[Federal Register Volume 72, Number 149 (Friday, August 3, 2007)]
[Proposed Rules]
[Pages 43202-43205]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-15057]


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SOCIAL SECURITY ADMINISTRATION

[Docket No. SSA 2007-0040]

20 CFR Part 404

RIN 0960-AG50


Sixty-Month Period of Employment Requirement for Government 
Pension Offset Exemption

AGENCY: Social Security Administration (SSA).

ACTION: Notice of proposed rulemaking.

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SUMMARY: To implement section 418 of the Social Security Protection Act 
of 2004 (SSPA), we propose to revise our regulations to explain that a 
State or local government worker will be subject to the Government 
Pension Offset (GPO) provision under title II of the Social Security 
Act (the Act), if any part of the last 60 months of government service 
was not covered by Social Security. We also propose to replace the 
words ``receiving'' and ``received'' with the word ``payable'' when 
referring to the eligibility to or payout from a government pension. 
This wording change will make the regulatory and statutory language 
consistent and help clarify when the GPO is applicable. In addition, we 
propose to revise our regulations to reflect a separate 60-month 
requirement that was made applicable to Federal employees by a 1987 
law.

DATES: To be sure that we consider your comments, we must receive them 
by October 2, 2007.

ADDRESSES: You may give us your comments by: Internet through the 
Federal eRulemaking Portal at http://www.regulations.gov; e-mail to 
[email protected]; telefax to (410) 966-2830; or letter to the 
Commissioner of Social Security, P.O. Box 17703, Baltimore, MD 21235-
7703. You may also deliver them to the Office of Regulations, Social 
Security Administration, 107 Altmeyer Building, 6401 Security 
Boulevard, Baltimore, MD 21235-6401, between 8 a.m. and 4:30 p.m. on 
regular business days. Comments are posted on the Federal eRulemaking 
Portal, or you may inspect them physically on regular business days by 
making arrangements with the contact person shown in this preamble.

FOR FURTHER INFORMATION CONTACT: Ines Riley, Social Insurance 
Specialist, Office of Income Security Programs, Social Security 
Administration, RRCC 126, 6401 Security Boulevard, Baltimore, 
Maryland 21235-6401, (410) 965-4138. For information on eligibility or 
filing for benefits, call our national toll-free number, 1-800-772-1213 
or TTY 1-800-325-0778, or visit our Internet site, Social Security 
Online, at http://www.socialsecurity.gov.

SUPPLEMENTARY INFORMATION:

Electronic Version

    The electronic file of this document is available on the date of 
publication in the Federal Register at http://www.gpoaccess.gov/fr/index.html.

Background

    If you receive a pension from a Federal, State or local government 
that is based on work that was not covered by Social Security, then the 
GPO may reduce certain kinds of Social Security benefits that you might 
also be eligible to receive. The GPO applies to Social Security wife's, 
husband's, widow's, widower's, mother's or father's, and divorced or 
surviving divorced spouse's benefits. For the sake of simplicity, these 
benefits are often referred to as spouse's benefits, even though other 
benefits, as described in the previous sentence, are affected. These 
benefits may be reduced, to zero if necessary, by two-thirds of the 
amount of your government pension from noncovered work. See section 
202(k)(5) of the Act, codified at 42 U.S.C. 402(k)(5). The GPO does not 
apply to Social Security retirement or disability benefits that you 
earned through your own covered employment.
    The GPO was enacted in 1977 to reduce the Social Security spouse's 
benefit of workers who have a government pension based on noncovered 
employment. Congress believed that persons who received a government 
pension based on their own noncovered work would receive a ``windfall'' 
if they also could receive unreduced Social Security spouse's benefits, 
regardless of their dependency on the insured spouse. (See S. Rep. No. 
95-572, 95th Cong., 1st Sess., at 28.) The GPO treats these government 
workers similar to workers in jobs covered by Social Security. Workers 
who earn their own Social Security retirement benefit, and who are 
eligible to receive a spouse's benefit, have the spouse's benefit, in 
effect, offset by their retirement benefit. They receive the larger of 
the two benefits. They do not receive both their own Social Security 
retirement benefit and a spouse's benefit. Therefore, the GPO prevents 
individuals who receive a government pension based on noncovered 
earnings from receiving more in combined pension and Social Security 
spouse's benefits than individuals who worked in covered employment and 
also were eligible for spouse's benefits. The GPO adjusts the spouse's 
benefit of a government worker to prevent a ``windfall.'' (See H. Rep. 
No. 100-391(I), 100th Cong., 2nd Sess., at 2313-466.)
    Before enactment of the SSPA, Public Law 108-203, on March 2, 2004, 
the law allowed an exception to the application of the GPO, referred to 
as the ``last day'' exception. Under this exception, State or local 
government workers could avoid application of the GPO by working 1 day 
in Social Security covered employment at the end of their career.
    Section 418 of the SSPA phases out the ``last day'' exception. 
Applications for spouse's benefits filed on or after April 1, 2004 will 
be subject to the GPO unless the individual's last 60 months of 
government employment are covered by Social Security. Therefore, if 
there is any noncovered government employment during the last 60 months 
of government service on which a pension is based, the GPO will apply. 
State or local government workers who filed an application for spouse's 
benefits before April 1, 2004, or whose last day of government 
employment was before July 1, 2004, are exempt from the GPO if they 
worked in covered employment on the last day of the government service 
on which their pension is based.
    The last 60-month requirement established by section 418 of the 
SSPA is similar to a requirement established by the Omnibus Budget 
Reconciliation Act of 1987 (OBRA 1987), Public Law 100-203, section 
9007. That law specified that Federal employees who transfer from the 
Civil Service Retirement System to the new Federal Employees Retirement 
System must work for at least 60 months in the aggregate in covered 
employment in order to avoid application of the GPO.
    For workers whose last day of State or local government employment 
occurs within 5 years after the date of

[[Page 43203]]

enactment (that is, between March 2, 2004 and March 1, 2009), the 60-
month requirement will be reduced (but not to less than 1 month) by the 
total number of months that the worker served in covered employment on 
or before March 2, 2004. The remaining month(s) of service needed to 
fulfill this 60-month requirement must be performed after March 2, 
2004. Therefore, even if a worker had 60 or more months of covered 
government service on or before March 2, 2004, that worker would still 
have to work his or her last month of covered government service after 
March 2, 2004.

Explanation of Proposed Changes

    We propose to revise the regulations in 20 CFR 404.408a as 
described below to reflect the changes enacted under section 418 of the 
SSPA and section 9007 of OBRA 1987.
    Section 404.408a(a) When reduction is required. This paragraph 
describes the conditions under which we will apply the GPO. This 
paragraph also explains how we will determine what the monthly pension 
amount is if the pension is not paid monthly or is paid in a lump sum. 
We propose to revise this paragraph to explain that we will apply the 
GPO:
    1. To the monthly Social Security wife's, husband's, widow's, 
widower's, mother's or father's, or divorced or surviving divorced 
spouse's benefit for each month a monthly pension from the Federal 
government based on noncovered employment is payable, unless the 
individual meets one of the exceptions in paragraph (b) of this 
section;
    2. To the monthly Social Security wife's, husband's, widow's, 
widower's, mother's or father's, or divorced or surviving divorced 
spouse's benefit if the State or local government employee's 
application for benefits was filed before April 1, 2004, or his or her 
last day of employment was worked before July 1, 2004, and the last day 
was not covered by Social Security; and
    3. To the monthly Social Security wife's, husband's, widow's, 
widower's, mother's or father's, or divorced or surviving divorced 
spouse's benefit if the State or local government employee's 
application for benefits was filed on or after April 1, 2004 and any 
portion of the last 60 months of government service was not covered by 
Social Security. However, if the individual files an application for 
benefits on or after April 1, 2004 and the individual's last day of 
service occurs after June 30, 2004 and before March 2, 2009, we propose 
to reduce the 60-month requirement (but not to less than 1 month) by 
the total number of months of Social Security covered employment under 
the State or local retirement system worked on or before March 2, 2004. 
We also propose to revise this paragraph to explain that, for the 
purposes of this transitional rule, we will count as a month of 
employment any month in which the individual worked in covered 
government employment for at least one day.
    We also propose to revise this paragraph to explain that if an 
individual's Social Security benefit is reduced because of GPO and he 
or she later returns to work for a government agency, his or her Social 
Security benefit will continue to be reduced unless he or she works at 
least 60 months in covered employment for the same employer or in the 
same pension plan. We are proposing this revision to clarify that a 
person who worked for one government agency could not return to work 
for another agency and earn an exemption from the GPO unless the work 
was covered by the same pension plan.
    We also propose to revise this paragraph to better explain how we 
treat government pensions that are not paid monthly or in a lump sum 
and how this information is obtained.
    Section 404.408a(b) Exceptions. This paragraph describes the 
conditions under which the GPO does not apply. We propose to revise 
this paragraph to include an exception for 60 months or more of Federal 
government employment covered under Social Security as provided by 
section 9007 of OBRA 1987. This new exception would follow the existing 
five exceptions and be designated as paragraph (b)(6).
    Section 404.408a(d) Amount and priority of reduction. This 
paragraph describes the amount of the GPO reduction and the order in 
which the GPO reduction will be made in relation to reductions for age 
and simultaneous entitlement to other Social Security benefits. We 
propose to add an explanation that if a person's pension is based on 
both government employment and private sector employment, the GPO will 
apply to the part of the pension based on noncovered governmental work. 
It will not apply to the part of the pension that is attributable to 
earnings from a nongovernmental entity. Because the GPO was designed to 
offset the Social Security spouse's benefit by the amount of the 
pension that was based on noncovered government employment, the offset 
should apply only to the governmental part of the pension. Some 
individuals work for school systems that have a public pension plan 
that also credits work for private schools. Thus, a teacher may work 
for 25 years in a public school and 5 years in a private school and 
both jobs participate in the same pension plan. However, because the 
GPO applies only to public employment, the portion of the pension 
attributable to work in the private sector is not subject to the GPO. 
In addition, the ``last day'' GPO exception, as well as the new 60-
month exception, applies only to public employment. Therefore, a 
teacher whose last day of employment, or last 60 months, is with a 
private school is not exempt from GPO for that part of his or her 
pension that is based on noncovered government service.

Clarity of These Rules

    Executive Order 12866, as amended, requires each agency to write 
all rules in plain language. In addition to your substantive comments 
on these proposed rules, we invite your comments on how to make them 
easier to understand. For example:
     Have we organized the material to suit your needs?
     Are the requirements in the rules clearly stated?
     Do the rules contain technical language or jargon that 
isn't clear?
     Would a different format (grouping and order of sections, 
use of headings, paragraphing) make the rules easier to understand?
     Would more (but shorter) sections be better?
     Could we improve clarity by adding tables, lists, or 
diagrams?
     What else could we do to make the rules easier to 
understand?

Regulatory Procedures

Executive Order 12866, as Amended

    We have consulted with the Office of Management and Budget (OMB) 
and determined that these proposed rules meet the requirements for a 
significant regulatory action under Executive Order 12866, as amended. 
Thus, they were subject to OMB review.
    Administrative costs attributable to the publication of this 
regulation are estimated to be negligible (i.e., less than 25 work 
years and $2 million). At the time of enactment of the SSPA, we 
estimated that this change would result in a reduction in the Old-Age, 
Survivors and Disability Insurance (OASDI) benefits of $5 million over 
the first 5 years, and $39 million over the first 10 years. We estimate 
that the effect of this change will be small initially, but will grow 
during the projection period such that in the 10th year there will be 
about 1,500 beneficiaries with GPO offset because of this change, with 
a decrease

[[Page 43204]]

in benefits during that year of about $10 million. The year-by-year 
estimates of these benefit payment reductions are presented in the 
table below.

------------------------------------------------------------------------
                                                           Reduction in
                                                               OASDI
                       Fiscal year                         benefits (in
                                                             millions)
------------------------------------------------------------------------
2004....................................................            (1/)
2005....................................................            (1/)
2006....................................................              $1
2007....................................................               1
2008....................................................               2
2009....................................................               4
2010....................................................               5
2011....................................................               7
2012....................................................               8
2013....................................................              10
                                                         ---------------
 Totals:
  2004-08...............................................               5
                                                         ---------------
  2004-13...............................................             39
------------------------------------------------------------------------
1/ Reduction in benefit payments of less than $500,000.

Regulatory Flexibility Act

    We certify that these proposed rules, when published in final, 
would not have a significant economic impact on a substantial number of 
small entities because they affect only individuals. Thus, a regulatory 
flexibility analysis as provided in the Regulatory Flexibility Act, as 
amended, is not required.

Paperwork Reduction Act

    These proposed regulations would impose no reporting or 
recordkeeping requirements subject to OMB clearance.

(Catalog of Federal Domestic Assistance Program Nos. 96.001, Social 
Security--Disability Insurance; 96.002, Social Security--Retirement 
Insurance; 96.004, Social Security--Survivors Insurance.)

List of Subjects in 20 CFR Part 404

    Administrative practice and procedure, Blind, Disability benefits, 
Old-Age, Survivors and Disability Insurance; Reporting and 
recordkeeping requirements, Social Security.

    Dated: May 30, 2007.
Michael J. Astrue,
Commissioner of Social Security.
    For the reasons set out in the preamble, we propose to amend 
subpart E of part 404 of chapter III of title 20 of the Code of Federal 
Regulations as set forth below:

PART 404-- FEDERAL OLD-AGE, SURVIVORS AND DISABILITY INSURANCE 
(1950- )

Subpart E--[Amended]

    1. The authority citation for subpart E of part 404 continues to 
read as follows:

    Authority: Secs. 202, 203, 204(a) and (e), 205(a) and (c), 
216(l), 222(c), 223(e), 224, 225, 702(a)(5), and 1129A of the Social 
Security Act (42 U.S.C. 402, 403, 404(a) and (e), 405(a) and (c), 
416(l), 422(c), 423(e), 424a, 425, 902(a)(5), and 1320a-8a and 48 
U.S.C. 1801.

    2. Amend Sec.  404.408a by revising paragraph (a), adding paragraph 
(b)(6) and revising paragraph (d)(1) to read as follows:


Sec.  404.408a  Reduction where spouse is receiving a Government 
pension.

    (a) When reduction is required. For the purposes of this section, 
we use the term ``Government pension'' to mean a monthly pension from a 
Federal, State, or local government agency for which you were employed 
in work not covered by Social Security.
    (1) Unless you meet one of the exceptions in paragraph (b) of this 
section, your monthly Social Security benefits as a wife, husband, 
widow, widower, mother or father, divorced or surviving divorced spouse 
will be reduced each month that a periodic benefit is payable to you 
from the Federal government for work you performed that was not covered 
by Social Security.
    (2) If you filed an application for Social Security benefits as a 
wife, husband, widow, widower, mother or father, divorced or surviving 
divorced spouse before April 1, 2004, or your work with a State or 
local government ended before July 1, 2004, your benefits will be 
reduced each month a periodic benefit from a State or local government 
pension plan is payable to you, if the pension is based on work that 
was not covered by Social Security on the last day of employment unless 
you meet one of the exceptions in paragraph (b) of this section.
    (3)(i) If you file an application for Social Security benefits as a 
wife, husband, widow, widower, mother or father, divorced or surviving 
divorced spouse on or after April 1, 2004, and your work with a State 
or local government ended July 1, 2004 or later, your benefits will be 
reduced each month that a periodic benefit is payable to you from a 
State or local government pension plan for which you were employed in 
work not covered by Social Security during any portion of your last 60 
months of such service that ends with your last day of employment, 
unless you meet one of the exceptions in paragraph (b) of this section.
    (ii) If the last day of your State or local government service 
occurs after June 30, 2004 and before March 2, 2009, we may reduce the 
requirement that you must work your last 60 months in covered 
employment. You still must work 60 months altogether in covered 
employment. We will reduce the last 60-month requirement (but not to 
less than 1 month) by the total number of months you performed in 
Social Security covered employment, under the same State or local 
retirement system, on or before March 2, 2004. The months do not have 
to be consecutive. You must work the remaining number of months needed 
to total 60 months of covered government employment after March 2, 
2004. Therefore, even if you have 60 or more months of covered 
government employment on or before March 2, 2004, you must work your 
last month of covered government employment after March 2, 2004. We 
consider employment of at least 1 day in a given month to be a month of 
employment.
    (4) If you receive a Government pension based on noncovered 
employment and later return to work for a government agency, your 
monthly Social Security benefit as a wife, husband, widow, widower, 
mother or father, divorced or surviving divorced spouse will always be 
reduced because of your Government pension, unless the later work is 
covered by Social Security and you work at least 60 months in covered 
employment for the same employer or in the same pension plan. For 
purposes of this section, Federal Government employees performing work 
that is covered by Medicare, but not otherwise covered by Social 
Security, are not considered to be performing work covered by Social 
Security.
    (5)(i) If the Government pension is not paid monthly or is paid in 
a lump-sum, we will allocate it on a basis equivalent to a monthly 
benefit and then reduce the monthly Social Security benefit 
accordingly.
    (ii) We will generally obtain information about the number of years 
covered by a lump-sum payment from the pension plan.
    (iii) If one of the alternatives to a lump-sum payment is a life 
annuity, and the amount of the monthly or other periodic payment can be 
determined, we will base the reduction on that amount.
    (iv) Where the period or the equivalent monthly pension benefit is 
not clear, it may be necessary for us to determine the reduction period 
on an individual basis.
    (b) * * *
    (6) If you receive a pension for Federal Government employment and 
that employment was covered under Social Security for 60 months or more 
in the aggregate during the period beginning January 1, 1988 and ending 
with the first month of entitlement to

[[Page 43205]]

Social Security benefits as a wife, husband, widow, widower, mother or 
father, divorced or surviving divorced spouse.
* * * * *
    (d) * * *
    (1)(i) If you became eligible for a Government pension based on 
noncovered service after June 1983, we will reduce (to zero, if 
necessary) your monthly Social Security benefits as a wife, husband, 
widow, widower, mother or father, divorced or surviving divorced spouse 
by two-thirds the amount of your monthly pension.
    (ii) If your Government pension is based in part on earnings from a 
nongovernmental entity, we will base the amount of the reduction on 
only the portion of the pension that is based on noncovered government 
service. We will not consider that portion of the pension that is 
attributable to the nongovernmental earnings in determining the amount 
of the reduction.
    (iii) If the reduction is not a multiple of 10 cents, we will round 
it to the next higher multiple of 10 cents.
* * * * *
 [FR Doc. E7-15057 Filed 8-2-07; 8:45 am]
BILLING CODE 4191-02-P