Pensions that interact with Social Security

A specific group of workers — those with pensions from employment not covered by Social Security — has historically faced provisions reducing their benefits. This area has changed recently and warrants care.

The background

Some public sector employment, in certain states and for certain federal workers under older systems, is not covered by Social Security. Workers pay into a separate pension system instead.

Someone with a career split between covered and non-covered employment therefore has a Social Security earnings record that appears low, because the non-covered years show as zeros or low amounts.

Because the benefit formula is progressive — replacing a high proportion of low average earnings — such a worker would appear to be a low earner and receive a proportionally high benefit, despite also having a pension.

Two provisions were introduced to address this.

The two provisions

The windfall elimination provision modified the benefit formula for workers receiving a pension from non-covered employment, reducing their own Social Security benefit.

The government pension offset reduced spousal and survivor benefits for those receiving a pension from non-covered employment, in many cases eliminating them.

Both provisions affected substantial numbers of teachers, firefighters, police officers and other public employees in the affected states.

The recent change

Legislation enacted in early 2025 repealed both provisions.

The practical effect is that affected workers and their spouses receive benefits calculated without those reductions, with the change applying retroactively to benefits payable from January 2024.

The Social Security Administration has processed adjustments and retroactive payments for affected recipients.

Anyone who was affected by these provisions, or who declined to claim spousal or survivor benefits because of them, should check their position — some people who never applied because they were told they would receive nothing may now be entitled.

Given the recency of the change and the volume of affected cases, verifying your own position directly with the administration is worthwhile rather than relying on older guidance, a great deal of which remains in circulation online.

What this means for planning

For public sector workers approaching retirement, several things follow.

Benefit estimates produced before the change may understate what is now payable, and it is worth obtaining a current estimate.

Spousal and survivor benefits that were previously offset may now be available, which changes household claiming strategy — particularly for a public sector worker married to someone with a substantial Social Security record.

Retirement plans built around the assumption of a reduced benefit may now have more margin than assumed, which is an unusual and welcome direction for a planning revision.

The broader point about non-covered employment

Regardless of these provisions, the underlying situation requires attention.

Workers in non-covered employment need to understand their own pension system thoroughly: the benefit formula, the vesting requirements, whether there is an inflation adjustment, the survivor options, and the funding status of the plan.

Public pension funding varies enormously by jurisdiction, and some plans face significant shortfalls.

Those with careers split between covered and non-covered employment should also verify that their Social Security earnings record correctly reflects the covered years.

Checking your position

The practical steps.

Obtain a current Social Security statement through an online account.

Where you were previously affected by either provision, confirm that the adjustment has been applied and that any retroactive amount was received.

Where you did not claim a spousal or survivor benefit because you were advised it would be offset, ask whether an application is now appropriate.

And obtain current information from your pension system, since public plan rules also change.

Checking your own pension plan

Regardless of the Social Security interaction, several things about a public pension warrant attention.

Whether there is a cost of living adjustment, and whether it is guaranteed or discretionary. An unindexed pension loses substantial real value across a long retirement.

The survivor options and what they cost, since the election is generally irreversible.

The funding status of the plan, which varies considerably between jurisdictions and is publicly reported.

And the rules on returning to work in covered employment, which can suspend payments.

General information only, not financial advice. This area changed recently and guidance is still settling — consult the Social Security Administration directly and a qualified adviser about your own situation.