Email FacebookTwitterMenu burgerClose thin

Congressional Bill May Soon End Windfall Elimination


The windfall elimination provision and government pension offset both can reduce the Social Security payments a public employee collects. But there’s a bill in Congress, which has strong backing, that could eliminate both the windfall elimination provision and the government pension offset. Here’s what you need to know about both and how it might affect your Social Security payments. Consider working with a financial advisor as you create or update a retirement plan.

Windfall Elimination Provision (WEP)

The Windfall Elimination Provision (WEP) reduces the amount of Social Security benefits people can collect if they receive a government retirement plan in addition to Social Security. It applies only to workers who did not pay Social Security taxes, and so did not earn credits toward Social Security income during their working years.

According to the Congressional Research Service, roughly 6% of workers didn’t receive Social Security credits in 2021. Most are local, state and federal employees who don’t pay Social Security taxes because they qualify for government pensions instead.

Workers earn Social Security credits based on their annual earnings, and these credits are used to determine eligibility for Social Security benefits. For 2024, workers can earn one credit for each $1,730 of earnings, up to the maximum of 4 credits per year. The number of credits needed to qualify for benefits depends on the type of benefit, but generally, workers need 40 credits (equivalent to 10 years of work) to be eligible for retirement benefits.

For each year that a worker pays Social Security taxes, they receive what the government calls a “year of coverage.”  The actual benefit amount is determined by the average indexed monthly earnings over the worker’s highest 35 years of earnings. So, if you don’t have 35 years of earnings by the time you apply for retirement benefits, your benefit will be lower. The Social Security Administration counts years without work as zeroes in your benefit calculation.

Government workers who receive alternative pensions, such as teachers, police officers and civil servants, often don’t earn years of coverage because they don’t pay Social Security taxes.

Windfall elimination applies to retired workers with less than 30 years of Social Security-covered employment.

Government Pension Offset (GPO)

Congressional Bill May Soon End Windfall Elimination

The Government Pension Offset (GPO) applies to individuals who receive a government pension based on work that was not covered by Social Security. Specifically, it affects individuals who are eligible for spousal or survivor benefits from Social Security.

According to the Social Security Administration, the GPO adjusts spousal or widow(er) benefits for those who get “non-covered pensions,” which are paid by employers who don’t withhold Social Security taxes from salaries.

The GPO was enacted to prevent double earnings by individuals who did not contribute to Social Security through their government employment and could still receive Social Security benefits based on their spouse’s or deceased spouse’s earnings record.

To do this, the GPO reduces a recipient’s Social Security payments by “two-thirds of the monthly non-covered pension and can partially, or fully, offset an individual’s spousal/widow(er) benefit, depending on the amount of the non-covered pension.”

Why Public Employees Oppose WEP and GPO

Public employees have long called for Congress to repeal both windfall elimination and the pension offset. In particular, they say, it unfairly targets people who paid Social Security taxes during their working lives.

For example, if a teacher also has a summer job in the private sector, they would earn Social Security credits through this work. Windfall elimination could reduce the Social Security payments that they receive even though they paid into the system through that second job.

Other civil servants who work in states where they do pay Social Security taxes may find themselves caught up in system of overlaps, with their government pension set against their years of paying into the system. This can create confusion and lead to errors that reduce someone’s lifetime benefits in retirement.

What Congress Is Poised to Do

The bipartisan legislation aims to ensure that public sector workers could receive full Social Security benefits by repealing the WEP and GPO from the Social Security Act.

According to proponents of the bill, both statutes significantly reduce benefits for almost three million Americans, many of which are teachers, police officers, and government workers. And, if it passes, public employees could see a significant bump in retirement incomes.

U.S. Senators Sherrod Brown (D-OH) and Susan Collins (R-ME) initially introduced the legislation in 2021.

“Public servants from across the country have dedicated their professional careers to the service of their country, yet many face reduced retirement benefits due to the Windfall Elimination Provision and Government Pension Offset,” said Senator Collins in a press release in March 2023.

Bottom Line

Government workers have long opposed the WEP and GPO, two policies that have the effect of reducing the Social Security benefits of public employees. If this legislation passes, almost three million Americans could see an increase in retirement benefits.

Retirement Tips

  • Calculating what you should be getting in pension payments can be challenging. That’s where the insight and guidance of a financial advisor can be very helpful. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • Use SmartAsset’s no-cost Social Security calculator to get a quick estimate of what you will be getting in retirement.

Don’t miss out on news that could impact your finances. Get news and tips to make smarter financial decisions with SmartAsset’s semi-weekly email. It’s 100% free and you can unsubscribe at any time. Sign up today.

For important disclosures regarding SmartAsset, please click here.

Photo credit: © Rissing, ©, ©