This opinion explains that for the purposes of determining the amount of the non-covered government pension to use for applying the Government Pension Offset (GPO), SSA includes the amount of the pension that is attributed to service credits the claimant purchased for pension purposes from the California State Teachers Retirement System. The opinion further explains that the amount of the government pension for non-covered employment should not be reduced proportionally to eliminate consideration of purchased service credit.

You have asked whether the agency should include a purchased service credit when determining the amount of a non-covered government pension used to apply the Government Pension Offset (GPO) provision of the Social Security Act (Act) to the wife’s insurance benefits (WIB) payable to V~ (Claimant).

In determining applicability of the GPO to an application for spouse’s benefits, the government pension for non-covered employment should not be reduced proportionally to eliminate consideration of purchased service credit.

According to the information provided, on April 15, 2016, Claimant applied for WIB on the record of her husband, D~, the number holder. In her application, Claimant reported that she was entitled to a government pension from her previous non-covered work as a teacher working for the Capistrano Unified School District in California. To complete her application, Claimant submitted a statement from CALSTRS showing her adjusted gross pension payment as $2,524.79 per month. The agency found that Claimant was entitled to WIB beginning April 2016. However, the agency applied the GPO to her benefits and found that no cash amount was payable because her monthly benefit amounts were fully offset by two-thirds of the gross monthly amount of her non-covered pension. In July 2016, Claimant submitted a Request for Reconsideration along with supporting information and evidence. Claimant argued that the GPO reduction should include only the portion of her pension that is based on her length of service, not from an “annuity” that she purchased for $54,635.52. Claimant reported that her length of service as a teacher was 14.481 years. Her Social Security earnings record shows non-covered earnings from the Capistrano School District in all years from 1993 through 2006. She has provided a document from CALSTRS showing that she purchased an additional five years of service credit. She claims that her total service time was 19.481 years for purposes of calculating her pension amount after the addition of the purchased service credit. Based on her own calculation, she alleges that her pension would be 74.33% (14.481 divided by 19.481) of her gross pension amount had she not paid for the five years additional service credit. Claimant has requested that the agency reduce her gross pension amount for calculation of the GPO by 25.67%.

An individual may be eligible for WIB if she is the wife of an individual who is entitled to Social Security old-age or disability insurance benefits. See Social Security Act (Act) § 202(b)(1)(B); 20 C.F.R. § 404.330 (2018). However, the amount of a spouse’s benefit may be reduced if her benefit is subject to the GPO in Section 202(k)(5) of the Act. See Act § 202(b)(2); 20 C.F.R. §§ 404.304(e), 404.408a; Program Operations Manual System (POMS) GN 02608.100. The GPO generally applies to a spouse’s benefit for any month the spouse receives a government pension based on her earnings for state or local government service in a position not covered by Social Security. See Act § 202(k)(5)(A); 20 C.F.R. § 404.408a(a)(2); POMS GN 02608.100A, C.1. A government pension is “any monthly periodic benefit (or equivalent) [an individual] receives that is based on [his or her] Federal, State, or local government employment.” 20 C.F.R. § 404.408a(a)(1)(i); see also POMS GN 02608.100B (stating “[a] pension is a periodic or lump sum payment received from an employer’s retirement or disability plan, which is payable because of retirement or a permanent disability. The payment can be from either a defined benefit or defined contribution plan (e.g., 401(k), 403(b), or 457) and based upon the spouse’s non-covered earnings while in the service of a federal, state, or local government.”).

Claimant argues that the agency, in calculating the amount of the GPO, should count only the portion of her CALSTRS pension that is based on her 14.481 years of service and should exclude the 5 years of additional purchased service credit. In so arguing, Claimant suggests that Section 202(k)(5)(A) of the Act is severable, and that the “based upon such individual’s earnings” language excludes consideration of any portion of an otherwise qualifying pension that is not directly attributable to non-covered wages earned by the claimant. However, Claimant’s position is unavailing for several reasons.

Section 202(k)(5) does not contain any explicit language setting out the distinction Claimant urges. Rather, the GPO provision merely describes an individual who in the past received non-covered earnings from a Federal or state agency, which later qualifies them to participate in and receive a monthly periodic benefit. Contrary to Claimant’s position, the “based upon” language of Section 202(k)(5)(A) does not require a dollar-to-dollar correlation between the claimant’s eligibility to receive a monthly periodic payment and the actual amount of earnings the claimant received over their course of employment.

In this case, the GPO provision of Section 202(k)(5)(A) was triggered because Claimant receives a monthly pension payment based on the non-covered work she performed as a California public school teacher. Section 202(k)(5)(A) does not contain the distinction Claimant attempts to read into the Act regarding additional service credit purchased by an individual which can be combined with the period for which they earned wages. Rather, Section 202(k)(5)(A) merely establishes applicability of the GPO to pensions based on non-covered earnings.

The regulations implementing Section 202(k)(5)(A) provide further support for the position that the GPO provision does not distinguish between years of non-covered employment for which there were actual earnings and years of non-covered employment attributable to purchased service credit. For example, omitting the “based upon such individual’s earnings” language of Section 202(k)(5)(A), the regulations merely state that “If you are entitled to wife’s, husband’s, widow’s, widower’s, mother’s or father’s benefits and receive a Government pension for work that was not covered under social security, your monthly benefits may be reduced because of that pension.” 20 C.F.R. 404.304(e) (emphasis added). Clarifying this point further, 20 C.F.R. § 404.408(a)(2) states that the agency will reduce spouse’s benefits for each month that the claimant receives a government pension based on “non-covered employment.” Likewise, the POMS section interpreting the GPO explains that applicability of the provision is triggered by non-covered employment with a Federal or state entity, defining offset as “a reduction of spouse’s benefits due to the receipt of a federal, state, or local government pension.” POMS GN 02608.100 (emphasis added). The Act, regulations, and POMS include exceptions to the GPO, but Claimant’s situation does not fit within any of the exceptions. See Act § 202(k)(5); 20 C.F.R. § 404.408a(b); POMS GN 02608.100C.1.b. Thus, the Act, regulations, and POMS do not authorize a division of a monthly pension amount based on a distinction between years of service and purchased service credit. Rather, the individual’s receipt of a government pension based on non-covered employment triggers application of the GPO.

There is no dispute that Claimant receives a monthly government pension payment from CALSTRS, based on her State non-covered employment as a California public school teacher. The fact that as part of the CALSTRS pension program, Claimant was afforded the opportunity to increase her monthly pension amount by purchasing additional service credit does not change fundamental nature of her CALSTRS pension plan, which subjects her spouse’s benefit to reduction under the GPO. Claimant cited no authority for her position that her monthly pension payment is severable and should be reduced proportionately to account for the five years of service credit she purchased as part of her pension plan.

In Schneyer v. Colvin, 578 F. App’x 677 (9th Cir. 2014), the Ninth Circuit addressed an analogous provision under the CALSTRS pension program which established a minimum pension for retired state educators, with the amount of the pension calculated based on an employee’s length of service, regardless of salary. Schneyer, 578 F. App’x at 678. Schneyer argued that the GPO should not apply to his benefits because his CALSTRS pension was not based on “earnings,” but instead on his length of service. Id. The Court, however, rejected this argument noting that the provision setting up the minimum pension based on length of service was “not a stand-alone pension, but an amendment to the existing CALSTRS pension regime. The statutory provision that established the [Minimum Guarantee Monthly Allowance] is but one chapter in a lengthy and interconnected set of statutory provisions that set out the CALSTRS retirement program.” Id. The Ninth Circuit concluded that “[f]or these reasons, the earnings-based nature of the overall CALSTRS pension is not affected by the addition of a single element that turns on length of service.” Likewise, in Claimant’s case, there is nothing showing the provision allowing participants the opportunity to purchase additional service credit is a stand-alone pension plan independent of CALSTRS, or that it changes the earnings-based nature of the overall CALSTRS pension program. The analysis in Schneyer of an analogous provision of the CALSTRS’s plan suggests that a federal court reviewing the facts of this case would reject Claimant’s argument regarding the “based on earnings” language of Section 202(k)(5)(A).

Moreover, Claimant’s underlying premise differentiating her monthly pension amount as dually based on earnings and on purchased service credit is undermined by the California statute establishing the provisions of the CALSTRS program that allows members to purchase additional service credit. That statute explains that a member who wishes to purchase additional service credit must pay “all contributions with respect to that service at the contribution rate for additional service credit, adopted by the board as a plan amendment, in effect on the date of the request to purchase additional service credit.” CAL. EDUC. CODE § 22801(a) (West 2018). Explaining the contribution rate the member must pay for additional service credit, the statute states:

"(b) If the member is employed to perform creditable service subject to coverage by the Defined Benefit Program on the date of the request to purchase additional service credit, the contributions shall be based upon the compensation earnable in the current school year or either of the two immediately preceding school years, whichever is highest.

"(c) If the member is not employed to perform creditable service subject to coverage by the Defined Benefit Program on the date of the request to purchase additional service credit, the contributions shall be based upon the compensation earnable in the last school year of credited service or either of the two immediately preceding school years, whichever is highest, and additional regular interest shall be added to the contributions from July 1 of the subsequent year in which the member last performed creditable service subject to coverage by the Defined Benefit Program to 20 days after the date of the request. " CAL. EDUC. CODE § 22801 (West 2018) (emphasis added).

Thus, CALSTRS premises the purchase of additional service credit on the amount of compensation earned by the member either in the current school year if they are still employed, or on the compensation earnable in the last year of credited service of the member if they are no longer employed. See id. The contributions a member pays to purchase additional service credit is based on the non-covered earnings they would have received had their employment continued during the additional years in question. See id. This scheme, requiring contribution to the plan based on a member’s potential years of earned compensation, further weighs against Claimant’s argument of severability of her monthly pension amount. This element of the plan that turns on the purchase of service credit, particularly where the computation of the purchase price is directly tied to the member’s most recent year of earned compensation, does not affect “the earnings-based nature of the overall CalSTRS pension.” Schneyer, 578 F. App’x at 678.

Other courts examining application of the GPO have rejected similar arguments as the one advanced by Claimant. In Kaeding v. Astrue, No. 1:09-cv-382, 2011 WL 334303 (W.D.N.C. Jan. 31, 2011), the Court upheld the agency’s reduction of a claimant’s monthly benefit amount based on a cost of living adjustment (COLA) to her state pension for non-covered employment as a public school teacher. The Court found that the claimant’s argument that the agency should not apply the GPO to effect additional reductions when her pension’s value was increased by COLAs misconstrued the effect of the GPO. Kaeding, at *3. The Court reasoned that any increase in the monthly pension amount, regardless of cause, triggered the Act’s GPO provision. See id., at *4. Applying the reasoning of Kaeding to the facts of the present case, the portion of Claimant’s increased monthly pension amount attributable to purchased service credit, rather than earnings from her years of employment, would not operate to reduce the offset of her monthly spouse’s benefit. The GPO offset would nonetheless apply to her full monthly pension amount, regardless of the purchased service credit resulting in an increase of her monthly pension amount.

In another analogous case, Baily v. Sullivan, 771 F. Supp. 215 (S.D. Ohio 1991), the Court considered plaintiff’s argument that application of the GPO violated her constitutional right to contract because, similarly to the present case, she had purchased 4.33 years of federal employment credit as a teacher, with the remainder of her pension based on non-covered earnings from 21.3 years of employment. See Baily, 771 F. Supp. at 216-19. The Court rejected plaintiff’s argument, noting that she “did not purchase her benefits as though they were an annuity” and the purchase of additional service credit did not constitute a separate contract outside of her present pension plan, such that she was seeking to receive a return on an investment. Id. at 219. Rather, the Court noted that the purchase of additional service credit was a structured part of the present plan and “plaintiff merely stacked her years served with two different employers in order to qualify for the State Teachers Retirement pension several years early. We find no support whatsoever that plaintiff’s stacking of work years somehow operates to create a constitutionally protected right where none existed.” Id. Likewise, Claimant’s purchase of additional service credit in the present case was a structured provision of her present CALSTRS’s plan, not a separate pension plan or outside contract.

Finally, the agency’s application of the GPO to Claimant’s full month pension amount, regardless of additional purchased service credit, is consistent with the purposes and legislative intent of the GPO. As the Supreme Court noted in Heckler v. Mathews, 465 U.S. 728 (1984), Congress’s purpose in enacting the GPO was to preserve the Social Security trust fund, and was concerned that double benefits may have cost the fund in excess of $190 million. Mathews, 465 U.S. at 732. Here, Claimant receives the full portion of her non-covered government pension through CALSTRS as though she had worked and fully contributed to the pension plan. She also seeks to receive the full portion of Social Security spouse’s benefits, as though she were receiving only a portion of her non-covered government pension. Thus, not only is Claimant’s position factually and legally inaccurate, it would also frustrate the clear legislative intent and purpose of the GPO.

For determining the applicability of the GPO provision to Claimant’s spousal benefit, the agency should not reduce Claimant’s government pension for non-covered employment through CALSTRS proportionally to eliminate consideration of her five years of purchased service credit.