, the way to prevent this from happening is to get the data much more quickly,” Warshawski said.

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“It would be nice if state and local governments provided the agency with data on retirement benefits, retirement benefits, but they don’t,” Warshawski said.

There are steps beneficiaries affected by these rules may take to gauge how much income they might expect in retirement.

For workers with five or more years of uncovered earnings, the Social Security Administration provides a supplemental fact sheet about the WEP and GPO rules.

While the agency does not calculate adjusted retirement benefits to adjust for this income, individuals can do so themselves through online tools, including WEP And GPO calculators.

“We recommend that people review their Social Security statement at least once a year, which includes important information about the WEP and GPO,” a Social Security spokeswoman said in a statement.

There is still a risk that information may be ignored, or incorrect data may be transmitted. This has prompted Lawrence Kotlikoff, a Social Security expert and professor of economics at Boston University, to urge beneficiaries to carefully track their income and retirement benefit information and match it to Social Security records.

If Social Security beneficiaries receive an overpayment notice, they may be able to work out a deal for partial payment, an extended payment period, or forgiveness of part of the overpayment, Warshawski noted.

“This has to be negotiated on an individual basis, for each person individually,” Warshawski said.

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