The House Ways and Means Committee has taken action on the Social Security Fairness Act (H.R. 82). This bill is of interest to a number of people in the federal community as it would repeal the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO).
Similar bills have been introduced every year for a number of years. This is the first time that the bill has advanced and it may result in a vote on the bill being taken on the floor of the House. The House bill is now up to 301 co-supporters. This means that, if it comes up for a floor vote, the bill is very likely to pass in the House.
There are now 42 co-sponsors for a similar bill in the Senate. If the bill does pass in the House, it will have a much harder time passing in the Senate.
What This Bill Would Do to WEP and GPO
This bill would have an impact on members of the federal community. Here is a quick summary of what the bill contains.
- It would repeal provisions that reduce Social Security benefits for individuals who receive other benefits, such as a pension from a state or local government.
- It would eliminate the government pension offset (GPO), which in various instances reduces Social Security survivors’ benefits for spouses, widows, and widowers who also receive government pensions of their own.
- It would also remove the windfall elimination provision (WEP), which in some instances reduces Social Security benefits for individuals who also receive a pension or disability benefit from an employer that did not withhold Social Security taxes.
Under the current House bill, the changes would be effective “for benefits payable after December 2021”. Of course, the wording of the bill could change by the time it passes in the House and Senate.
Statement from NARFE in Support of Bill
The National Active and Retired and Federal Employees Association (NARFE) quickly issued a press release supporting passage of the bill. No doubt, their view coincides with many federal employees who would like to see an increase in their retirement income. Here is a portion of the statement from the NARFE National President Ken Thomas:
WEP and GPO have deprived public servants of their full Social Security benefits for far too long. Federal workers, teachers, police officers, firefighters and others earned pensions through their service, and earned Social Security benefits separately through their or their spouses’ private-sector—or other covered—employment. Yet those earned Social Security benefits are reduced simply because they earned their public sector pension.
NARFE has pressed for repeal of these onerous penalties for decades. Bills have been introduced each Congress, often accumulating cosponsors from a majority of House members. Yet not once has the bill been considered by committee—until today. By approving the Social Security Fairness Act, the House Committee on Ways and Means has made more progress on this issue than has ever occurred. That is a real achievement.
How Do GPO and WEP Impact Federal Retirees?
Impact of WEP
These two provisions of the federal government’s retirement system were introduced in the 1980s. It was an effort to improve the financial health of the the Social Security system.
Public employee interest groups and those in Congress who represent large numbers of federal employees have been trying (without success) to repeal or revise these two requirements ever since they became effective.
The Windfall Elimination Provision affects only Social Security benefits to which you are entitled based on your own earnings record. As long as you have earned 40 credits, you will receive a Social Security benefit.
The Social Security System has a component designed to replace a higher portion of a low wage earner’s income than the income of the high-wage earner. CSRS employees, and others who have earned a retirement benefit based on work not covered by Social Security, often have many years in their Social Security earnings record with little or no employment covered by Social Security. This appears to the Social Security system like a low-wage earner, even though a federal employee had been working at a good job and earning a pension the entire time.
Impact of GPO
The Government Pension Offset (GPO), like the WEP, will only apply to those receiving a pension from employment not covered by Social Security. This means that it applies to CSRS retirees, and might apply to those retirees who are CSRS Offset or TransFERS.
But, unlike the WEP, the GPO applies to a Social Security spousal or survivor benefit to which an individual is entitled to based on the earnings of another person.
The reduces any Social Security spousal or survivor’s benefit to which you would be entitled by $2 for every $3 of your federal pension. This generally eliminates any benefit. The GPO always applies to straight CSRS retirees. Anyone who had at least 5 years of either CSRS Offset or FERS service would be exempt from the GPO.
Rationale for the WEP
Under the Windfall Elimination Provision, your Social Security benefits are figured using a modified benefit formula.
The reason for the WEP was to eliminate the “windfall” that could result if a federal employee were to receive a CSRS pension based on many years of federal service not covered by Social Security and also receive a full Social Security Benefit. In other words, it was designed to provide a full Social Security benefit because a federal employee had only a few years of employment covered by Social Security.
Why Does the GPO Exist?
According to the FERS Transfer Handbook issued by the Office of Personnel Management back in 1987, this is why the government pension offset exists and impacts the retirement income of some former federal employees.
If you retire from the federal service under CSRS and are also eligible for Social Security benefits as a spouse or survivor, your Social Security benefit will be reduced. It is reduced because you are receiving a pension from the Federal Government based on earnings that ar enot covered by Social Security. (Emphasis in original)Page 41, FERS Transfer Handbook: A Guide to Making Your Decision
Are These Proposals to Eliminate WEP and GPO Unfair?
Most FedSmith readers are current or retired federal employees. Therefore, many would benefit from a repeal of the WEP and GPO provisions of the federal retirement system. It is understandable that those of us in the federal community read numerous articles about why proposals should be adopted to provide greater benefits to this workforce.
There are reasons why these provisions have remained in force for more than three decades. One author who contributes to FedSmith has offered another perspective. To understand the arguments on both sides of the issue, here is a provision from a recent article on FedSmith by Brenton Smith:
This specific proposal would create a financial incentive for workers to opt-out of Social Security at the exact time that the program is struggling with the possibility of insolvency. These changes would cost the system roughly $700B in solvency and move the projected date of insolvency forward by a year.
That isn’t fair. That isn’t even thinking.
In the past writing on the subject, I have argued that it is not fair or wise to ask future retirees to reward people who opted-out of Social Security. (Read more on MarketWatch). Thereafter, I argued the adjustments based on WEP and GPO aren’t really all that harsh when compared to what you would have earned had you worked a full career in Social Security. (Read more on RedState)
Obviously, many readers will not agree with this position as can be seen from the numerous comments this article received.
While the WEP and GPO are not in the economic interests of many future federal retirees, the arguments against repeal of these provisions have not succeeded, in part because of the potential impact on the solvency of the Social Security system and its potential impact on other Social Security recipients. Seeing both sides of the issue can be helpful in understanding the complexity of the situation.
FedSmith will continue to update our readers on how the attempts to repeal the WEP and GPO fare in Congress.