[Federal Register Volume 80, Number 114 (Monday, June 15, 2015)]
[Rules and Regulations]
[Pages 34048-34051]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-14509]


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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: Final rule.

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SUMMARY: This final rule adopts, with clarifying changes, the proposed 
rule we previously published in the Federal Register on August 3, 2007. 
This final rule revises our Government Pension Offset (GPO) regulations 
to reflect changes to the Social Security Act (``Act'') made by section 
9007 of the Omnibus Budget Reconciliation Act of 1987 (OBRA 1987) and 
section 418 of the Social Security Protection Act of 2004 (SSPA). These 
regulations explain how and when we will reduce the Social Security 
spouse's benefit for some people who receive Federal, State, or local 
government pensions if Social Security did not cover their government 
work.

DATES: This final rule is effective on July 15, 2015.

FOR FURTHER INFORMATION CONTACT: Sylvia Diaz, Social Insurance 
Specialist, Office of Income Security Programs, Social Security 
Administration, 6401 Security Boulevard, Baltimore, Maryland 21235-
6401, (410) 965-1981. For information on eligibility or filing 
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 
www.socialsecurity.gov.

SUPPLEMENTARY INFORMATION:

Background

    Congress enacted the GPO in 1977 to reduce the Social Security 
spouse's benefit of workers who receive a government pension based on 
noncovered employment. A Social Security spouse's old-age benefit is a 
benefit that, under certain circumstances, the spouse, widow(er), 
mother, father, divorced spouse, or surviving divorced spouse of an 
insured person is entitled to receive. Congress created spouse's 
benefits to help people who depend on their working spouses for 
financial support, either because they did not work or did not work 
long enough to be entitled to their own Social Security retirement 
benefit.
    Spouse's benefits are separate from the Social Security retirement 
benefits earned based on an individual's own earnings record. We base a 
spouse's benefit on the Social Security earnings record of an 
individual's current, deceased, or former spouse. The GPO does not 
apply to Social Security retirement or disability benefits that we base 
on an individual's own earnings.
    Under the Social Security program, an individual who is entitled to 
more than one Social Security benefit at the same time does not receive 
the full amount of each benefit. For example, an individual who worked 
and paid Social Security taxes may be eligible for a retirement benefit 
based on his or her own earnings and may also be eligible for spouse's 
benefits based on another person's earnings. In this case, if the 
spouse's benefit is greater than the individual's retirement benefit, 
we will reduce the spouse's benefit by the amount of the individual's 
own retirement benefit. Therefore, the individual's own retirement 
benefit ``offsets'' the benefit amount paid as a spouse.
    In certain instances, an individual may earn wages but not pay 
Social Security taxes. We call this noncovered work. This situation 
exists for some Federal, State, and local government employees who 
contributed to a government-employee pension plan and receive a 
government pension. Since these individuals did not pay Social Security 
taxes on their noncovered employment, they are not eligible for Social 
Security retirement benefits based on that work. However, they may be 
eligible for Social Security spouse's benefits.
    Congress believed that individuals who received a government 
pension based on their own noncovered work would receive a ``windfall'' 
if they also received Social Security spouse's benefits that their 
government pension did not offset.\1\ To prevent this ``windfall,'' 
Congress passed the GPO provision in 1977.\2\ The GPO treats government 
workers similarly to individuals who worked in jobs that Social 
Security covered by reducing their Social Security spouse's benefit 
when they receive a government pension based on their own noncovered 
work.
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    \1\ See S. Rep. No. 95-572, at 28 (1977).
    \2\ Public Law 95-216, 91 Stat. 1509 (1977); see 42 U.S.C. 
402(k)(5)(A).
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    Under the 1977 law, the GPO did not apply if Social Security 
covered the person's last day of government employment. The wording of 
this law allowed an individual to spend an entire career in a 
noncovered job and avoid the GPO by working in a covered job for only 1 
day. To close this ``last

[[Page 34049]]

day loophole,'' Congress enacted section 418 of the SSPA, Public Law 
108-203, which amended the GPO provision of the Act. This amendment, 
made by section 418, requires that an individual's final 60 months of 
government work must be covered by both Social Security and the pension 
plan that provides the government pension in order to be exempt from 
the GPO. This amendment also phased out the ``last day'' loophole and 
provided a transitional rule that covered people whose last day of 
government employment occurred within 5 years of the enactment of SSPA.
    For workers whose last day of State or local government employment 
occurred between March 2, 2004 and March 1, 2009, we will reduce the 
60-month requirement by the total number of months that the worker 
served in covered employment on or before March 2, 2004. The worker 
must perform the remaining month(s) of service needed to fulfill this 
60-month requirement 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.
    The last 60-month requirement established by section 418 of the 
SSPA is similar to a requirement established by section 9007 of the 
OBRA 1987, Public Law 100-203. Section 9007 specified that Federal 
employees who transfer from the Civil Service Retirement System to the 
Federal Employees Retirement System must work for at least 60 months, 
taken together, in covered employment in order to avoid application of 
the GPO.
    On August 3, 2007, we published an NPRM in the Federal Register at 
72 FR 43202 proposing to revise our regulations to reflect the changes 
to the GPO made by section 418 of SSPA and section 9007 of the OBRA 
1987. We are finalizing the changes announced in the NPRM, with the 
modifications noted below.

Changes to Language Proposed in NPRM

    We re-worded and reorganized the proposed regulatory language to 
better explain how we apply the GPO rules. These changes make the 
regulations clearer and easier to understand. The language changes do 
not affect the substance of the regulation as proposed in our NPRM.
    In the NPRM, we proposed replacing the words ``receiving'' and 
``received'' with the word ``payable.'' We decided against this change. 
Variations of the term ``receive'' more clearly describe the fact that 
a government pension plan must pay a person a periodic benefit from for 
GPO to apply. Additionally, use of the term ``receive'' in this section 
maintains consistency throughout our regulations.
    We simplified the language in proposed 404.408a(a)(1), and 
redesignated the section as 404.408a(a)(2).We redesignated proposed 
404.408a(a)(1) as (a)(2) because we are adding a new 404.408a(a)(1). In 
the proposed rules, we used the terms ``government pension'' and 
``noncovered employment'' without a definition. We also referred to an 
individual's ``Social Security benefits as a wife, husband, widow, 
widower, mother or father, divorced or surviving divorced spouse'' 
throughout proposed 404.408a(a), as well as in proposed 404.408a(b) and 
(d).
    To simplify and clarify the rules, we added a definitional 
paragraph to 404.408a(a) for these terms. We defined the terms 
government pension and noncovered employment in 404.408a(a)(1)(i) and 
(a)(1)(ii) and added 404.408a(a)(2)(iii) to define ``spouse's 
benefits,'' which is a single term used to represent those 
beneficiaries affected by this section: Wives, husbands, widows, 
widowers, mothers, fathers, divorced or surviving divorced spouses. 
Using a single term to describe these groups simplifies our rules and 
makes them easier to understand. The addition of these terms does not 
change or affect the categories of beneficiaries affected or change the 
substance of the rules we proposed.
    We simplified the language in proposed 404.408a(a)(3) and moved it 
to 404.408a(b)(6), except for the final sentence of (3)(ii).
    We revised the final sentence of proposed 404.408a(a)(3)(ii) and 
moved it to 404.408a(a)(2).
    We simplified the first sentence of proposed 404.408a(a)(4) and 
moved it to 404.408a(b)(6)(ii) to clarify that it applies to the last 
60 months rule.
    We simplified the second sentence of proposed 404.408a(a)(4) and 
moved it to 404.408a(a)(1)(ii) to clarify that it applies to all of 
Sec.  404.408a.
    We simplified the language of proposed 404.408a(d) and added 
provisions from proposed paragraph 404.408a(a)(5).
    We revised the language of proposed 404.408a(b)(6) and moved it to 
404.408a(b)(7).
    We simplified formerly proposed 404.408a(a)(2) and moved it to 
404.408a(b)(8) as a new exception.

Public Comment

    On August 3, 2007, we published an NPRM in the Federal Register at 
72 FR 43202 and provided the public with a 60-day comment period. We 
received one comment. We carefully considered the concerns expressed in 
this comment but did not make any changes to the final rule as a result 
of the comment.
    Comment: A member of the public objected to the GPO, stating that 
government pensions are already larger than private pensions. The 
commenter opined that people who receive government pensions should not 
get extra payments since they already receive more than workers who 
lack pensions.
    Response: We did not adopt this comment, which reflects a 
misunderstanding of the GPO. The GPO does not increase government 
pensions and it does not increase Social Security benefits. Instead, it 
reduces the Social Security spouse's benefit of workers who receive a 
government pension based on noncovered employment. Because our current 
regulations reflect the purpose of the GPO, people who receive 
government pensions are not receiving extra payments.

Regulatory Procedures

Executive Order 12866 as Supplemented by Executive Order 13563

    We consulted with the Office of Management and Budget (OMB) and 
determined that this final rule does not meet the criteria for a 
significant regulatory action under Executive Order 12866, as 
supplemented by Executive Order 13563 and was not subject to OMB 
review.

Regulatory Flexibility Act

    We certify that this final rule will not have a significant 
economic impact on a substantial number of small entities because it 
affects individuals only. Therefore, the Regulatory Flexibility Act, as 
amended, does not require us to prepare a regulatory flexibility 
analysis.

Paperwork Reduction Act

    This final rule imposes 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

[[Page 34050]]

Insurance; Reporting and recordkeeping requirements; Social Security.

    Dated: June 5, 2015.
Carolyn W. Colvin,
Acting Commissioner of Social Security.

    For the reasons set out in the preamble, we amend 20 CFR chapter 
III, part 404, subpart E as follows:

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

Subpart E--Deductions; Reductions; and Nonpayments of Benefits

0
1. The authority citation for subpart E of part 404 is revised 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); 48 
U.S.C. 1801.


0
2. Amend Sec.  404.408a by revising paragraph (a), adding paragraphs 
(b)(6) through (8), and revising paragraph (d) to read as follows:


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

    (a) General--(1) Terms used in this section. (i) Government pension 
means any monthly periodic benefit (or equivalent) you receive that is 
based on your Federal, State, or local government employment.
    (ii) Noncovered employment means Federal, State, or local 
government employment that Social Security did not cover and for which 
you did not pay Social Security taxes. For the purposes of this 
section, we consider your Federal, State, or local government 
employment to be noncovered employment if you pay only Medicare taxes.
    (iii) Spouse's benefits are Social Security benefits you receive as 
a wife, husband, widow(er), mother, father, divorced spouse, or 
surviving divorced spouse.
    (2) When reduction is required. We will reduce your spouse's 
benefit for each month that you receive a government pension based on 
noncovered employment, unless one of the exceptions in paragraph (b) of 
this section applies. When we consider whether you receive a government 
pension based on noncovered employment, we consider the entire month to 
be a month covered by Social Security if you worked for a Federal, 
State, or local government employer in a position covered by Social 
Security for at least 1 day in that month and there was no noncovered 
employment that month under the same pension plan.
    (b) * * *
    (6) If you are receiving a government pension and the last 60 
months of your government employment were covered by both Social 
Security and the pension plan that provides your government pension.
    (i) If the last day of your government employment was after June 
30, 2004 and on or before March 2, 2009, we will apply a transitional 
rule to reduce the last 60-month requirement under the following 
conditions:
    (A) You worked 60 months in Federal, State, or local government 
employment covered by Social Security before March 2, 2004, and you 
worked at least 1 month of covered government employment after March 2, 
2004, or
    (B) You worked fewer than 60 months in government employment 
covered by Social Security on or before March 2, 2004 and you worked 
the remaining number of months needed to total 60 months after March 2, 
2004. The months that you worked before or after March 2, 2004 do not 
have to be consecutive.
    (ii) We will always reduce your monthly spouse's benefit if you 
receive a government pension based on noncovered employment and you 
later go back to work for a Federal, State, or local government, 
unless:
    (A) Your final 60 months of Federal, State, or local government 
employment were covered by Social Security; and
    (B) Both your earlier and later Federal, State, or local government 
employment were under the same pension plan.
    (7) If you are a former Federal employee and you receive a 
government pension based on work that included at least 60 months in 
employment covered by Social Security in the period beginning January 
1, 1988 and ending with the first month you became entitled to spouse's 
benefits, whether or not the 60 months are consecutive), and:
    (i) You worked in the Civil Service Retirement System (CSRS), but 
switched after 1987 to either the Federal Employees Retirement System 
(FERS) or the Foreign Service Pension System; or
    (ii) You worked in the legislative branch and left CSRS after 1987 
or received a lump sum payment from CSRS or another retirement system 
after 1987.
    (8) You were a State or local government employee, or a Federal 
employee who worked in the CSRS but switched to the FERS before 1988, 
your last day of service was in covered employment, and
    (i) You filed for spouse's benefits before April 1, 2004 and became 
entitled to benefits based on that filing, or
    (ii) Your last day of service was before July 1, 2004,
* * * * *
    (d) Amount and priority of reduction--(1) Post-June 1983 government 
pensions. (i) If you became eligible for a government pension after 
June 1983, and you do not meet one of the exceptions in paragraph (b) 
of this section, we will reduce (to zero, if necessary) your monthly 
Social Security spouse's benefits by two-thirds of the amount of your 
government pension.
    (ii) If you earned part of your pension based on employment other 
than Federal, State, or local government employment, we will only use 
the part of your pension earned in government employment to compute the 
GPO.
    (iii) If the reduction is not a multiple of 10 cents, we will round 
it to the next higher multiple of 10 cents.
    (2) Pre-July 1983 government pensions. (i) If you became eligible 
for a government pension before July 1983, and do not meet one of the 
exceptions in paragraph (b) of this section, we will reduce (to zero, 
if necessary) your monthly Social Security spouse's benefits as 
follows:
    (A) By the full amount of your pension for months before December 
1984; and
    (B) By two-thirds the amount of your monthly pension for months 
after November 1984.
    (ii) If the reduction is not a multiple of 10 cents, we will round 
it to the next higher multiple of 10 cents.
    (3) Reductions for age and simultaneous entitlement. We will reduce 
your spouse's benefit, if necessary, for age and for simultaneous 
entitlement to other Social Security benefits before we reduce it 
because you are receiving a government pension. In addition, this 
reduction follows the order of priority stated in Sec.  404.402(b).
    (4) Reduction not a multiple of $1.00. If the monthly benefit 
payable to you after the required reduction(s) is not a multiple of 
$1.00, we will reduce it to the next lower multiple of $1.00 as 
required by Sec.  404.304(f).
    (5) Lump sum payments. If the government pension is not paid 
monthly or is paid in a lump sum, we will allocate the pension on a 
basis equivalent to a monthly benefit and then reduce the monthly 
Social Security benefit accordingly.
    (i) We will generally obtain information about the number of years 
covered by a lump-sum payment from the pension plan.
    (ii) If one of the alternatives to a lump-sum payment is a life 
annuity, and we can determine the amount of the

[[Page 34051]]

monthly annuity, we will base the reduction on that monthly amount.
    (iii) If the period or the equivalent monthly pension benefit is 
not clear, we may determine the reduction period and the equivalent 
monthly benefit on an individual basis.
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[FR Doc. 2015-14509 Filed 6-12-15; 8:45 am]
BILLING CODE 4191-02-P