Dear Mr Kotlikoff:

Yesterday I had an appointment with my local social security office in Everett, WA to file for my retirement benefits. I am 67 and newly retired from six years working for Snohomish County Fire District1 as a facilities coordinator keeping 12 fire stations put together for 200 fighter fighter serving the largest urban fire district in Western Washington. That job earned me a small state pension. I was told something called the Government Pension Offset(GPO) is going to reduce my monthly social security check by 66 cents on every dollar received in state pension. From what i can find on the social security website this information appears accurate. What is not clear is if this offset is limited to just my monthly pension payments or does it also effect any other disbursement from my state pension accounts? There are three accounts in my name, one in an HCA to pay for health insurance, one that my employer contributed to and one that I contributed to over the last six years. These three funds total about $100,000 at present.

Is this Offset thing really going to cost me two thirds of my retirement savings? If so it seems a particularly shabby way to treat people who have years of public service in public safety careers Should i try to minimize my monthly pension payments by selecting a 100%survivor benefit and not exercising my option to purchase additional service credits with my personal retirement account balance ? Any advice you can provide will be greatly appreciated.

Dear Sir, The GPO will not reduce your own retirement benefit. Your own retirement benefit may be reduced under the Windfall Elimination Provision (WEP). But the WEP may not apply if you have 30 years working in the Social Security covered sector earning above the Substantial Earnings level, which is now roughly $20,000. You will get hit by the GPO if you try to collect a widower benefit, a divorced widower benefit, a spousal or a divorced spousal benefit.

The WEP and GPO don’t apply until you start collecting your non-covered pension. So if you can wait to collect it at a higher level, it could be best to take you retirement benefit starting immediately. But this will depend on whether you are, indeed, WEP. If you run yourself through software that fully incorporates the WEP and GPO and handles the historic Substantial Earnings levels, you’ll get the best strategy to pursue.

Let me agree that the WEP and GPO are very nasty provisions because so many people working in the non-covered sector aren’t told about them until the come to collect their Social Security benefits. Do be aware that the GPO doesn’t apply to widower benefits. That you could collect were your wife or ex wife to whom you were married for ten years or more to pass away.

My best, Larry