Occasionally, I’ll get an email or a question from a federal retiree about the Windfall Elimination Provision.
The WEP is so complex, but the questions surrounding it are usually the same. What’s the status of legislation to ditch it, or at least bring some relief to the 3% of Social Security beneficiaries who have to deal with it?
Unfortunately the answer then is the same as it is now. Yes, there’s legislation, but there’s not necessarily a clear path forward.
Maybe this year that will change.
The WEP is a complicated relic from a 1983 law that reduces Social Security benefits for a highly specific subset of retirees in the Civil Service Retirement System (CSRS). The goal was to prevent what members of Congress often called “double-dipping.”
Who falls in this group? It’s federal employees and other public sector workers who receive an annuity from their time in government but also worked in a Social Security-covered job, usually a position in the private sector.
According to the Congressional Research Service, that was about 1.9 million people across the country last December. Most of them are retirees from state and local government, but some are federal employees hired before 1984.
The National Active and Retired Federal Employees Association has a handy breakdown of the WEP’s impact on retirees in each state. Again, these numbers include all retirees, not just former feds.
California tops the list, followed by Texas, Ohio and Florida.
The WEP doesn’t impact anyone in the Federal Employees Retirement System, because FERS employees already pay into Social Security.
CSRS employees, however, do not pay the usual 6.2% payroll tax toward Social Security.
According to NARFE, the WEP could reduce a retiree’s monthly Social Security benefit by about $498 in 2021 from what’s normally allowed under the statutory formula.
Various members of Congress have made multiple attempts to eliminate the WEP and GPO, or at least reduce its impact, over the course of the last decade. But those previous attempts have failed.
This year, there are two bills worth keeping an eye on.
One is the Social Security Fairness Act, which Reps. Abigail Spanberger (D-Va.) and Rodney Davis (R-Ill.) introduced earlier this year.
This bill is relatively simple — at least as far as the WEP is concerned — and has bipartisan support from several House members. The legislation would simply eliminate the WEP, as well as the Government Pension Offset.
The GPO dates back to 1977, and it prevents public sector retirees from collecting a government annuity for their own work in non-Social Security covered employment and Social Security benefits based on a spouse’s work record.
The bill sounds great, right?
Well, there’s a second piece of legislation, the Public Servants Protection and Fairness Act, which House Ways and Means Committee Chairman Richard Neal (D-Mass.) reintroduced late last week.
The sheer fact that Democrats have introduced this bill shows why the WEP is trickier to shake than you might think.
This legislation doesn’t eliminate the WEP completely, but it does try to give impacted Social Security beneficiaries some relief. The bill would offset the WEP penalty to some extent by increasing Social Security benefits by $150 a month for those who are impacted.
Future retirees — anyone turning 62 in 2023 or later — would be subject to a new formula. The formula is complex, but the thought is that Social Security beneficiaries would walk away with a higher monthly benefit than they do now under the current scheme.
“The Public Servants Protection and Fairness Act garnered more support in Congress last year than any previous WEP reform bill,” Neal said in a statement. “This year, I look forward to building on that momentum to advance the bill even further, and we’re off to a running start with 139 original cosponsors.”
As Neal’s statement indicates, there isn’t necessarily consensus on how exactly Congress should deal with the WEP, even if many members think the provision is unfair and needs to change — somehow.
Organizations like NARFE would prefer to get the full repeal, but they’ll take the offset too. It’s… something.
“NARFE continues to support full repeal of the WEP, as the status quo has harmed too many hardworking and dedicated public servants for too many years,” Ken Thomas, NARFE’s national president, said. “While this bill does not provide WEP affected individuals the full repeal they are due, it represents a good first step in allowing some relief from this unreasonable penalty. We commend Chairman Neal for his continued leadership on this issue and urge both sides of the political aisle to work together on a compromise that improves fairness, provides real relief for current retirees and, importantly, passes into law.”
