With no advance notice that I'm aware of the House Social Security Subcommittee held a "field hearing" yesterday in Baton Rouge on the effects of the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO), which reduce Social Security benefits due to the receipt of pensions from work not covered by the FICA tax. Apparently, Louisiana doesn't cover state and local workers under Social Security so this comes up a lot in that state. It's obvious from the opening statements that the Republican leadership of the Subcommittee think these provisions are unfair, which they may well be.
The merits of the WEP and GPO can be argued but isn't there more than a little hypocrisy in the Republican Party's endless calls to "save Social Security" by increasing the retirement age and subjecting Social Security benefits to means testing at the same time they're acting as if they want to increase Social Security benefits? Isn't it also a sign that they're never going to vote to increase the retirement age or means test Social Security? Those plans will always be highly unpopular.
No, WEP is not unfair. It would be unfair to provide a government employee with a non-covered pension a Social Security retirement benefit worth 90% of his or her AIME when, if they were paying FICA on their government salary, they would receive a retirement benefit worth around 40% of their AIME.
ReplyDeleteThe WEP is simply an equalizer. Without it, non-covered employers (often collecting significant pensions) would be treated as low income earners when their benefit is calculated.
Anyone who understands the concept of bend points and the progressive nature of the RIB calculation grasps the need for the WEP.
Same goes for WIB and AUXSPO. Those benefits are intended for dependents. An individual collecting a pension worth 150%+ more than the WIB rate is not dependent on anyone. Therefore the total offset of WIB for those individuals is also fair.
This is the correct answer. All of the people who complain WEP and GPO are unfair don’t actually understand the rules behind WHY they are rules. You were not a long term, low wage earner while earning your non-covered pension, therefore you shouldn’t be treated like a long term, low wage earner in the eyes of SSA.
ReplyDeleteWEP is far less unfair than GPO. Between the WEP guarantee, phase out for workers with multiple years of substantial earnings, and reduction of bend points, there are many ways that the reduction is limited.
ReplyDeleteOn the other hand, spouses get absolutely creamed by the GPO. I would venture to guess (based solely on my own experience) that most get nothing.
I do think that WEP is unfair to recipients of foreign social security benefits. Many of those workers did, in fact, have long careers of modest earnings, but get offset regardless.
GPO is entirely fair. If a spouse gets a $1500 pension, their potential spousal/survivor benefit is reduced by $1k. If that same spouse were getting a social security benefit of $1500, their potential spousal/survivor benefit would be reduced by $1500. If anything, GPO is still biased in favor of those with non-covered pensions.
DeleteAren't these a form of means testing, as least as the explanations provided here go? One pays into Social Security, but gets nothing back because they have the temerity to receive a (specific kind) of benefit. But if that was an annuity or stock dividends or 401k money, or a private pension then no GPO or WEP applies. Sounds means testing to me. And "often collecting significant pensions" hasn't spoken to the teachers and municipal people who don't fit that bill and get whacked because their summer employment for 35 years and part time work nets them zero. Not disputing that the intent re: taxpaid pensions and tax paid FICA vis a vis calculating what one gets has a point but the real world way this works out basally is means testing one category of beneficiaries.
ReplyDeleteif you earn $200k in countable earnings your monthly check would be around 1000 give or take. If you earned 2 million in countable earnings the last 200k would raise your monthly check 1/8th of what the first 200k gained you. We front load the benefits. If you have non countabe earnings it makes you look like you are a low wage person when you may not be; hence the penalty.
ReplyDeleteSometime in 2042, one of the last remaining CSRS beneficiaries alive is going to have a serious struggle explaining WEP to the lowest-bidder AnswerDroid behind the glass at SSA's Virtual Field Office
ReplyDelete@9:39 is spot on.
ReplyDeleteGPO actually favors non-covered pension recipients more than it does SSA survivors. SSA survivors suffer from a 1:1 benefit offset. GPO only has an offset of 2/3 of their total pension amount. It's fair, and should it be changed, GPO should be 1:1 offset like SSA only benefits are subject to.
After working for the agency for 20 years, I can see an argument for GPO being unfair, but not WEP.
ReplyDeleteGPO just looks more unfair than it actually is. The simple fact of the matter is that the vast majority of non-covered public pensions are far, far more generous in general than Social Security retirement benefits are.
ReplyDeleteNow, if they want to do something to be seen as fixing an inequity, they should eliminate the double offset situation where Social Security disability benefits are offset twice for the same non-covered pension (first by applying WEP, then by doing a public disability benefit offset on the lower post-WEP benefit amount) just because it happens to be a non-covered disability benefit.
That is a totally unfair situation.
WEP and GPO are not unfair. If anything, they are more generous that for those exclusively under FICA. Two spouses who have identical earnings history, both file for RIB at retirement with nearly identical benefit amounts. If one dies, the survivor gets no additional benefit.
ReplyDeleteChange the scenario to one spouse working for a non-covered employer. At retirement, one spouse has with a non covered benefit and the other spouse has a FICA covered benefit at the same amount. If the FICA covered spouse dies first, GPO will reduce the survivors benefit for the widow(er) by two-thirds. Even so, that is one-third better than the alternative.
People are entrenched with the idea that WEP and GPO are unfair because they don't want to be convinced otherwise.