Are social security benefits reduced if you have a pension

If you earned a government pension from a job not subject to Social Security tax withholding (“noncovered employment”) and are also eligible for Social Security benefits through a job where Social Security taxes were withheld, two provisions might reduce your benefits: the windfall elimination provision (WEP) and the government pension offset (GPO).

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Receiving a Private Pension
Receiving a Public Pension
Need Legal Help?
Can you collect Social Security and pension at the same time?
Do private pensions reduce Social Security benefits?
Will a pension affect my benefits?
What things reduce Social Security benefits?

The WEP affects how a worker’s Social Security benefit is calculated. If you’re subject to the WEP, your benefit is calculated using a modified formula, possibly resulting in a benefit reduction. The amount of the reduction depends on the year you turn 62 and the number of years in which you had substantial earnings and paid into Social Security (no reduction applies to those with 30 years or more of substantial earnings). The reduction cannot be more than one-half of your pension from noncovered employment. Spousal and dependent benefits may also be reduced, but not survivor benefits.

The GPO may affect spousal or survivor benefits if the spouse or survivor earned a government pension from noncovered employment. In this case, the GPO may reduce Social Security benefits by up to two-thirds of the amount of the pension.

For example, if you receive a $900 monthly government pension and are eligible for a $1,000 monthly Social Security spousal benefit, you would receive only $400 per month from Social Security [$1,000 minus $600 (2/3 times $900) equals $400]. You would still receive your $900 pension, so your combined benefit would be $1,300.

Not all government employees are subject to these provisions. For example, federal employees under the Federal Employees Retirement System are exempt because they pay Social Security taxes on earnings. However, public-sector employees in some states do not pay Social Security taxes, and thus could be subject to the WEP. The GPO affects pensions from noncovered federal, state, or local government employment.

Rules and calculations for the WEP and the GPO are complex. Visit the Social Security website, ssa.gov, for more information.

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The amount of your Social Security benefits is determined by how long you've been in the workforce, how much you've earned, and when you retire. Most employees are covered by Social Security and have Social Security taxes withheld automatically by their employers. Although most federal workers hired after 1983 are covered by Social Security, public-sector workers in many states aren't covered.

Pension plans are offered and maintained by both private- and public-sector employers. You, and many other retirees, may collect both Social Security benefits and a monthly pension check. Receiving a pension doesn't automatically reduce your Social Security benefits. The key factor in determining whether your Social Security benefits will be affected by your pension is whether you receive a pension from government or other non-covered work.

Receiving a Private Pension

If you worked only in jobs for which you were covered by Social Security and your employers withheld Social Security taxes from your paycheck, your pension payments won't have any effect on your Social Security benefits. You can receive your full Social Security benefit and your full pension without penalty.

Receiving a Public Pension

If you earned a public pension, the Windfall Elimination Provision or Government Pension Offset may affect your benefits. Each rule is described below.

Windfall Elimination Provision (WEP)

If you earned a pension from a job in which your employer didn't withhold Social Security taxes from your paycheck, and you also worked at least 10 years in other jobs to qualify for Social Security retirement benefits, you may be affected by the WEP. The WEP rules affect how retirement or disability benefits are calculated and may require a lower Social Security benefit.

The WEP reduction is limited to no more than one half the amount of the pension from employment that isn't covered by Social Security. For example, if a public-sector pension is $600 per month, the WEP reduction in Social Security benefits can't be greater than $300. The maximum WEP reduction is $413.

WEP also affects the benefits of dependents. If you're affected by the WEP and receive a reduced Social Security benefit of $800 per month, your spouse would receive a maximum spousal benefit of $400, one-half your WEP benefit amount. However, if you die, the WEP reduction is removed and your surviving spouse's Social Security benefit is returned to the standard benefit formula.

Government Pension Offset (GPO)

If you receive a pension from a government job in which you didn't pay Social Security taxes, some or all of your Social Security spousal or survivor benefit may be offset. Usually, Social Security spousal benefits are equal to half the worker's benefit if claimed at the spouse's full retirement age or less if claimed at an earlier age. Survivor benefits are equal to the full amount of the worker's benefit if claimed at the survivor's full retirement age and less if claimed at an earlier age.

The GPO reduces the amount of your Social Security spousal or survivor benefit by two-thirds of the amount of your government pension. For example, if you receive a monthly government pension of $600, two-thirds of that amount, or $400, must be used to offset your spousal or survivor benefit. If you're eligible for a $500 spousal benefit, you'd receive $100 per month from Social Security.

Some individuals are exempt from the GPO. Generally, your Social Security spousal or survivor benefit won't be reduced if you:

Receive a government pension that isn't based on your earnings; or
Are a federal, state or local government employee whose pension is based on a job in which you were paying Social Security taxes; and
- You filed for and were entitled to spousal or survivor benefits before April 1, 2004; your last day of employment (that your pension is based on) is before July 1, 2004; or you paid Social Security taxes on your earnings during the last 60 months of government service.

Need Legal Help?

The WEP and GPO rules can be complicated and require careful review. For more information, including information on GPO exemption, you may contact your Social Security office. If you would like legal assistance, you should contact a Social Security attorney.

Yes. There is nothing that precludes you from getting both a pension and Social Security benefits. But there are some types of pensions that can reduce Social Security payments.

Does a pension reduce my Social Security benefits? In the vast majority of cases, no. If the pension is from an employer that withheld FICA taxes from your paychecks, as almost all do, it won't affect your Social Security retirement benefits.

Will a pension affect my benefits?

money you take out of your pension will be considered as income or capital when working out your eligibility for benefits - the more you take the more it will affect your entitlement. if you already get means tested benefits they could be reduced or stopped if you take a lump sum from your pension pot.

Once you earn more than the limit, Social Security deducts $1 from your benefits for every $2 you earn. In the year you reach full retirement age, Social Security becomes more forgiving.