Social Security Administration Issues
The Government Pension Offset (GPO) and the Windfall Elimination Provision (WEP)
The GPO and WEP are Social Security provisions which impact individuals who have chosen to serve their school boards, towns, cities, counties and states in public jobs. These provisions reduce retired public employee’s individual Social Security and survivor benefits. The Government Pension Offset (GPO) eliminates or reduces the spousal benefit by an amount that is determined using a formula which factors in the amount of a teacher’s retirement benefit. This reduction occurs whether the Social Security receiving spouse is alive, deceased, or divorced. Remember, the GPO only impacts those individuals who were not eligible to retire prior to December 31, 1982 (at least age 55 and twenty years of credible service). The following examples help clarify how the GPO may affect an individual in these different circumstances.
The GPO and WEP affect public employees in states that do not participate in the Social Security system. These Social Security benefit reductions affect public employees in virtually every state; however, those states with the greatest impact, in addition to Louisiana, are Alaska, California, Colorado, Connecticut, Illinois, Kentucky, Maine, Massachusetts, Missouri, Nevada, New Mexico, Ohio, Rhode Island, and Texas.
Non-public employees with private pensions get to keep their entire Social Security benefit and their Social Security survivor benefits. Take a minute to contact members of your congressional delegation to let them know you do not appreciate being treated differently from your family members and friends who worked in private sector jobs.
Contact a Social Security representative to verify your years of “substantial” earnings and request a calculation of your Social Security benefit. Visit www.ssa.gov for more detailed information on the GPO and WEP, and how these offsets are computed.
What is Being Proposed and What You Can Do
Each year, several bills are proposed by members of the U.S. Congress which address the reduction or repeal of both the GPO and WEP. The Coalition to Preserve Retirement Security has information regarding these proposals posted on their website, www.retirementsecurity.org.
In addition, a grassroots organization founded in California–Social Security Fairness–has developed a web site that provides updated information on the repeal initiative. That web site address is www.ssfairness.com. The web site provides a thorough explanation of GPO/WEP, and suggests steps you can take to further the cause for the repeal of these federal statutes.
You can find the latest information on the proposals before the U.S. Congress by searching for GPO repeal and WEP repeal on the web site of the Library of Congress. That web site address is http://thomas.loc.gov.
Rep. Rodney Davis (R-Illinois)
Status: Refereed to Subcomittee on Social Security
Senator Sherrod Brown (D-Ohio)
Status: Refereed to Committee on Finance
What You Need to Know
The Government Pension Offset
The Government Pension Offset (GPO) eliminates or reduces the spousal benefit by two-thirds the value of a teacher’s retirement benefit. This reduction occurs whether the Social Security receiving spouse is alive, deceased, or divorced. Remember, the GPO only impacts those individuals who were not eligible to retire prior to December 31, 1982 (at least age 55 and twenty years of credible service). The following examples help clarify how the GPO may affect an individual in these different circumstances.
Michael collects a Social Security benefit of $800 per month. His wife, Jan, who is a retired public school teacher worked for a school district that did not pay Social Security on its employees. Jan receives a monthly teacher annuity of $1,200. For the purpose of this example, both Michael and Jan are age 65 or older.
Effect of GPO with Living Spouse
Jan’s potential Social Security: Benefit: $800 X 1/2 = $400
Amount Calculated for GPO reduction: $1,200 X 2/3 = $800
Total monthly Social Security benefit: $400 – $800 = No benefit
Effect of GPO upon Death or Divorce
Jan’s potential Social Security Benefit: $800
Amount Calculated for GPO reduction: $1,200 X 2/3 = $800
Total Social Security Benefit: $800 – $800 = No benefit
These examples illustrate a complete offset, whereas in other situations, there may not be a complete offset. It is important to remember that in cases where a complete offset has not occurred, any increase in the teacher’s benefit, even the provision of periodic COLAs from the Teachers’ Retirement System of Louisiana, will result in a recalculation of the Social Security benefit. In other words, as the teacher’s annuity goes up, the Social Security benefit goes down.
The Windfall Elimination Provision (WEP)
The Windfall Elimination Provision uses a modified formula that may reduce your earned Social Security benefit. The modified formula applies to you when you attain age 62 or if you become disabled after 1985 and first become eligible after 1985 for a monthly pension based in whole or in part on work where you did not pay Social Security taxes.
The modified formula is used to figure your Social Security benefit beginning with the first month you get both a Social Security benefit and a teacher’s retirement benefit. However, you can be exempt from WEP if you retired or were eligible to retire prior to December 1985 or have 30 years of substantial Social Security earnings.
The WEP reduction formula does not totally eliminate potential Social Security earnings. In addition, the WEP reduction is not based on how much you earned from other work not covered by Social Security (e.g., your teacher’s retirement benefit). The formula used for calculating the first portion of the Social Security benefit will be reduced if you have less than 30 years of “substantial” earnings in Social Security. Table A in the sidebar illustrates the amount of earnings Social Security considers “substantial” for various years. Table B illustrates the reduced percentage used to calculate the first portion of your Social Security benefit based on less than 30 years of “substantial” earnings in Social Security.
Contact a Social Security representative to verify your years of “substantial” earnings and request a calculation of your Social Security benefit.
I am a retired public educator from (insert where you taught) writing about two unjust Social Security provisions that affect hundreds of thousands of retired educators and other public employees across the country. These provisions are known as the Government Pension Offset (GPO) and the Windfall Elimination Provision (WEP). I urge Congress to enact legislation repealing these two Social Security provisions.
The Government Pension Offset (GPO) eliminates or reduces the spousal benefit by two-thirds the value of a teacher’s retirement benefit. The WEP reduces, but does not eliminate, a portion of an individual’s Social Security earned from other work outside of his/her public employment.
I am affected by the (insert your personal story here about how the GPO, the WEP or both have affected you).
U.S. Senator _____________________ has introduced S.____, and U.S. Representative __________________ has introduced H.R.____that call for complete repeal of both the GPO and WEP. I am asking that you support this legislation and to repeal GPO and WEP.
(The authors and bill numbers will change with each session of Congress and should be obtained from the Coalition to Preserve Retirement Security’s web site.)
The repeal of the GPO and the WEP would greatly benefit thousands of public servants now being penalized for their life’s work. Lawmakers have promised to help seniors with various programs or reforms. These are hard times for seniors living on fixed incomes. The costs of health insurance, prescription drugs and general cost of living expenses continue to increase. Thank you for taking the time to consider my request. I look forward to hearing from you on how you will help in this endeavor.
Letter Writing Tips
- Remember proper format including date and appropriate titles:Today’s date
The Honorable (name -U.S. Senator)
United States Senate
Washington, D.C. 20510
The Honorable (name -U.S. Rep.)
U.S. House of Representatives Washington, D.C. 20515
Dear Senator or Representative (Insert Last Name):
- The first paragraph should be a short introduction of who you are and that you are requesting your Senator or Congressman to sign on as a cosponsor of either S 896 or HR 1795.
- The second paragraph should be a brief explanation of the issue on which you are writing.
- The third paragraph (or section, if needed) is an explanation of how the GPO, WEP or both are impacting you. Include as much information as you feel comfortable sharing, such as how long you taught, how many years your spouse may have worked to earn his/her Social Security, how much money you are losing on a monthly/yearly basis, how many years you worked in education and in other employment to earn the Social Security, etc.
- The concluding paragraph should thank them for their time and consideration on this issue. Ask to be sent a written response to your letter and to be kept on a mailing list regarding this issue. Remember to be factual and direct. Limit your letter to one page.
Contacting the Louisiana
Address the envelope to U.S. Senator as:
The Honorable (insert name of U.S. Senator), Senator
United States Senate
Washington, D.C. 20510
Address the envelope to U.S. Representatives as:
The Honorable (insert name of U.S. Representative), Representative
U.S. House of Representatives
Washington D.C. 20515
The members of the U.S. House of Representatives from Louisiana are:
Stephen Scalise (District 1)
Cedric Richmond (District 2)
Clay Higgins (District 3)
Mike Johnson (District 4)
Ralph Abraham (District 5)
Garret Graves (District 6)
Opposing Mandatory Social Security Remains Priority
Record-high federal budget deficits and a Social Security trust fund whose days are numbered are forcing lawmakers to look everywhere for money to return the fund to long-term solvency.
One of the places they can find a substantial amount of cash is in the pockets of state and local workers and, if public employees are not aware of this risk, they could find that they have significantly less money for their retirement than they had planned.
While nearly all Americans participate in Social Security, about 5 million state and local workers nationwide and 220,000 in Louisiana do not. With the Social Security trust fund projected to be exhausted by 2042, some observers have proposed that the program’s tax base be broadened by requiring all newly hired public employees to participate. In September, in fact, Rep. Nick Smith, R-Mich., introduced a Social Security reform bill that, if it were to become law, would require all new government workers to participate in Social Security.
Rep. Smith and others likely view mandatory coverage of public employees as a harmless way to boost Social Security’s finances, but it actually could cause significant hardship for millions of Americans.
Forcing Louisiana’s state and parish governments and their employees to pay Social Security taxes – 12.4 percent of payroll split equally between employers and workers – could divert about $952 million from the state to the federal government over five years, according to a recent study by The Segal Company, making it one of the hardest-hit states in the country. The national cost during the first five years of mandatory coverage would total $26 billion, according to the study.
Although this would have a minimal impact on Social Security – extending its projected solvency by just two years, according to the Social Security Administration – it would have potentially devastating effects on government employee retirement plans. Having to pay Social Security taxes could mean several things for state and local governments, their employees and their taxpayers, none of them good. Mandatory coverage could result in a dramatic increase in retirement costs for governments and public workers, a sharp reduction in retirement benefits for public employees, the elimination of government services to offset the higher costs or a combination of these things.
Paying Social Security taxes on top of current pension contributions would, in many cases, increase public employer retirement costs by one-half or more and nearly double spending by employees on their retirement, according to the Segal report. Alternatively, state and local governments and their employees could reduce their pension fund contributions by an amount equal to the Social Security tax. This, though, would lead to severe cuts in pension benefits that would not be made up for by Social Security (since pensions, whose contributions can be invested and multiplied, pay higher benefits per dollar contributed than Social Security). A third option would be for governments to finance the new tax by cutting costs in other areas, such as schools, police forces and fire departments.
Public safety workers, in particular, would face hardships if they were forced to participate in Social Security. Their pension funds now typically allow them to collect retirement benefits before age 62 because of the physical strain of their jobs. Social Security, however, includes no such provision. In addition, most public pensions allow for partial disability benefits, whereas Social Security requires a worker to be completely disabled in order to receive such benefits.
Since 1999, the Coalition to Preserve Retirement Security, a group of public employer and employee organizations that includes the Louisiana Association of Public Employees’ Retirement Systems, has worked to ensure that Social Security coverage is not forced on government workers. The group’s effectiveness was seen in 2001, when President Bush’s Commission to Strengthen Social Security became the first Social Security advisory panel in memory not to recommend mandatory coverage for newly hired public employees.
This does not mean, though, that public employees in Louisiana and elsewhere are safe from mandatory Social Security coverage. The introduction of the Smith bill, in fact, should serve as a warning. With Congress making no progress on securing the long-term solvency of Social Security, taxing state and local workers now outside the system could be a tempting partial solution. In addition, mandatory coverage has the potential of providing billions of dollars to help finance a transition to personal accounts, should lawmakers decide to add them to the program. Members of Congress need to hear now as much as ever before that what Social Security needs is real structural reform, not a stop-gap measure that unfairly burdens public employees.
Coalition to Preserve Retirement Security