Pros and Cons of Cutting Social Security’s Windfall Elimination Provision
A pair of federal government provisions designed to reduce excessive Social Security payouts are once again being targeted for elimination by U.S. lawmakers. At issue are the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO), both of which were introduced decades ago and both of which have drawn criticism for restricting Social Security benefits for public-sector pensioners.
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A recent hearing by the U.S. House Ways and Means Committee’s Subcommittee on Social Security concluded that the WEP and GPO deny public servants “their hard-earned retirement benefits,” according to a Nov. 21 news release from the office of Rep. Abigail Spanbeger (D-Va.).
In response to that hearing, Spanberger and Rep. Garret Graves (R-La.) issued a joint statement in support of eliminating the two provisions:
“For more than four decades, the Windfall Elimination Provision and the Government Pension Offset have slashed the Social Security benefits earned by millions of Americans who served their communities and their fellow Americans,” Spanberger and Graves said. “We commend the House Ways and Means Committee for prioritizing this simple issue of fairness…[but] a hearing alone will not connect Americans who devoted much of their careers to public service with the benefits they earned.”
As previously reported by GOBankingRates, many state and local government jobs are not covered by Social Security because of the WEP and GPO. The reason is that these workers don’t pay Social Security taxes on their earnings or get credit for that work when the Social Security Administration calculates their benefits. Instead, they are given pensions designed to replace Social Security.
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Both provisions are designed to ensure that certain workers don’t get “unfairly high” Social Security benefits in addition to their pensions. However, many lawmakers, public workers and retiree groups claim that the measures go too far and end up punishing employees who have pensions from public sector jobs but have also paid into Social Security through part-time work or other employment.
For example, educators who don’t earn Social Security in public schools but who work part-time or during the summer in jobs covered by Social Security have “reduced benefits, even though they pay into the system just like others,” Spanberger said in a statement.
According to the SSA, if you work for an employer who doesn’t withhold Social Security taxes from your salary, any retirement or disability pension you get from that work can reduce your Social Security benefits. Employers in this category might be government agencies or foreign-based companies.
To address the problem, Spanberger and Graves earlier this year reintroduced the bipartisan Social Security Fairness Act, which aims to repeal the WEP and GPO. The bill has “broad bipartisan support among 300 lawmakers” in the U.S. House, according to Spanberger and Graves.
But getting it signed into law could be a challenge. Previous efforts to repeal the provisions have fallen short, and the Social Security Fairness Act itself was introduced more than a year ago. One problem with getting it passed is figuring out how to pay for it.
As the Center on Budget and Policy Priorities (CBPP) noted in a 2022 report, the bill to repeal WEP and GPO “includes no offsetting tax increases or spending cuts” and would therefore “worsen Social Security financing” and add $150 billion to the program’s costs over the next decade.
The CBPP recommends updating the WEP to include new rules for workers with non-covered pensions rather than repealing the provision.
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This article originally appeared on GOBankingRates.com: Pros and Cons of Cutting Social Security’s Windfall Elimination Provision
