The Social Security Windfall Elimination and Government Pension Offset Provisions for Public Employees in the Health and Retirement Study
Social Security Bulletin. 74(3): 55-69.
15 Pages Posted: 5 Aug 2014 Last revised: 25 Apr 2015
Date Written: August 1, 2014
This article uses Health and Retirement Study data to investigate the effects of Social Security's Windfall Elimination Provision (WEP) and Government Pension Offset (GPO) on Social Security benefits received by households. The provisions reduce benefits for individuals or the dependents of individuals whose work histories include jobs for which they were entitled to a pension and were not subject to Social Security payroll taxes (“noncovered” employment). We find that about 3.5 percent of households are subject to either the WEP or the GPO, and that the provisions reduce the present value of their Social Security benefits by roughly one-fifth. Households affected by both provisions experience benefit reductions of about one-third. Under the WEP, the Social Security benefit reduction is capped at one-half of the amount of the pension from noncovered employment, which substantially reduces the WEP penalty and prevents the WEP adjustment from falling disproportionately on households in the lowest earnings category.
Keywords: Wealth, Wealth Distribution, public economics, welfare, retiree, retirement, pension, retirement pension, social security, civil service, government employees, public employee, public sector, public sector labor markets, public sector labour markets
JEL Classification: D31, E21, H55, I3, J14, J26, J32, J45
Suggested Citation: Suggested Citation