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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
two-thirds the value of a teacher's retirement
benefit. The Windfall Elimination Provision (WEP)
reduces, but does not eliminate, a portion of an
individual's Social Security earned from other work
outside of his/her public employment.
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.
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.
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.
Sample Letter
Dear Senator/Congressman:
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.
Sincerely,
Letter Writing Tips
1. 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):
2. 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 1523 or HR 2638.
3. The second paragraph should be a brief
explanation of the issue on which you are writing.
4. 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.
5. 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 Congressional Delegation
Address the envelope to U.S. Senator as:
The Honorable (insert name of U.S. Senator), Senator
United States Senate
Washington, D.C. 20510
The U.S. Senators from Louisiana are:
Mary Landrieu
David Vitter
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:
Rodney Alexander (District 5)
Charles W. Boustany, Jr. (District 7)
William M. Cassidy (District 6)
Anh “Joseph” Cao (District 2)
John Fleming (District 4)
Charlie Melancon (District 3)
Stephen J. Scalise (District 1)
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.
Ronald Hawkins
Coalition to Preserve Retirement Security
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