January 1, 2024
Congress just repealed the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO) which limited Social Security benefits for individuals and their spouses if one spouse worked for the schools, police, or government in Massachusetts. President Biden is expected to sign the bill into law in early January 2024.
This repeal, through bill HR 82, offers significant benefits for divorcing couples, particularly when dividing retirement benefits. Previously, WEP and GPO reduced Social Security benefits for individuals receiving pensions from non-Social Security-covered employment, such as state or local government jobs. This includes members of the Massachusetts Teachers Association (MTRS), State Employee Retirement System (SERS), and the Massachusetts Bay Transportation Authority (MBTA), among others.
The Windfall Elimination Provision (WEP) reduced the amount of Social Security that such government employees receive upon retirement in such a way that they received less than they would have received if they had never worked in a government job at all! In other words, if a person worked for 10 years for a private company that was paying into Social Security and then retired, that person would receive more Social Security than a Massachusetts teacher who worked 10 years for the same company, paying the same amount into Social Security, and then worked as a public school teacher for the rest of their career.
The Government Pension Offset (GPO) has even more implications for divorcing couples. Normally, after 10 years of marriage, a divorced spouse can qualify for a social security benefit that is equal in value to half of the benefit that their spouse receives. The spouse with the larger benefit does not “share” their benefit in any way with the ex-spouse or get less money. The spouse with the higher Social Security benefit keeps their entire benefit, and the ex-spouse gets one half as much, even if they never worked or contributed to Social Security.
The GPO law typically wiped out that spousal benefit completely, unless that person’s pension was very low, e.g., under $20,000, and their ex-spouse’s Social Security was very high.
This reduction often created financial inequities during divorce settlements, especially for spouses relying on their partner’s Social Security benefits post-divorce. This is particularly the case since most lawyers and judges do not know how to value Social Security benefits when they divide assets. They readily divide pensions, sharing the value of benefits between spouses, but they rarely calculate the value of Social Security benefits in order to fairly and equitably share assets. The fact that Social Security benefits cannot be divided with a QDRO, like other retirement plans, misleads the vast majority of judges and lawyers from dealing with their value.
Without a doubt, most lawyers and judges will continue to fail to calculate the value of a spouse’s social security benefits, but the situation is somewhat ameliorated now. The pension holding spouse, if they were married 10 years, will now be able to collect a meaningful amount of Social Security based on their ex-spouse’s earnings record.