Section 218 of the Social Security Act permits U.S. governments (federal, state or local) to voluntarily exempt specific government positions from participating in the nation’s Social Security program. That means that government employees working in those exempted positions do not pay into Social Security from their earnings, and also that their state or local government employer need not contribute a matching amount to Social Security. Today, there are 27 U.S. States which have exempted at least some government positions from Social Security, so state or local employees working in those government positions do not pay into the Social Security program from their earnings. When those government employees retire, they receive a “non-covered” pension (a pension earned without contributing to Social Security).
However, those who enjoy a career free of paying into Social Security typically find later in life that there are consequences for working and not contributing to Social Security. For one thing, they won’t be eligible for Social Security retirement benefits, unless they also worked elsewhere and earned enough credits to be eligible. For another, their Social Security spousal or survivor benefits will also be affected. There are two Social Security provisions, enacted decades ago – the “Windfall Elimination Provision” or WEP, and the Government Pension Offset, or GPO – which will great reduce any Social Security benefits those with a non-covered government pension become entitled to. WEP and GPO are often called “unfair” by those affected. But are they? This Encore Edition of a recent Ask Rusty article sheds some light on that question. Click here to read the previously published Ask Rusty article about the fairness of WEP and GPO. Or if you’d rather listen to the article, click here for the podcast.