Social Security Fairness Act Aims to End Unfair Public Pension Offsets
Security benefits are based on an individual’s earnings and paid according to a progressive formula. For working families with lower lifetime earnings, Social Security replaces a larger proportion of previous earnings than it would for higher income earners. But, the Government Pension Offset (GPO) and the Windfall Elimination Provision (WEP) impose offsets, which unfairly penalize many public employees. The offsets rely on a formula that does not fully consider workers’ lifetime earnings. GPO-WEP offset formulas are enforced when a public employee is eligible for a pension from their work that is not covered (non-covered) by Social Security, but who also has worked in other employment where they earned Social Security benefits (covered). Both provisions were intended to adjust benefits for higher income earners but in practice severely harm lower-income and middle-class retirees and their survivors; the very people Social Security’s progressive benefit was designed to help.
AFSCME and RPEC support the Social Security Fairness Act (S. 1302, H.R. 82), introduced by Sen. Sherrod Brown (D-OH) and Rep. Rodney Davis (R-IL). The legislation would fully repeal both the GPO and WEP.
A full repeal of GPO and WEP would cost $150 billion over 10 years, unless offset with new revenues or contributions dedicated to Social Security. SSA has reported that full repeal of both GPO and WEP could also change the fiscal solvency of Social Security Trust funds.
How the Government Pension Offset (GPO) Works – Social Security pays benefits to the spouse of retired and disabled workers and to widow(er)s of deceased workers. The GPO offset requires a reduction in the Social Security spousal and widow(er)’s benefit received by public employees who earn a pension from non-covered employment. The GPO offset amounts to a two-thirds reduction in one’s public pension. If two-thirds of one’s government pension is more than their Social Security benefit, their benefit could be reduced to zero. The GPO especially hurts low-wage public sector workers, particularly women, who find the Social Security benefits they expected substantially diminished, if not eliminated entirely. This happens even if their public pension is very modest. As of December 2021, some half a million Social Security beneficiaries saw GPO take away all of their spousal or widow(er)s benefits. About 83% of these individuals were women.
How the Windfall Elimination Provision (WEP) Works – The WEP offset reduces the Social Security benefit of a public employee who has job earnings in non-covered employment, but who also worked in covered employment and qualified for a Social Security benefit by working at least 40 quarters (or 10 years). It applies to people who split their careers and received both a pension from uncovered work and Social Security benefits based on fewer than 30 years in covered employment. WEP reduces a worker’s standard monthly benefits by up to 55%. Basically, a worker’s earned Social Security benefit is cut by an arbitrary amount with middle- and lower-income workers losing the largest amount of their monthly benefit, further reducing or eliminating large portions of their Social Security.
The WEP, along with GPO, was enacted as part of the 1983 Social Security Refinancing Act (P.L. 98-21) that was designed to shore up the financing of the Social Security Trust Fund.
Individuals are Unfairly Impacted by GPO and WEP – The GPO-WEP provisions unfairly penalize approximately 25% of public workers. As of December 2021, about 2.0 million Social Security beneficiaries were affected by the WEP and 723,970 Social Security beneficiaries, or about 1% of all beneficiaries, had spousal or widow(er)’s benefits reduced by the GPO. The number affected by GPO does not include those who were potentially eligible for spousal or widow(er)’s benefits but were deterred from filing for them because of their expectation that the GPO would cut the spousal or widow(er)’s benefit. Due to the new data exchanges, the Social Security Administration (SSA) will soon have 35 years of W-2 earnings data for all covered workers on file. With this data, SSA will be able to more accurately identify individuals who are receiving pensions from non-covered employment, but whose benefits are not yet being reduced. As SSA begins to use this data, it is likely that more individuals will have their Social Security benefits reduced from these unfair laws.
AFSCME and RPEC support full repeal of GPO and WEP.