If you’ve earned a public pension, beware of how it affects your Social Security benefits

That meant she had about $3,100 a month to live on: her survivors benefit, plus her public pension.

It was enough for her to meet her expenses, with a little cushion. But then the Social Security Administration, apparently after a routine review, determined it had mistakenly overpaid her for more than a year. It slashed her survivor benefit from about $1,300 a month to about $100 a month.

On top of that, the Social Security Administration demanded that Cocks repay more than $16,000 to make up for the overpayment.

Cocks was devastated.

“That letter was a total shock,” Cocks, now 68, told me. “It forced me to go back to work part-time. And I don’t know how I’m going to pay back $16,000.”

The reason that Cocks’s survivors benefit was cut to almost nothing is something called the Government Pension Offset. Cocks had never heard of it before the Social Security Administration imposed it on her. Had she known about it prior to her retirement, she might have stayed on her secretary’s job a little longer to improve her long-term financial position.

Cocks has asked the Social Security Administration for a waiver of her payback (or at least a payment plan), saying it would create a financial hardship, and has a hearing scheduled for Thursday. She also says she provided the Social Security Administration with all the information it requested upon retirement, and that it was at fault for the miscalculation, not her.

For those who work for municipal or state governments and expect to draw a public pension someday, it’s important to know about the Government Pension Offset, as well as something called the Windfall Elimination Provision, which also may reduce Social Security benefits for those who begin taking a public pension.

Here’s what you should know:

What is the Government Pension Offset?

It’s a law passed 40 years ago that primarily affects state and local government employees, like teachers, police officers, and firefighters. Those workers receive a pension based on earnings that are exempt from Social Security payroll taxes. By contrast, private-sector workers pay 6.2 percent of wages in Social Security taxes, an amount that is matched by their employers. Congress in 1983 enacted the GPO to address the apparent preferential treatment of those public-sector workers who do not pay into the Social Security system.

What was the rationale for the GPO?

It’s complicated, but, in essence, Congress concluded that people who receive both a public pension and some form of Social Security benefits (as a spouse, widow, or widower) were treated more generously than those who worked only in the private sector. It was intended to eliminate an unintended but apparent inequity. Debate goes on in Congress to this day on whether the GPO goes too far (or not far enough) and should be adjusted.

How does it work?

If you are receiving a Social Security survivors benefit and you begin taking a public pension, the Social Security Administration will reduce your Social Security benefits by an amount equal to two-thirds of the amount you receive in your new public pension.

How did it affect Venera Cocks?

Upon retirement, in round numbers, Cocks began receiving $1,800 a month in a pension. That triggered the GPO (unbeknownst to Cocks). It meant her existing survivor’s benefit of $1,300 a month had to be reduced by two-thirds of her pension amount. Two-thirds of $1,800 (her monthly pension amount) is $1,200. Thus, her Social Security benefit of $1,300 a month was slashed by $1,200 a month, leaving her $100 a month.

What happens if two-thirds of a retiree’s pension is more than their survivors benefit?

Their survivors benefit is reduced to zero.

Does the GPO affect only survivors, that is, widows and widowers, receiving Social Security benefits?

No, there is another category of people who may be affected by the GPO — those married people who may be eligible to collect up to 50 percent of their spouse’s Social Security benefits.

How many people does the GPO affect?

As of 2023, the GPO reduced benefits for almost 745,000 Social Security beneficiaries, approximately 1 percent of all beneficiaries, according to the American Society of Pension Professionals and Actuaries.

Of those, about half were spouses and half were widows or widowers. In about two-thirds of cases, the GPO eliminated benefits entirely, the pension society says.

Why was Cocks caught unaware of the GPO?

Cocks says she provided all the information the Social Security Administration requested upon retirement. She also had a pre-retirement discussion with the Falmouth retirement board, which manages her pension. But she says no one mentioned the GPO and how it would affect her.

Should the local retirement board have discussed it with Cocks?

The director of the Falmouth Retirement Board told me it “is not qualified” to advise its members on Social Security law. He said those getting close to retirement are “routinely advised” to consult with the Social Security Administration. He also pointed out a Social Security tab on the Falmouth retirement board website that says the GPO “may reduce and in some instances eliminate” benefits and provides a link to the Social Security Administration website that details the GPO.

What is the Windfall Elimination Provision?

The WEP comes into play when you begin taking a public pension while receiving your own “earned” Social Security benefits. To qualify for basic Social Security retirement benefits, you need to have worked in the private sector (while paying Social Security taxes) for a minimum of 10 years, though it doesn’t have to be consecutive years (you need 40 “quarters,” that is, 40 three-month periods). If you qualify and begin taking your earned Social Security benefits, those benefits will be reduced when you begin taking your pension.

What was the rationale for the WEP?

The formulas are complicated, but suffice it to say the system strives to provide a safety net, particularly for long-term, low-wage earners. The way it does that is by counting 90 percent of your first $1,174 a month in earnings toward your benefits. As income increases, the percentage used to calculate your benefits decreases on a sliding scale. One unintended consequence of this sliding-scale calculation is that it gives an economic advantage — a “windfall” — to those retirees who worked in the private sector long enough to qualify for benefits before going to work in the public sector and earning a pension there. The WEP was intended to eliminate that advantage. Like the GPO, it remains controversial and subject to continuing political debate.

How much does the WEP reduce my Social Security benefits when I begin taking a public pension?

The WEP cuts your Social Security benefits by a percentage based on how many years you had substantial earnings in the private sector; the more years you had (and thus the more you paid into the system), the higher percentage of your Social Security benefits you are allowed to keep. The Social Security Administration provides an online WEP calculator.

The bottom line? Do your homework before retirement to avoid what happened to Cocks.

Got a problem? Send your consumer issue to sean.murphy@globe.com. Follow him @spmurphyboston.