This page was last updated on: September 18, 2019
Question: I am an ARP Participant who elected out of Social Security. I also am entitled, or may in the future be entitled, to collect some Social Security (either because of another job, or as a spouse, widow or widower). How are my Social Security benefits affected by my being an ARP Participant who elected out of Social Security?
Answer: There are two situations which may affect the amount of your Social Security benefits: application of the Windfall Elimination Provision (WEP) and application of the Governmental Pension Offset (GPO).
Under the WEP, the amount of your Social Security benefit will be calculated using a modified formula which provides lower Social Security benefits than you would otherwise receive. The WEP eliminates a windfall that, under prior law, allowed a higher paid worker who worked mainly at a job not covered by Social Security to collect the same Social Security benefit as a lower paid worker who worked only at a job covered by Social Security if they both had the same average monthly Social Security earnings. Generally, the modified formula, which is complex, lowers the Social Security benefit of the worker who worked mainly at a job not covered by Social Security to remove this windfall. (See the Social Security publication referenced below for more information on the formula.) However, there is an exception: if you have 30 or more years of "substantial earnings" in a job where you did pay Social Security taxes, your benefit will not be reduced by WEP.
Additionally, if you become entitled to collect Social Security spouse's, widow's, or widower's benefits, such benefit may be reduced because of the GPO. Under the GPO, your spouse, widow, or widower payments from Social Security will be reduced by two-thirds of your government pension payment amount. For example, if you get a monthly ARP benefit of $600, two-thirds of that, or $400, must be deducted from your Social Security spouse, widow, or widower benefits. If you are otherwise eligible for a $500 spouse's, widow's or widower's benefit from Social Security, you will receive $100 per month from Social Security ($500 - $400 = $100) in addition to your $600 ARP benefit.
If you receive your ARP pension in a lump sum, the Social Security Administration, in order to apply the WEP and GPO, will calculate the reduction in your benefits as if you chose to get monthly benefit payments from your government work.
If you opt to roll over your ARP benefits to an IRA, your benefits will still be reduced by the WEP and GPO, if applicable. Rolling over your benefits does not avoid this reduction in benefits.
More information is available about the WEP and the GPO on the Social Security website. Social Security Publication 05-10045, about the WEP, including how the modified formula works, is available at: http://www.ssa.gov/pubs/10045.html and Social Security Publication 05-10007, about the GPO, is available at: http://www.ssa.gov/pubs/10007.html.
Questions regarding the above may be directed to Prudential, the State's current Third Party Administrator, at (844) 505-7283.
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