It is a new year with a new Administration and a new Congress coming into power in Washington, DC. While we do not know what will happen as a result, with a projected budget deficit of more than one trillion dollars, it seems that Uncle Sam is throwing money at a variety of organizations, projects and programs and, apparently, we will let our future generations worry about paying it back to those that are loaning America the money to spend.
As organizations, groups, companies and state and local governments line up to seek a piece of this borrowed largesse coming from the federal government, it is not surprising that there is a possibility that some of this spending may come to benefit federal employees–at least that is the hope of the organizations that represent the financial interests of the federal community.
Here is an example.
A common source of complaints from members of the federal community is the impact that the Government Pension Offset and the Windfall Elimination Provision can have on retirement income of those who have worked for the federal government for a number of years. If you never paid attention to these laws, you may want to take note. Chances are, one of them may apply to you. According to the National Active and Retired Federal Employees Association (NARFE): "Hundreds of thousands of retired federal civil servants, as well as other public-sector retirees, have lost Social Security income as a result of these offsets, and many annuitants are affected by both."
The organization says that 465,000 Social Security beneficiaries are affected by the Government Pension Offset and that and 75 percent have lost their entire Social Security spousal benefit. Apparently, about 972,000 Social Security beneficiaries are also affected by the Windfall Elimination Provision.
Government Pension Offset
The Government Pension Offset (GPO) affects anyone who receives a pension payment from work not covered by Social Security. In effect, if you are under the Civil Service Retirement System (CSRS), CSRS Offset, or if you are covered by the Federal Employees Retirement System (FERS) and transferred from CSRS, this law may impact your retirement income.
But, as noted by John Grobe in his article on this topic: "The good news for CSRS Offset or FERS transferees is that they become exempt from the GPO after working five years under CSRS Offset or FERS. In fact, folks who transferred to FERS during the first open season were immediately exempt from the GPO."
Here is how the GPO will reduce your retirement income. If you are married and your spouse receives Social Security benefits, or if you would normally be entitled to a survivor benefit from a spouse who has died, your Social Security payment will be reduced and, in all likelihood, it will be eliminated completely. Two-thirds of the amount of the earned civil service retirement annuity is used to offset Social Security spousal or survivor benefits that might otherwise have been payable.
Windfall Elimination Provision
The Windfall Elimination Provision (WEP) does not eliminate a Social Security benefit to which you are entitled on your own earnings record. However, it does have the effect of reducing the money you will receive. If you have earned 40 quarters of coverage, you will receive at least a small Social Security benefit. For more information, check out Windfall Elimination and Your Retirement Future by John Grobe for a quick explanation.
Rationale for the WEP and GPO
Readers occasionally ask about the reasons for these two programs that reduce the retirement income of government employees. In testimony before Congress, a representative of the Congressional Budget Office said that the perceived need for provisions such as the GPO and the WEP arises from three characteristics of the Social Security program:
- Not all workers are covered under Social Security, and the majority of noncovered workers are employees of federal, state, or local governments.
- Social Security provides benefits to spouses and survivors of retired and disabled workers without reducing those workers’ own benefits.
- The benefit formula is weighted to replace a greater percentage of earnings for beneficiaries with low lifetime earnings.
The Social Security Fairness Bill has now been introduced in the House of Representatives. This bill was introduced on January 7, 2009 and it has 88 cosponsors. It is a short bill. It’s sole purpose is to repeal the Government Pension Offset and the Windfall Elimination Provision.
As noted in GPO and WEP Changes: Don’t Hold Your Breath, the fact that a number of Representatives have co-sponsored a bill does not really mean anything. A Congressman can co-sponsor a bill and still vote against it.
Elimination the GPO and WEP would be expensive. While not often cited by proponents of elimination these provisions, according to the National Taxpayers Union, elimination of the GPO and WEP would cost about $9.2 billion over a five year period. That figure is probably lower than the actual costs as it was based on testimony from 2000.
But, with Congress and the new Administration in a mood to spend a great deal of money, HR 235 could get traction in this Congress. We will keep our readers informed about any movement of the bill to eliminate these restrictions on your retirement benefits.