There is pressure from state legislatures for action concerning the windfall elimination provision (WEP) and the government pension offset (GPO). Both are benefit formulas that reduce Social Security benefits for workers and their eligible family members if the worker receives (or is entitled to) a pension based on earnings from employment not covered by Social Security.
The WEP is intended to remove an advantage or “windfall” that workers it affects would otherwise inadvertently receive due to the interaction between the regular Social Security benefit formula and the workers’ relatively short careers in Social Security-covered employment.
According to the Congressional Research Service (CRS), in December 2021, the WEP affected approximately about 2 million people—mainly state and local government employees covered by alternative staff-retirement systems, as well as most permanent civilian federal employees hired before Jan. 1, 1984, who are covered by the Civil Service Retirement System.
Strength in Numbers
A resolution is before the Maine legislature that calls on the Maine Public Employees Retirement System to study the creation of an interstate compact with other states affected by the windfall elimination provision and the government pension offset.
Rep. Randall Greenwood (R-Wales) introduced the bill, HP 778, on March 21, 2023; Sen. Joe Baldacci (D-Penobscot) is the bill’s sponsor in the Senate. The legislation would require the Maine Public Employees Retirement System to submit a report with its recommendations, including any suggested legislation, to the Joint Standing Committee on Labor and Housing no later than Dec. 6, 2023.
It was referred to the House Committee on Labor and Housing, which reported the bill to the House on May 10 and recommended that the full House adopt it. The Maine House passed the measure on May 23; the Senate followed suit two days later. The two versions now must be reconciled.
Two state legislatures are considering measures that call on the U.S. Congress to repeal both the WEP and the GPO.
Illinois. The Illinois Senate has adopted SR0007, a resolution calling for the repeal of the WEP and the GPO from the Social Security Act.
Sen. Chapin Rose (R-Champaign) introduced the bill on Jan. 12, 2023. The Senate Special Committee on Pensions voted in favor of the resolution on Feb. 22; the full state Senate passed it on May 19.
Louisiana. The Bayou State’s legislature has gone one better: both chambers have adopted a resolution that urges Congress to enact legislation to repeal the WEP and the GPO.
Rep. Michael Johnson (R-Pineville) introduced HCR67 on May 1; the House adopted it unanimously 15 days later; the Senate followed suit on May 23.
Both chambers of the legislature also have adopted HCR69, a resolution that calls on the House Committee on Retirement and the Senate Committee on Retirement to study and make recommendations regarding benefit options for future employees of the state of Louisiana to avoid penalties associated with the WEP and the GPO.
The CRS in its annually updated report “Social Security: The Windfall Elimination Provision (WEP)” notes that there are pro and con arguments concerning the WEP:
- Supporters argue that the formula is a reasonable means to prevent overgenerous payments and unintended benefits to people who have earnings not covered by Social Security and receive pensions from noncovered work.
- Opponents argue that the provision substantially reduces a benefit that workers may have included in their retirement plans, and it reduces benefits disproportionately for lower-earning households. Others criticize the current WEP formula as an imprecise way to determine the actual windfall when applied to individual cases.
The Illinois resolution observes that according to the Congressional Research Service (CRS), more than 700,000 people nationally are affected by the GPO and approximately 2,000,000 people are affected by the WEP. And, it warns, the number of people affected by them “grows every day as more and more people reach retirement age.”
It continues that the WEP and the GPO can be applied to a qualifying survivor’s benefit, each independently reducing the available benefit and together eliminating a large portion of the total Social Security benefit available to the survivor. Further, it argues, both have a “disproportionately negative effect on employees working in lower-wage government jobs, such as police officers, firefighters, teachers, and state employees.”
The resolution goes on to say that because of the effect the WEP and the GPO have on Social Security benefits, those affected by them may have no choice but to return work in order to provide for even basic needs—but that could be a catch-22 that results in even lower benefit levels.
The Louisiana legislature argues that:
“The WEP unfairly reduces the earned Social Security benefit using an averaged indexed monthly earnings formula and may reduce Social Security benefits for affected persons by as much as one-half of the retirement benefit earned as a public servant in employment not covered under Social Security.”
It adds that:
“The WEP causes hardworking individuals to lose a significant portion of the Social Security benefits that they earned themselves.
And both the Illinois and Louisiana resolutions single out the GPO for extra criticism.
The Louisiana measure says that:
“The GPO formula unfairly reduces the spouse or survivor Social Security benefit by two-thirds of the amount of federal, state, or local government retirement or pension benefit received by the spouse or survivor, in many cases completely eliminating the Social Security benefit even though the spouse paid Social Security taxes for many years.”
The Illinois iteration says that the GPO:
- negatively affects a spouse or survivor receiving a federal, state, or local government retirement or pension benefit who would also be entitled to a Social Security benefit earned by a spouse;
- unfairly reduces the spouse or survivor Social Security benefit by two-thirds of the amount of the federal, state, or local government retirement or pension benefit received by the spouse or survivor, in many cases completely eliminating the Social Security benefit even though the survivor's spouse paid Social Security taxes for many years; and
- has a harsh effect on hundreds of thousands of citizens and undermines the original purpose of the Social Security dependent and survivor benefit.
Not the First
The calls from Maine, Louisiana and Illinois are not the first proposals concerning the WEP and the GPO; the CRS also notes that bills have been introduced in Congress that would affect both.