Expert's View

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Reg Jones

NARFE, one of federal employees and retirees best friends, tracks bills in Congress that would affect you if they became law. In the March 2022 issue of their magazine, they’ve highlighted five of them that deal with a pair of issues that either are or will be of concern to you. Here they are:

H.R. 82/S. 1302: The Social Security Fairness Act. It would repeal both the Government Pension Offset (GPO) and Windfall Elimination Provision (WEP).

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H.R. 2337: The Public Servants Protection and Fairness Act. It would reform the Windfall Elimination Provision (WEP) bu providing a monthly rebate of $150 to current beneficiaries (age 62 or older before 2023) and creating a new formula to calculate benefits for future WEP-affected individuals (turning 62 in or after 2023).

H.R. 4788: Well-Being for Every Public Servant Act of 2021. Fully repeals the Windfall Elimination Provision for individuals whose combined monthly income from their non-Social Security covered government annuity and Social Security benefits is $5,500 or lower, with graduated implementation on benefits above that amount.

H.R. 5723: Social Security 2100: A Sacred Trust. Expands and strengthens Social Security benefits, improves the solvency of the Social Security trust fund, repeals the Windfall Elimination Provision and Government Pension Offset, and provides for numerous other Social Security related improvements.

H.R. 5834: Equal treatment of Public Servants Act of 2021. Reforms the Windfall Elimination Provision (WEP) by providing a monthly payment of $100 to current WEP-affected beneficiaries (age 62 or older before 2023) and $50 for an affected spouse or child.  Creates a new formula to calculate benefits for future WEP-affected individuals (turning 62 in or after 2023).

Since all five of them focus on the WEP and the GPO, I thought it would be a good idea to examine each in turn and find out what they do – and why they were became law in the first place. First let’s look at the WEP.

Under the WEP, every CSRS employee who reaches age 62 and is eligible for an annuity based in whole or part on employment where they didn’t pay Social Security taxes will have a lower  formula used to compute their Social Security benefit. Only those with 30 or more years of “substantial earnings” under Social Security—which rises each year; this year $27,300—will receive a full benefit. Everyone else will receive a lesser amount, with the reduction as much as about $500 a month.

Congress enacted this law because it wanted to eliminate an unintended windfall that federal retirees had been enjoying for years. What do they mean when they say “windfall”? I’ll let the Social Security Administration explain:

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“Social Security benefits replace a percentage of a worker’s pre-retirement earnings. The formula used to compute Social Security benefits includes factors that ensure that lower-paid workers get a higher percentage of return than their more well-to-do counterparts.  For example, lower-paid workers could conceivably get a Social Security benefit that equals up to 90 percent of their pre-retirement earnings. Highly paid workers receive rates of return that are considerably less. (The average is about 42 percent.)

“Before the law was changed in 1983, employees who spent time in jobs not covered by Social Security had their benefits computed as if they were long-term, low-wage workers.  Thus they received the advantage of the higher percentage of Social Security benefits in addition to their other pension. The modified formula eliminates this windfall.”

In effect, the Congress took away what it viewed as a disproportionate benefit. While that may not sit well with anyone who is affected by the WEP, their decision was logical and that logic will be hard to overcome. Whether Congress will change its mind again remains to be seen.

For the full WEP story, go to https://www.ssa.gov/pubs/EN-05-10045.pdf.

Next week we’ll take a similar look at the Government Pension Offset.

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