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Federal Employee Financial Planning: Social Security Fairness Act - GPO (EP 11)

The Social Security Fairness Act would remove the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO) from the Social Security Act. The WEP and the GPO have substantially decreased millions of retired public sector employees’ Social Security benefits, impacting a significant amount of Social Security beneficiaries. So, in this episode, Michael, Tommy and John will be discussing what exactly this means for those that are paying into the Social Security system and how this might affect those who are not.

Listen in as they share an example of a state system that doesn’t pay into Social Security and what kind of benefits these employees could be taking advantage of. You will learn how this could be changed to be more fair, why you should educate yourself on this topic and allow your voice to be heard, and so much more. 

Listen to the full episode here:

What you will learn:

  • The amount of people not paying into Social Security. (2:10)
  • What the maximum Social Security benefit is right now. (3:20)
  • The cap on a CSRS pension. (5:10)
  • What GPO is. (7:20)
  • An example of a state system that doesn’t pay into Social Security. (9:50)
  • How we can fix this to make it fair for all. (14:26)
  • The importance of speaking up about this unfair act. (18:00)

Ideas worth sharing:

"There are millions of people who have retired having not paid into Social Security or that are currently working and not paying the Social Security tax.” - Mason & Associates, LLC

“The state pensions are much more lucrative than a Social Security pension.” - Mason & Associates, LLC

“At the end of the day we want to believe the best in everyone but this act just isn’t fair.” - Mason & Associates, LLC

Resources from this episode:

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Read the Transcript Below:

Congratulations for taking ownership of your financial plan by tuning into the Federal Employee Financial Planning Podcast, hosted by Mason & Associates, financial advisors with over three decades of experience serving you.

Michael Mason:      Welcome to the Federal Employee Financial Planning Podcast, this is Michael Mason, certified financial planner. Across the table from me, John Mason, certified financial planner, and Tommy Blackburn also, certified financial planner and certified public accountant.

Mason & Associates have over three decades experience helping federal employees with their financial plans. This episode deals with Social Security Fairness Act which is currently HR 82.

And also, just off the press the other day, repeal of Government Pension Offset is also in SS, Social Security 2100. So, this is a bill being proposed, Social Security 2100, the one that's already been proposed — Social Security Fairness Act HR 82. So, we wanna deal with this.

Before we can really understand the repeal of Government Pension Offset, we have to understand America that there are literally (and this may come as a shock to you) millions and millions of people that have retired, having not paid into social security that are currently working and not paying the social security tax.

These folks are state and federal employees. The Federal Employees Civil Service Retirement System hired before 1983 — CSRS was created in the 1920s, social security wasn't created until after that. So, that system, CSRS (Civil Service Retirement System) does not pay the social security tax.

In lieu of a social security pension, these folks get a CSRS or a federal pension, and many states have the same scenario where they pay into their state pension, but they don't pay into social security. And let me just suggest that these state pensions are much more lucrative than a social security pension.

And to understand this rule, we have to understand millions of people that are not supporting the social security system in both of these bills will be granted social security survivor benefits and/or spousal benefits better than people that have paid in to the system.

So, John, let's talk about some examples here because this is a difficult subject. So, an example of maybe a federal employee and that pension, and we'll give a state employee example.

So, let's start with … I guess, we should start with maybe what the maximum social security benefit is right now, and then compare that to a federal and a estate pension.

John Mason:   Sure. So, as we think about social security and the benefits that it provides, the maximum, I think, right now, is about 3,900. If you have paid in social security your entire career, you've achieved your highest 35 years of earnings, I believe the maximum benefit right now, Mike, is around 3,900. And I'm pretty sure that that would require somebody to not only have paid in the maximum, but have delayed their social security all the way until age 70.

So, 3,800, let's round that up to 4,000 a month; that's $48,000 a year, cost of living adjusted for the rest of that person's life. But that didn't start until 70 and it was your highest 35 years of earnings to get at that.

Social security is skewed towards providing a higher income replacement for lower income households. So, social security replaces more of your net pay. When you make a lower amount of money, it replaces a lower percentage of your net pay, the higher salary or the more high income you have.

Pensions are a different story. So, if we look at civil service retirement system, for example, somebody may have 30 or 40 years of service, but their pension is based on their highest 36 months of consecutive earnings or high-3.

So, that's a big distinction: high-3 versus high-5, these are not close. In addition, there is no cap on what a CSRS pension can be. So, the cap on a CSRS pension, Mike, is really the only cap is what the government will pay its government employees.

So, I think right now, we wrote down that Dr. Fauci is a federal employee who makes $420,000 a year. So, his pension is going to be based off of 420,000. There's not a social security check on the planet that's based on 420,000 of earnings. So, there's big difference between a pension and a social security benefit especially for our CSRS folks.

In addition, Dr. Fauci, in theory, could have retired at 30 years in age 55 with that high-3 and have began collecting that pension 15 years before somebody could have received the max social security.

Michael Mason:     You know, and the important distinction here is the contribution to CSRS is 7%. He made that, he didn't make the contribution to social security, which is 6.2%. And he's been there long enough.

Now, folks, all we can use is what's on the internet, and what's on the internet is he started at National Institutes of Health well before 1983. So, he may have changed along the way, but he was in that CSRS system and 80% of his high-3 is a $336,000 pension.

In the social security system, when you get spousal benefits or survivor benefits, those things are intended for people that didn't have a pension. Not intended for, in this case, Dr. Fauci (we're using him just because he's a household name right now). But it was not intended to give Dr. Fauci half of his spouse's social security as if he stayed home and raised the kids while he's drawling a $336,000 pension.

So, eliminating Government Pension Offset and just tossing millions of people like Fauci, even if you're half a Fauci or a quarter of a Fauci, it's still not the right thing to do. So, now let's go to …

John Mason:   So, Government Pension Offset: I'm not sure if we've defined Government Pension Offset and Windfall Elimination Provision yet.

So, Government Pension Offset or GPO (we’ll probably refer to GPO a lot in the episode) is your ability as a CSRS or basically, anybody that has a nonsocial security covered pension. GPO eliminates your ability to collect social security benefits based on somebody else's record.

So, Mike, if you and I are married and I have the CSRS pension, Government Pension Offset would prevent me from doing two things: one, claiming off your social security record while you're alive, and then two, claiming survivor social security benefits at your death. So, GPO or Government Pension Offset effectively eliminates your ability to do that.

If you have social security benefits in your own right, that could be impacted by Windfall Elimination Provision. So, it's important that we make sure that we're talking about each of these independently because Windfall Elimination Provision is your ability to collect the benefits that you've paid into and you've earned versus GPOs off a spouse.

Michael Mason:     And it's important for this conversation, we'll do another episode that deals with Windfall Elimination Provision. The most egregious part of this social security unfairness act is getting rid of Government Pension Offset — that’s the most egregious part.

So, let me see if I can put it a little bit together, then Tommy will give you an example of a California State employee which could be California or Illinois or New Jersey or New York, any of those; the fact is simple, when you have social security, when two people have paid into it, husband and wife, you don't get to draw your retirement, $3,000 a month and half of your spouse’s 3,000 a month.

The only time that half ever comes into play is when you look at a spouse's social security earnings or Medicare earnings, and they're both zero. That's the only time. It was not intended to give people with a pension a supplemental spousal benefit.

And that's why in 1977, Congress got together — and before that, they were doing this. Congress got together and said, “Hey, what are we doing? These people haven't paid into social security and we're giving them better benefits than those that have. We're giving them better spousal benefits and better survivor benefits.”

We hope to give you a couple of examples here. Let's go to … and this could be almost any state. It could be California, Illinois, New Jersey. The biggest ones are the biggest and the bluest ones that have pensions that don't pay into social security.

Tommy Blackburn:     An example of a state system that that comes to mind that doesn't pay into social security, is not covered by social security is the CalSTRS (California State Retirement System).

An example, there is you could have a professor in California under that system earning a $200,000 salary, which is probably not unrealistic at all of an example. And their pension under that system could replace 100% of that salary. So, a $200,000 pension, 100% replacement of what they are earning.

In that system, as we've said, they're not covered under social security, so they have never paid a dime into it. If this, as you said, social security unfairness act passes, they could now pull half of their spouse's social security in addition to a 100% pension replacement in this example of 200,000. So, maybe that's an extra 15,000 and there’s half of their spouse's social security on top of their 200,000.

The system as I think you've been making or we've been making a point of was designed for spouses who stayed at home to take care of their family, not to be a windfall when you've been paying into a different system that clearly has positioned you to be well off in retirement.

Michael Mason:    Obviously, with 230 representatives co-sponsoring this bill — and it's bipartisan, but it's heavily Democrat and it's heavily 45 more out of California alone. With 230 representatives co-sponsoring, this somehow or another, they feel like this college professor has been aggrieved, that he was able to avoid social security, 6.2% into social security and not get a $45,000 pension, get a $200,000. Somehow or another he's been hurt so bad that now we need to bone up and give that person half of a social security spouse.

It could even be a divorce spouse from years ago or all of social security benefits from a survivor perspective, where again, John said earlier, if I have a $30,000 social security check and my wife does, I die, all she's getting is her 30,000 check. She's not getting her check and mine, but we're going to give that to the college professor that never paid in. We're going to give that person their $200,000 pension and their spouse's $30,000 survivor benefits after having never paid in.

So, let's put some faces to this theory or not theory/to what's really happening. If you're in the military, you earn a pension, you don't have to pay into it other than the service 20 years. So, you have your 20-year pension, but you're also paying into social security.

If you're in Virginia, in the Virginia Retirement System, you're paying into social security. If you're a present-day federal employee hired after 1984, you're paying some into your pension and you're paying into social security. If you're like everyone sitting around this table, you’re private sector and you're paying into social security and our wives are paying into social security.

So, when we think about this, and again, when I say that you eliminate the Government Pension Offset, which both of these bills do, what you're saying to the folks that haven't paid in, that you're going to get a better benefit from your spouse's record, from survivor benefits than the people that have made social security work.

Right now, it's fair. What Congress did in 1977 was fair. They said, don't treat people that work all their lives, but don't pay into social security, don't look at their social security statement and see no social security earnings and think they're broke. So, they're treating them fair.

So, let's assume that Social Security Fairness Act is going to be fair, how do you fix it for all the folks that have paid in? For Mike and Bobby Mason, for the military that's paid in, how do we fix it then so that it is fair to those people?

Tommy Blackburn:  Well, it seems like you should almost look at them like you're looking at all these new participants that we're going to allow in the system to collect off their spouse's records.

So, if Tommy, John, Mike worked their entire careers and their spouses worked their entire careers and have paid into the system, what seems fair in this situation, I believe, would be Tommy gets to collect his benefit that he's paid for, and he gets to collect half of his wife's benefit while she does the same.

I think that would be fair. And so, maybe round easy numbers would be, let's assume, 30,000 for each private sector spouse there. So, I get 30, my wife has 30 on her record. Each of us could then collect half on the other, so 45,000 for each of us while we're alive.

Michael Mason:    Yeah. So, we we're talking 90,000. We just took 60,000 and made it 90. And then oh, by the way, if Jess dies before you, then you keep your 30 and you get her 30. You would bankrupt social security overnight. That's what you're going to do for people that haven't paid into it.

They could never turn that switch and do the same thing. Great analogy, Tommy. You could never turn the switch and do the same thing for the folks that have paid in, but that would be truly the Fairness Act.

John Mason:   And some of the logic behind this is just inherently flawed. So, if we think about a CSRS person, which is a nonsocial security covered pension, their pension's likely going to be higher than social security that they would've received. It's almost always going to be higher.

So, at that person's death, well, one, when they retire, they have the ability to say at my death, I want half of my pension to go to my surviving spouse. So, in that scenario, if you have two CSRS folks, that CSRS pension, survivor benefits doesn't automatically go to that spouse for free, they have to pay for it.

So, if that survivor benefits go into a social security covered spouse, they have to pay for it. I think we, around this table would be okay eliminating GPO at death, that survivor benefit, if social security participants were paying for that survivor benefit to pass on to these nonsocial security covered employees.

But right now, there is no survivor benefit payment. There's no way to say “Mike, I want to leave you my survivor social security. And for that, you're going to charge me 10, 15, 20% for that SBP.”

It's not in the system. If we're going to eliminate GPO, we're talking about two things: eliminating GPO while we're both alive, and eliminating GPO when we're dead or one of us is dead, and we have to solve for it in two ways. It's not just a singular issue.

Michael Mason:   At the end of the day, folks, we try to believe the best in everybody. 230 members of Congress have signed onto this and it's getting momentum and it's just not fair, and it's almost silly. We're assuming they just don't know the rules. There was a reason in 1977 that Congress put in place Government Pension Offset.

There's a reason, it's a valid one. And hopefully, we've done a good job articulating this. And hopefully, if this bill gets momentum, we can have organizations like AARP; the American Association of Retired People to look and say, “Wait a second, 90% of the population, all they do is pay into social security. Those are the ones that are our clients, and we're going to add millions of people to the social security roles that haven't paid the freight.”

And will we always pay the benefit? Yeah, they'll just tax more and more people, but in America, it's just not fair. You don't get something better for not having paid in. So, we ask you to really watch what's happening, let your voice be heard.

This is the one time that the silent majority needs to be unsilent and say by golly, “I'm the one that's footing the bill. Let's not do something just because we haven't been educated on it.” We're not saying these congressmen and women are bad. We're just saying that they must not know the rules. Otherwise, this would not be an issue.

John Mason:    Mike, I think all of your points are valid. I think we've really hit on a lot of great topics tonight. As we close down this episode and move to the future episode, next time, we're going to talk about the Windfall Elimination Provision and how that applies to both noncovered social security pensions and social security together.

But as we close down this episode, let's just do a quick recap on the cost of social security. So, for most of America, one of the highest tax rates they pay is called a flat tax. 6.2% of every person's salary goes into social security on the employee side. In addition to that, the employer is also kicking in 6.2%.

So, 12.4% going into social security for folks who make under, I believe 137,000 a year, flat 12.4. And we're talking about giving benefits to people who have made 100, 200 … 300,000 in their careers where both the employee didn't pay for it and the employer didn't pay for it.

Folks, when you throw in Medicare, 7.65% flat tax is one of the highest taxes that the lower income and probably the majority of America pays, because it's a flat 7.65 on your entire salary unless you've hit wage base.

This is the Federal Employee Financial Planning Podcast, hosted by Mason & Associates. If you like what you hear, check us out at You can register for our blog. You can tune in to our live radio show. The first and third Tuesday, live stream available at

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