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My wife is a public school teacher in Colorado with a government pension that will be more than 75% of my social security benefit in today's dollars. (The relevant number being 75%, consisting of 1/(2/3) for GPO consideration and an additional 0.5 for spousal benefits multiplier.) She has not paid into Social Security for enough years to have her own benefit.

Additional considerations: (1) I am about 11 years from Full Retirement Age (FRA); (2) her pension benefit does not give Cost of Living Adjustments (COLA); instead, they do an "Annual Increase" of 0 to 2%, depending on funding level of the pension and inflation - current and expected AI is 1.0%.

Over time, my SS benefit will likely overtake hers, assuming inflation and also assuming for this conversation that SS benefits are not substantially lowered in coming years due to the upcoming SS funding crunch.

My question is when are her GPO considerations evaluated? This is relevant given the difference in COLA for SS versus AI for her pension, resulting in different slopes over time. Is GPO a one-time evaluation at the time that she files for SS benefits? Is it at FRA or at the time that I file? Is it reconsidered for widower benefits if I die before she does?

Background

The Social Security rules for spouses such as mine who paid into a government pension and have not paid SS taxes on their career earnings is that their Social Security spousal benefit is reduced by 2/3 of the amount of their government pension. This is known as the Government Pension Offset (GPO) for Social Security.

The spousal benefit for SS is 50% of the higher-earning spouse's SS benefit, up to the benefit at Full Retirement Age (FRA) of the higher-earning spouse. This spousal benefit is reduced in most cases if the lower-earning spouse has a government pension, as noted above.

I put together an example set of curves to illustrate my resulting question. Suppose that the government pension is 5000/month and FRA SS benefit is 3800/month in current valuation. Over time, these can increase according to Cost of Living Adjustments (COLA) for SS and according to Annual Increase (AI) for the government pension. In the curves below, I modeled 3% for SS COLA and 1% for pension AI.

In the example, the GPO eliminates the spousal SS benefit until age 85, where 1/2 of FRA SS crosses the point of 2/3 of the government pension benefit. Conversely, if the higher-earning spouse dies first, the GPO from the government pension benefit is always below the FRA of the higher-earning spouse, and the widow would stand to get a SS benefit that depends on when the GPO amount is evaluated.

I have also included the dotted curve for the max SS benefit at age 70, which is 24% higher than the SS FRA benefit. This further pushes the survivor benefit above the GPO curve (dashed blue) and gives even larger dependence on the timing of evaluating the GPO subtraction from survivor benefits.

For those impacted by GPO where the government pension's annual increase does not keep up with SS COLA, is the GPO calculation updated over time, or is it one-time only? This is complicated by the need for the spouse to verify their government pension amount with the Social Security Administration, which seems onerous to do every year. Social Security and Government Pension Offset example

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Looking at the application form for Government Pension Questionaire (Form SSA-3885), the following is noted in the form above where the applicant signs the form:

I agree to promptly report to the Social Security Administration if the amount of my present pension or annuity changes. I understand that my pension or annuity may affect my Social Security benefits and that failure to report such pension or annuity may result in an overpayment which I may have to pay back.

For the pension, this means reporting the annual increase each year it is non-zero, which answers my question.

The next question is how to report it. The following is shown in publication 05-10077 (2024 guide):

You can call, write, or visit us to make a report. Have your Beneficiary Notice Control Number (BNC) handy. Your BNC will be on any letter we send you about your benefits.

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