If you receive Social Security Disability Insurance (SSDI) and also collect a pension or retirement benefit, you may have heard that the two can affect each other. That's true in some situations — but not all. The rules around SSA offsets are genuinely complicated, and many people are surprised to learn that certain retirement and pension benefits can reduce their SSDI payment while others have no impact at all.
For workers in Maryland and the DC Metro Area, this issue comes up constantly. The region has one of the highest concentrations of federal employees, state and local government workers, and military veterans in the country — many of whom receive pensions or retirement benefits that may interact with their SSDI in ways they don't expect.
Understanding which benefits are exempt can make a real difference in your financial planning and in making sure the Social Security Administration isn't reducing your check when it shouldn't be.
An SSA offset is a reduction applied to your Social Security Disability Insurance benefit because you're also receiving another type of income — typically a pension or retirement benefit from work that wasn't covered by Social Security taxes.
The most significant offset rules are the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO). Both were enacted to prevent people from collecting full Social Security benefits when they also receive a pension from a job where they didn't pay into the Social Security system. Congress reasoned that the SSDI benefit formula is weighted to replace a higher percentage of income for lower earners, and someone with a government pension might appear to be a low earner under that formula even if they aren't.
The result: your SSDI benefit can be reduced — sometimes substantially — depending on what type of pension you receive and where it came from.
It's worth noting that the Social Security Fairness Act, signed into law in January 2025, eliminated the WEP and GPO for most affected workers. For many Maryland and DC-area government employees who had previously seen their SSDI reduced because of a state or local pension, this change is significant. However, other offset rules remain in effect, and understanding how your specific benefits interact with SSDI still matters.
Before covering the exemptions, it helps to understand what types of retirement income have historically triggered offsets — and may still do so under remaining rules.
Pensions from federal, state, or local government employment where Social Security taxes were not withheld are the most common source of offset issues. In this region, that's a large population. Maryland teachers covered under the Maryland State Retirement and Pension System, Montgomery County and Prince George's County public safety employees, and DC government workers under certain older pension arrangements all had potential exposure to WEP and GPO reductions before 2025. Many of these workers are still sorting out whether the SSA has properly updated their benefits following the legislative change.
Workers' compensation benefits and certain public disability benefits can also trigger a separate offset — the workers' compensation offset — which reduces SSDI payments when combined income exceeds 80 percent of a worker's pre-disability earnings. Maryland and Virginia each have their own workers' compensation systems, and how a settlement is structured under either can significantly affect an SSDI recipient's monthly payment.
The Social Security Administration's rules carve out a meaningful list of exemptions. If your pension falls into one of the following categories, it generally will not reduce your SSDI benefit.
If you worked a job where Social Security taxes (FICA) were withheld from your paycheck, any pension or retirement benefit you earned from that employment is not subject to offset. This covers the vast majority of private-sector pensions and 401(k)-type retirement accounts. For the many Maryland and DC-area residents who have worked a mix of private-sector and government jobs over their careers, it's important to understand that only the non-covered government portion of a pension has any potential to trigger an offset.
This is particularly relevant for the large federal workforce in Maryland, Virginia and DC. Unlike the older Civil Service Retirement System, FERS was designed from the start to work alongside Social Security. FERS employees pay Social Security taxes and earn Social Security credits throughout their careers. Because of this, FERS pensions are not treated as non-covered pensions and do not trigger the offset reductions that CSRS pensions historically did. Federal employees under FERS who become disabled and qualify for SSDI can generally receive both their FERS disability or retirement benefit and their full SSDI payment without offset.
Retirement distributions from private employer pension plans, 401(k) accounts, 403(b) plans, and similar defined contribution accounts are exempt from SSA offsets — provided the underlying employment was covered by Social Security. This includes IRA distributions funded by rollovers from covered-employment retirement accounts. For the large private-sector workforce throughout the Baltimore-Washington corridor, these benefits are fully protected from offset.
The DC Metro Area is home to a substantial veteran population, and this exemption matters for many of them. Disability compensation and pension benefits paid by the Department of Veterans Affairs (VA) are not counted as pensions for SSA offset purposes. Veterans who receive both VA benefits and SSDI are generally not subject to any reduction based on their VA income. These are treated as entirely separate programs, and a veteran's service-connected disability rating has no bearing on their SSDI eligibility or payment amount.
The Railroad Retirement Board administers its own retirement system for railroad workers. While less common in today's workforce, Maryland has a history of railroad employment, particularly in the Baltimore area. Tier I Railroad Retirement benefits are coordinated with Social Security and are treated similarly to Social Security benefits themselves — they do not trigger the offset provisions that apply to non-covered government pensions.
Following the repeal of the WEP and GPO in January 2025, many state and local government employees who were previously subject to these provisions no longer face those specific reductions. Maryland public school teachers, county police officers, firefighters and other government workers who receive pensions from non-covered employment may now be entitled to their full SSDI benefit.
However, the SSA does not always update these records automatically or quickly. If you were subject to a WEP or GPO reduction before the repeal and haven't seen your benefit adjusted, it's worth investigating whether you're owed back pay or a corrected payment going forward.
It's worth addressing workers' compensation separately because it operates under its own offset rules, independent of the WEP and GPO.
If you receive both SSDI and workers' compensation benefits, the SSA may reduce your SSDI payment if your combined income exceeds 80 percent of your average current earnings before your disability. This rule applies regardless of whether your workers' compensation comes from a government or private employer — and it applies whether your claim was filed under Maryland's workers' compensation system, Virginia's, or DC's.
Certain lump-sum workers' compensation settlements can be structured in ways that minimize or eliminate this offset, particularly when the settlement is spread out and allocated properly. Getting this structuring right requires legal guidance before the settlement is finalized, since it's very difficult to undo after the fact.
Errors happen — and they're more common than many people realize, particularly in the wake of the 2025 WEP and GPO repeal. The SSA may incorrectly apply a reduction to a pension that is actually exempt, or may be slow to update your record after the legislative changes. If you believe your SSDI benefit has been improperly reduced, you have the right to appeal that determination.
The first step is requesting a written explanation from the SSA detailing how your benefit was calculated. From there, you can request reconsideration, and if that is denied, pursue a hearing before an Administrative Law Judge. These appeals have strict deadlines — generally 60 days from the date of the notice — so acting promptly is critical.
Many people applying for or receiving SSDI don't realize that pension income could affect their monthly payment until they see a reduced deposit. By that point, sorting out whether the reduction was correct — and fighting an improper one — can take months.
The DC Metro Area's unique workforce mix makes this more than an abstract concern. Federal retirees, state government employees, teachers, first responders, veterans and private-sector workers often have layered income sources that require careful analysis. If you're approaching retirement age while receiving SSDI, or weighing whether to take a pension before or after filing for disability benefits, understanding the offset rules in advance gives you real options. Timing, benefit elections and settlement structuring can all affect how much you ultimately receive.
The intersection of SSDI and retirement income is one of the more technically complex areas of Social Security law. Getting it wrong means leaving money on the table — or having your benefit reduced when it shouldn't be.
At Lebau & Neuworth, we help clients throughout Maryland and the DC Metro Area understand how their income sources interact with Social Security Disability benefits, identify improper offsets and pursue appeals when the SSA gets it wrong. Whether you're a federal employee, a state or county worker, a veteran or a private-sector retiree, we can review your specific situation and help you protect the benefits you've earned.
Contact our office to speak with an SSDI attorney today!
