The Social Security Administration (SSA) applies an offset to ORP benefits under two programs:
Exceptions to the offsets: The SSA allows exceptions to their two offset programs. Check the SSA website for details about these exceptions.
The Windfall Elimination Provision (WEP) is applied when an ORP Participant applies for SSA benefits under their own earnings record.
Rule for the ORP: The SSA will use an ORP Participant's (total) ORP account balance on the date he or she terminates employment with the Commonwealth to develop a proxy "state pension”*. The SSA calculates the proxy “state pension” by amortizing your account balance over your life expectancy. The SSA uses their own mortality tables for this purpose.
This proxy for a state pension is then used to calculate your Primary Insurance Amount.
The Government Pension Offset (GPO) is applied to an ORP Participant applying for SSA benefits under their spouse’s earnings record.
Rule for the ORP: The SSA will use an ORP Participant's (total) ORP account balance on the date he or she terminates employment with the Commonwealth to develop a proxy "state pension"* to offset.
The SSA offsets their normal (spousal) benefit to you by two thirds of your proxy state pension.
* What is a proxy "state pension"? Social Security representatives have been instructed to record this “state pension” amount on their systems as having been derived from a “lump sum.” This does not mean that you have taken any payments from the ORP; nor does it mean that you must take any payments from the ORP. However, this method of recording the “state pension” on the SSA systems means that they do not request annual updates of your “state pension” in the future.