TN 11 (05-20)
A. Applicability of Government Pension Offset and Windfall Elimination Provision to
One-Time Payment of Temporary Supplemental Allowance from the New Hampshire Retirement
System
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This opinion explains that GPO should apply to benefits for receipt of the $500.00
one-time supplemental allowance payment from the New Hampshire Retirement System.
In addition, the WEP should also apply for number holders (NH) who first become entitled
to Social Security benefits during New Hampshire’s 2019 fiscal year. For a NH who
was already entitled to Social Security benefits prior to 2019, the PIA should not
be recalculated based on receipt of the additional payment.
Because the legislation that authorized the allowance payment does not indicate the
payment is for a specific time period, SSA should prorate the $500 allowance across
a lifetime by applying the appropriate actuarial guidance set forth in POMS GN 02608.400D. or RS 00605.364C., respectively.
2. Opinion
I. Question Presented
You asked us whether the Social Security Administration (SSA) should apply the Government
Pension Offset (GPO) or Windfall Elimination Provision (WEP), or both, to a one-time,
$500 payment authorized by the State of New Hampshire to certain members of the state’s
retirement system.
II. Short Answer
SSA should apply the GPO to the payment, and should include the payment in calculating
the WEP guarantee, but only for number holders who become entitled to Social Security
benefits during New Hampshire fiscal year 2019. For number holders whose entitlement
to Social Security benefit entitlement precedes FY 2019, the WEP guarantee should
not be recalculated.
III. Background
In 2018, the State of New Hampshire enacted an appropriation for an “additional one-time
allowance” of $500 to retired members of the state retirement system who met specified
eligibility criteria. Eligibility for the payment was limited to:
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retired members of the state retirement system who were receiving an allowance;
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who had retired with at least 20 years of creditable service;
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who had been receiving an allowance for at least 5 years prior to July xx, 2018; and
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whose annual retirement allowance on June xx, 2018 was not greater than $30,000.
N.H. Laws 2018, ch. 304:1(I). OGC has been asked to evaluate the one-time payment
under SSA’s laws, regulations, and policies pertaining to GPO and WEP.
IV. Applicable Law
A. The Government Pension Offset
The GPO reduces a spouse’s Social Security benefit if that spouse also receives a
government pension from noncovered work (i.e., work where Social Security taxes were
not deducted from the employee’s pay). See section 202(k)(5) of the Act, 42 U.S.C. § 402(k)(5). The purpose of the GPO is explained
on SSA’s website as follows:
If this person’s government work had been subject to Social Security taxes, we would
reduce any spouse, widow, or widower benefit because of their own Social Security
benefit. The Government Pension Offset ensures that we calculate the benefits of government
employees who don’t pay Social Security taxes the same as workers in the private sector
who pay Social Security taxes
See Government Pension Offset.
A government pension is “any monthly periodic benefit (or equivalent) [a person] receive[s]
that is based on [his or her] Federal, State, or local government employment.” 20
C.F.R. § 404.408a(a)(1)(i). For payments not paid monthly or paid in a lump sum, the
payment is allocated “on a basis equivalent to a monthly benefit” and the monthly
social security benefit is then reduced accordingly. 20 C.F.R. § 404.408a(d)(5).
B. The Windfall Elimination Provision
The WEP was enacted in 1983 as part of major amendments to the Social Security Act
designed to shore-up the program’s long-term financing. The purpose of the WEP was
“to remove an unintended advantage that the regular Social Security benefit formula
provided to certain retired or disabled worker-beneficiaries who were also entitled
to pension benefits based on earnings from jobs not subject to the Social Security
payroll tax.” See Congressional Research Service, Social Security: The
Windfall Elimination Provision (WEP), at 6, 98-35-version 36 (updated Feb. 7, 2019), available at: https://crsreports.congress.gov/product/pdf/RS/98-35 (last visited Apr. 24, 2019). When it applies, the WEP alters the formula used to
calculate an individual’s primary insurance amount, which in turn reduces the individual’s
monthly benefits. See 42 U.S.C. § 415(a)(7)(A)(i), (B)(i). The WEP applies to individuals who attain age
62 after 1985 and who first become eligible after 1985 for “a monthly periodic payment
… which is based in whole or in part upon his or her earnings for [non-covered] service…
.” 42 U.S.C. § 415(a)(7)(A)(i)-(ii). Periodic payments include “lump sum” payments
when the payments are “a commutation of, or a substitute for, periodic payments.”
42 U.S.C. § 415(a)(7)(C)(i), (iii).
The Program Operations Manual System (POMS) provides additional guidance for determining
whether payments are a “pension.” See POMS RS 00605.364, Determining Pension Applicability, Eligibility Date, and Monthly
Amount. POMS advises that if employer or employer and employee contributions are used to
determine the payment, it is generally a pension subject to the WEP. See
POMS RS 00605.364.A.1.
Receipt of a pension based in whole or in part on noncovered work triggers application
of the WEP, which adjusts the formula for calculating a beneficiary’s Primary Insurance
Amount (PIA). In calculating the WEP PIA, the amount of the pension is not relevant.
The pension amount is considered only when calculating the WEP guarantee, which limits
reduction of benefits under the WEP to one half of the monthly pension attributable
to noncovered work. 42 U.S.C. § 415(a)(7)(B)(i); POMS RS 00605.370.A. However, the WEP PIA and WEP guarantee are not recomputed due to changes, such as yearly increases in the amount of the pension or entitlement
to additional pensions. See POMS RS 00605.360.C.2; POMS RS 00605.364.D.
V. Analysis
A. Application of the GPO
We believe that the $500.00 allowance should be subject to a GPO because it meets
the regulatory definition of a government pension.
First, the allowance meets the regulatory definition of a government pension because
it is a benefit received that is based on state government employment. See 20 C.F.R. § 404.408a(a)(1)(i). The State of New Hampshire authorized payment only
to individuals who were part of the state retirement system, who had a specified number
of years of creditable service, and who received a yearly allowance below $30,000.
N.H. Laws 2018, ch. 304:1(I). The allowance, therefore, is a benefit based on state
government employment.
A close reading of POMS GN 02608.400 supports the position that the one-time allowance should be considered a pension.
The allowance most closely satisfies the first example in POMS GN 02608.400A.1.a: “If employer and employee contributions are used to determine the payment… it is
generally a pension subject to the GPO.” POMS GN 02608.400A.1.a. Here, while the specific dollar amount of the allowance is fixed, only those employees
whose annual “retirement allowances” are $30,000 or less are eligible for the payment.
N.H. Laws 2018, ch. 304:1(I). Under state law, a “retirement allowance” is defined
as the “sum of the member annuity and the state annuity.” NH Rev. Stat. Ann. § 100-A:1(XXII).
In turn, “member annuity” means “annual payments for life derived from the accumulated
contributions of the member” while “state annuity” means “annual payments for life
derived from contributions by an employer.” Id. at § 100-A:1(XX, XXI). Eligibility for the one-time payment thus hinges on the sum
of the employer and employee contributions. Since employer and employee contributions
are used to determine eligibility for the additional payment, it should be considered
a pension subject to the GPO.
Additionally, the one-time allowance payment is not similar to any of the types of
payments that are expressly exempt from GPO: foreign pensions, Social Security benefits,
Veterans Administration benefits, Black Lung benefits, Railroad Retirement Board annuities,
a survivor annuity, early incentive retirement payments, state supplemental disability
payments, and workers’ compensation. See POMS GN 02608.400.B. The payment most closely resembles a Cost of Living Adjustment (COLA), which has
been considered to be a change in the amount of the non-covered government pension
for the purpose of imposing the GPO. See POMS GN 04030.090.B.7-8 (treating COLA-related pension adjustments as a “change in the non-covered
pension amount.”).[1]
Taking this guidance further, we believe that the one-time allowance should be treated
as an additional lump sum pension payment under POMS GN 02608.400.C.3. The New Hampshire bill specifically provides that the “additional allowance
shall not become a permanent addition to the member’s base retirement allowance.”
N.H. Laws 2018, ch. 304:1(II). However, it does not matter for GPO purposes whether
we deem the additional payment to be a separate pension or an addition to the monthly
pension amount, because under both scenarios the amount would be prorated and included
in the GPO calculation. See POMS GN 02608.400.C.
Although the bill specifies that the payment will be made in FY 2019, it does not
indicate that the payment is for that fiscal year. N.H. Laws 2018, ch. 304:1(I). Because the legislation does not specify
that the payment is for a specific time period, SSA should prorate the additional
$500 allowance across the number-holder’s lifetime by applying the actuarial guidance
set forth at POMS GN 02608.400.D.3; POMS GN 02608.400.D.4.c, Table of Actuarial Values.[2] The GPO calculation would be made using the sum of the regular monthly allowance
and the prorated $500 payment.
B. Application of the WEP
The WEP is applied at the time of the initial calculation of the individual’s primary
insurance amount (PIA). See 20 C.F.R. § 404.213(b) (when calculating PIA, “we consider the amount of your monthly
pension… that you are entitled to for the first month in which you are concurrently
entitled to Social Security benefits.”). POMS instructs that the PIA is not recalculated
based on subsequent changes to pensions based on noncovered work. See POMS RS 00605.360, 00605.364. “A change in the amount of the beneficiary’s pension or entitlement to
additional pensions will not affect the initial primary insurance amount (PIA) determined
under WEP.” POMS RS 00605.360.C and RS 00605.364.D. Therefore, benefit payments for beneficiaries whose PIA was calculated pursuant
to the WEP before receipt of the additional $500 allowance will notbe recomputed.
However, if an individual who has been receiving the New Hampshire state pension only
becomes entitled to Social Security benefits during FY 2019 (the authorization period
for the one-time payment) and has received the additional $500 allowance, that additional
sum should be prorated and included in calculating the WEP guarantee. The WEP formula
is a flat mathematical adjustment to the PIA, and is not subject to adjustment based
on the amount of the monthly periodic payment that triggers its application. The amount
of the pension is only relevant when calculating the WEP guarantee, which limits reduction
of the PIA to one half the monthly amount of the pension based on noncovered work.
To determine the WEP guarantee amount, the agency determines the beneficiary’s regular
PIA and subtracts one half of the monthly payment attributable to noncovered work.
42 U.S.C. § 415(a)(1)(B)(i). After completing calculations under both the WEP formula
and the WEP guarantee formula, the Act instructs the agency to set the individual’s
PIA to the greater of these two alternative calculations. 42 U.S.C. § 415(a)(1)(B)(i).
The result is that the WEP cannot reduce an individual’s PIA by an amount greater
than one half of the monthly periodic payment attributable to noncovered services.
Because the additional $500 allowance is paid only to individuals already receiving
a state retirement allowance, the one-time payment should be treated as an addition
to the retirement allowance rather than a separate, lump-sum pension. The New Hampshire
legislation indicates that the payment is “additional” to the retirement allowance,
not a new pension. N.H. Laws 2018, ch. 304:1(I); see POMS RS 00605.364.C.3-5. Because the legislation does not specify that the payment is for a specific
time period, SSA should apply the lump sum amount across the number-holder’s lifetime
by applying the actuarial guidance set forth at POMS RS 00605.364.C.5.b; POMS RS 00605.364, Table of Actuarial
Values.[3]The agency would calculate the WEP guarantee using the sum of the regular monthly
retirement allowance and the prorated additional payment.
[1] In a 2015 decision, the New Hampshire Supreme Court explained that under state law,
COLAs are statutorily distinct from the retirement allowance. SeeAm. Fed'n of Teachers v.
State, 167 N.H. 294, 306, 111 A.3d 63, 73 (N.H. 2015). In that case, the court rejected
a teacher’s association’s arguments that the State of New Hampshire was bound under
the contract clause of both the New Hampshire Constitution and United States Constitution
to provide annual COLAs to members of the state employee pension plan. Id. The decision does not affect the conclusion we reach regarding the treatment of the
one-time allowance payment for GPO purposes. The Am. Fed’n of Teachers decision was interpreting the constitutionality of a state legislative change to
the method of calculating COLAs – whereas the question here involves the application
of a one-time payment under the Social Security statute, regulations, and policies.
[2] If the pension-paying agency prorates the lump sum allowance to determine a monthly
amount for a specified period, SSA would include that amount in determining the GPO
for those months. See POMS GN 02608.400.D.3. At the end of the specified period, the GPO should be recalculated. See POMS GN 02608.100.C.2.c (GPO does not apply when the “proration of a lump sum payment based on a specified
period ends.”).
[3] If the pension-paying agency prorates the lump sum to determine a monthly amount
for WEP purposes, SSA would divide the lump sum by the number of months specified
by the pension-paying agency. See POMS RS 00605.364.C.5.a.
VI. Conclusion
SSA should apply the GPO to the $500.00 one-time payment. SSA should only include
the additional payment in applying the WEP for number holders who first become entitled
to Social Security benefits during New Hampshire’s 2019 fiscal year. For those number
holders who were already entitled to Social Security benefits prior to 2019, their
PIA should not be recalculated based on receipt of the additional payment.