Will Government Workers Facing Social Security Cuts Receive Relief? By Reuters

By Mark Miller

CHICAGO (Reuters) – Relief may soon be on the horizon for over 2 million Americans facing significant cuts to their Social Security benefits due to their work in government jobs with pensions.

These reductions arise from two complex regulations: the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO). Both are intended to prevent individuals from receiving benefits from both Social Security and public-sector pensions simultaneously.

The impact of these cuts can be substantial. For instance, under the WEP, a worker retiring this year who would have received a monthly Social Security benefit of $976 could see that amount reduced to $548, as noted by the Congressional Research Service. The GPO can lead to even more severe reductions in spousal and survivor benefits.

“These laws are fundamentally unfair,” asserts Jessica Klement, legislative director for the National Active and Retired Federal Employees Association, an organization advocating for the repeal of WEP and GPO.

Currently, there is legislation introduced in both houses of Congress aimed at eliminating both provisions. However, the proposal gaining traction focuses solely on WEP and adopts a gradual approach.

The Equal Treatment of Public Servants Act of 2015, sponsored by Representative Kevin Brady, a Republican from Texas and chair of the influential Ways and Means Committee, initially sought to reduce WEP penalties by 50 percent. A revised version, introduced in July, delays relief until 2026 and only reduces penalties by 14 percent, which would mean an average monthly increase of $77 for future retirees. If implemented in 2016, this plan would benefit around 1.25 million individuals.

While the National Active and Retired Federal Employees Association prefers a complete repeal of WEP and GPO, they initially supported the original version of Brady’s bill and are now voicing concerns regarding the amendments.

“Full repeal is the ultimate goal,” Klement emphasized.

As of the end of 2015, WEP affected approximately 1.7 million beneficiaries, while GPO impacted about 652,000 individuals.

WHY WEP AND GPO?

Why are government workers treated differently from others concerning benefits? The answer lies in how Social Security benefits are allocated based on varying wage levels among workers.

Social Security employs a progressive benefit formula that awards higher benefits to individuals with lower average lifetime earnings compared to those with higher incomes. However, this formula does not differentiate between those who had lower wages and those who spent part of their careers in positions not covered by Social Security. Many federal and state jobs fall outside this system because they are linked to government pension plans.

The WEP was established to address the higher benefit returns that workers in such positions might receive from Social Security, despite not being classified as low-income. The effect of the WEP is lessened for individuals who have spent 21 to 29 years in Social Security-covered work, and it is entirely eliminated for those with 30 years or more in such positions.

For federal employees, the WEP pertains only to those who began working for the federal government before 1983, were covered by the Civil Service Retirement System, and did not contribute to Social Security. Those already included in the newer Federal Employees Retirement System contribute to Social Security and are thus exempt from WEP.

While WEP and GPO make sense to policymakers, they often appear unjust to beneficiaries who believe they are entitled to the full benefits earned from their private-sector employment.

Furthermore, many workers are caught off guard when they apply for benefits. Until 2005, there was no requirement for employers to inform workers about these provisions. Even now, they are only obligated to alert new employees about potential effects on their Social Security benefits from prior jobs.

Since 2007, the Social Security Administration’s annual statement of benefits has included information on the potential impact of WEP and GPO, providing guidance for those affected to calculate their benefits. Individuals who have only worked in jobs excluded from Social Security receive a notice indicating their ineligibility.