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The Intertwined Destinies: Medicaid Cuts, Digital Taxes, and Social Security Evolution
Money Explainers
Seguir
29/6/2025
A look at three major shifts: Medicaid cuts, Canada's digital tax dispute, and the end of Social Security's GPO. How will these impact you? #EconomicImpact #SocialWelfare#PolicyChanges
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00:00
Good evening, we bring you an important update regarding a significant change to social security
00:05
provisions that impacts a specific group of beneficiaries. We're referring to the elimination
00:10
of the government pension offset or GPO. This rule was officially removed in January 2025,
00:16
marking a notable shift in how spousal and survivor benefits are calculated for those
00:21
also receiving a non-social security pension. The GPO was a social security provision that
00:27
had the effect of reducing and in some cases, completely eliminating certain American social
00:32
security benefits. To understand the GPO, one must first grasp social security's spousal and
00:39
survivor benefits. These benefits are designed to pay eligible individuals a portion of their
00:44
spouse's full social security benefits. This legislative change was a direct response to a
00:50
Supreme Court ruling in Califano v. Goldfarb in 1977, which deemed a sex-based distinction in
00:57
survivor benefits unconstitutional. However, this was heavily criticized, and the reduction was
01:03
later changed to two-thirds of the non-covered government pension. For example, if someone
01:08
received a monthly non-covered pension of $1,200, two-thirds or $800 would be deducted from their
01:16
spousal benefit. If their spousal benefit was $1,000, they would then receive $200 from social security.
01:22
It's crucial to note that if this reduction amount was higher than the monthly social security benefit,
01:28
the individual might not have received any social security benefits at all. Previously,
01:33
men had to prove financial dependence on their deceased wives to receive survivor benefits.
01:39
While women did not have to prove dependence on their husbands, while both involved pensions and
01:43
reductions in social security payments, as of December 2023, approximately 1% of all social
01:50
security beneficiaries had their benefits reduced by the GPO, with spouses and widows, widowers equally
01:57
affected. This raised concerns about fairness, as these workers were receiving pensions without
02:03
having paid social security taxes on those government earnings, and it added hundreds of millions of
02:08
dollars to the program's annual cost. Congress thus created the GPO to ensure that individuals
02:15
receiving pensions from non-covered government employment would not receive full social security
02:20
spousal and survivor benefits. For spousal benefits, the maximum amount is 50% of the spouse's full
02:27
retirement age benefit, also known as the primary insurance amount, or PI. Survivor benefits,
02:33
conversely, can go up to 100% of the PI. These benefits are particularly vital for individuals,
02:40
who either do not qualify for social security on their own, or would only receive a very modest
02:45
amount. The GPO specifically impacted the social security spousal or survivor benefits of most workers
02:51
who receive federal, state and local pensions from employment not covered by social security.
02:57
The origin of the GPO dates back to the social security amendments of 1977.
03:01
The Supreme Court's decision meant that hundreds of thousands of retired men who had worked in
03:06
government positions not covered by social security, suddenly qualified for spousal or
03:11
widower benefits. Initially, the GPO completely offset social security spousal benefits by 100%
03:18
of the non-covered government pension. It is also important to clarify that the GPO is distinct
03:23
from the windfall elimination provision. WEP could affect individuals receiving both a non-covered pension
03:29
and social security retirement or disability benefits. GPO specifically applied to those
03:35
receiving a government pension alongside social security, spousal or survivor benefits. A key
03:42
difference is that WEP could not completely eliminate a person's benefits, whereas GPO could. With the removal
03:49
of the GPO in January 2025, eligible individuals previously affected by this offset will now see their social
03:56
security spousal and survivor benefits calculated without this specific reduction. We will continue to
04:03
follow the implications of this and other social security updates. That's our report for tonight.
04:09
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