Pension-eligible workers face complex Social Security rules that may reduce benefits. How to more accurately estimate retirement income

When Joyce Debnam’s husband passed away, she began receiving $1,400 a month in Social Security survivor benefits.

Eight months later, that income unexpectedly changed. The trigger: Debnam retired from her job at the United States Postal Service in 2013 after four decades of service.

That life change prompted Debnam’s Social Security benefits to be cut to just $174 a month. Moreover, the Social Security Administration notified her she had to return $5,000 in benefits she had been overpaid.

“When I got that letter, I almost hit the floor,” Debnam said.

She was particularly surprised because before her retirement, Debnam had contacted the Social Security Administration to let them know she was retiring and asked whether that would affect her monthly checks.

“They told me no, that I was eligible for retirement and I would get my money,” Debnam said.

Today, Debnam, 80, of Suitland, Maryland, has paid back the $5,000 sum and relies almost exclusively on her postal pension to pay bills, which means her other retirement goals such as traveling or fixing up her home are not possible.

Debnam is one of millions of workers who is affected by Social Security rules related to public workers and reductions in the benefits they are eligible to receive.

The Windfall Elimination Provision, or WEP, reduces benefits for people who receive a pension from work where they did not pay into Social Security and also had fewer than 30 years of substantial employment or covered employment.

About two million people, or 3% of Social Security beneficiaries, were affected by the WEP as of December 2022, according to the Congressional Research Service.

Another rule, the Government Pension Offset, or GPO, reduces the spousal, widow or widowers’ benefits for people who also receive pensions from government work not covered by Social Security.

About 734,601 Social Security beneficiaries were affected by the GPO as of December 2022.

Like Debnam, many workers are surprised to find their benefits are reduced when they are counting on that income.

“These policies make it difficult for affected workers and their families to plan for retirement,” Rep. Mike Carey, R-Ohio, said during a recent House Ways and Means subcommittee hearing on the rules in Baton Rouge, Louisiana.

“Far too often, people are unaware that they are subject to the WEP or GPO until their spouse retires,” Carey said.

This prompts some people to return to work, while others adjust their spending habits or change their standard of living, he noted.

“Even for public servants who are aware of these policies, the complexities of these formulas makes it difficult to determine the Social Security benefits that they will eventually receive,” Carey said.

Congress is considering ways to address these rules. One proposal, the Social Security Fairness Act, calls for eliminating both the WEP and GPO altogether. The bicameral, bipartisan bill has the support of a majority of House lawmakers, with 300 co-sponsors.

Professional organizations, such as the American Postal Workers Union, and others representing police, firefighters and teachers, support the change.

Experts say it will be difficult to come up with a solution that compensates workers who pay into Social Security for their entire careers, and those who also work for jobs where they pay into a pension, equally.

For now, workers who are affected must navigate the complicated rules to plan for their retirements.

Moreover, they may be affected by benefit overpayments, where beneficiaries receive more money than they are due because the Social Security Administration has wrong or incomplete information.

In those situations, the agency requires beneficiaries to pay the money back.

Overpayments of retirement benefits mostly affect beneficiaries of state and local governments who receive noncovered pensions, Mark Warshawsky, senior fellow at the American Enterprise Institute and former deputy commissioner for retirement and disability policy at the Social Security Administration, wrote in a recent op-ed.

The agency may discover a pension it didn’t know existed or an amount of pension income that was not previously reported.

“At large, the way to prevent it from happening is to get the data much more quickly,” Warshawsky said.

“It would be nice if the state and local governments provided the agency with the data on the retirement benefit, the pension benefit, but they don’t,” Warshawsky said.

There are steps beneficiaries who are affected by these rules may take to gauge how much income they may expect in retirement.

For workers with five or more years of noncovered earnings, the Social Security Administration provides a supplemental fact sheet about the WEP and GPO rules.

While the agency does not calculate the altered retirement benefit to adjust for that income, individuals can do it themselves through tools online, including WEP and GPO calculators.

“We recommend that people review their Social Security Statement at least once every year, which includes important information about WEP and GPO,” a Social Security spokeswoman said in a statement.

There is still the risk that information may be overlooked, or the wrong data may be transferred. That has prompted Laurence Kotlikoff, a Social Security expert and Boston University economics professor, to urge beneficiaries to carefully track their own earnings and pension benefit information and cross check it with Social Security’s records.

In the event Social Security beneficiaries receive an overpayment notice, they may be able to work out a deal for a partial payment, extended period of payment or forgiveness of part of the overpayment, Warshawsky noted.

“That has to be negotiated on a one-off basis, for each person individually,” Warshawsky said.