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.