[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]
FOURTH IN A SERIES OF SUBCOMMITTEE
HEARINGS ON PROTECTING AND
STRENGTHENING SOCIAL SECURITY
=======================================================================
HEARING
before the
SUBCOMMITTEE ON SOCIAL SECURITY
of the
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
__________
JUNE 9, 2005
__________
Serial No. 109-20
__________
Printed for the use of the Committee on Ways and Means
_____
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COMMITTEE ON WAYS AND MEANS
BILL THOMAS, California, Chairman
E. CLAY SHAW, JR., Florida CHARLES B. RANGEL, New York
NANCY L. JOHNSON, Connecticut FORTNEY PETE STARK, California
WALLY HERGER, California SANDER M. LEVIN, Michigan
JIM MCCRERY, Louisiana BENJAMIN L. CARDIN, Maryland
DAVE CAMP, Michigan JIM MCDERMOTT, Washington
JIM RAMSTAD, Minnesota JOHN LEWIS, Georgia
JIM NUSSLE, Iowa RICHARD E. NEAL, Massachusetts
SAM JOHNSON, Texas MICHAEL R. MCNULTY, New York
PHIL ENGLISH, Pennsylvania WILLIAM J. JEFFERSON, Louisiana
J.D. HAYWORTH, Arizona JOHN S. TANNER, Tennessee
JERRY WELLER, Illinois XAVIER BECERRA, California
KENNY C. HULSHOF, Missouri LLOYD DOGGETT, Texas
RON LEWIS, Kentucky EARL POMEROY, North Dakota
MARK FOLEY, Florida STEPHANIE TUBBS JONES, Ohio
KEVIN BRADY, Texas MIKE THOMPSON, California
PAUL RYAN, Wisconsin JOHN B. LARSON, Connecticut
ERIC CANTOR, Virginia RAHM EMANUEL, Illinois
JOHN LINDER, Georgia
BOB BEAUPREZ, Colorado
MELISSA A. HART, Pennsylvania
CHRIS CHOCOLA, Indiana
DEVIN NUNES, California
______
SUBCOMMITTEE ON SOCIAL SECURITY
JIM MCCRERY, Louisiana, Chairman
E. CLAY SHAW, JR., Florida SANDER M. LEVIN, Michigan
SAM JOHNSON, Texas EARL POMEROY, North Dakota
J.D. HAYWORTH, Arizona XAVIER BECERRA, California
KENNY C. HULSHOF, Missouri STEPHANIE TUBBS JONES, Ohio
RON LEWIS, Kentucky RICHARD E. NEAL, Massachusetts
KEVIN BRADY, Texas
PAUL RYAN, Wisconsin
Allison H. Giles, Chief of Staff
Janice Mays, Minority Chief Counsel
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public
hearing records of the Committee on Ways and Means are also published
in electronic form. The printed hearing record remains the official
version. Because electronic submissions are used to prepare both
printed and electronic versions of the hearing record, the process of
converting between various electronic formats may introduce
unintentional errors or omissions. Such occurrences are inherent in the
current publication process and should diminish as the process is
further refined.
C O N T E N T S
__________
Page
Advisory of June 2, 2005 and related advisory of June 7, 2005
announcing the hearing......................................... 2
WITNESSES
U.S Government Accountability Office, Barbara D. Bovbjerg,
Director, Education, Workforce, and Income Security............ 6
Social Security Administration, Frederick G. Streckewald,
Assistant Deputy Commissioner, Disability and Income Security
Programs....................................................... 13
______
Georgia General Assembly and the National Conference of State
Legislatures, the Honorable Nan Grogan Orrock.................. 30
Coalition to Preserve Retirement Security, Teresa Bierdeman...... 37
Grand Lodge, Fraternal Order of Police, Chuck Canterbury......... 43
Association of Texas Professional Educators, Randall Iglehart.... 48
Federally Employed Women, Patricia Wolfe......................... 52
American Federation of State, County, and Municipal Employees,
Charles M. Loveless............................................ 56
SUBMISSIONS FOR THE RECORD
Ahearn, Catherine L., Massachusetts Teacher Association, Peabody,
MA, statement.................................................. 68
Aiken, Margaret, Atlanta, GA, statement.......................... 68
Alberti, Jeanne M., Harvard, MA, statement....................... 69
Ambrosius, Barbara, Cincinnati, OH, letter....................... 69
Anderson, Debra, Lincoln Parish Schools/Ruston Junior High,
Ruston, LA, letter............................................. 70
Arner, John, Rim of the World High School, Lake Arrowhead, CA,
letter......................................................... 70
Association of Americans Resident Overseas, statement............ 71
Atwell, Kathleen, Sun City, CA, letter........................... 73
Bartholomew, John, Lewisville, TX, statement..................... 73
Billings, Sheila, Salem, MA, statement........................... 73
Blank, Janet, Hamilton County, Cincinnati, OH, letter............ 74
Bonn, Kathleen, Newbury Park, CA, statement...................... 74
Brand, Sharon, Arlington Heights, IL, letter..................... 74
Braun, Valerie, Woody Creek, CO, letter.......................... 75
Brown, Penny, Los Angeles Unified School District, Cypress, CA,
statement...................................................... 75
Brubaker, Barbara, Cma, Pine Bluff Chemical Activity, Redfield,
AR, letter..................................................... 75
Buford, Gracie, Nacogdoches, TX, statement....................... 76
Carlson, Beverly, CTA/NEA-Retired, Marysville, CA, letter........ 76
Carpenter, Ellen, Hingham Public Schools--South Elementary
School, Hanover, MA, statement................................. 77
Clark, Ida, Montgomery, AL, letter............................... 77
Clark, Judith, Retired Employees Association of Orange County,
Huntington Beach, CA, statement................................ 78
Crowley, Lisa, South Portland, ME, statement..................... 81
Daniels, Margaret, Hurst, TX, statement.......................... 82
Dannenberg, Jennifer, Skyline High School, Berkeley, CA,
statement...................................................... 82
Davis, Robert, Rockwall, TX, statement........................... 82
Delaney, Lynn, Skyline High School Oakland Unified School
District, Oakland, CA, letter.................................. 82
Derman, Edward, California State Teachers' Retirement System,
Sacramento, CA, statement...................................... 83
Desmarais, Therese K., Rockport, MA, letter...................... 85
Dixon, Jerry, Seward, AK, statement.............................. 86
Elam, Carl and Naomi, Graham, WA, joint statement................ 86
Elia, Joyce, Mission Viejo, CA, statement........................ 87
Fallis, Charles, National Association of Retired Federal
Employees, Alexandria, VA, statement........................... 88
Flynn, Judith, Federally Employed Women, Corvallis, OR, statement 90
Fowler, Cheryl, Brownsville, TX, letter.......................... 90
Fransen, Marilyn, Rapid City, SD, letter......................... 90
Frost, Janet, San Francisco, CA, statement....................... 92
Galvin, Cecile, Orange County (CA) Employees Association, Laguna
Niguel, CA, letter............................................. 92
Gillispie, Helen, Longview, TX, letter........................... 93
Goodwin, Jae, Framingham, MA, letter............................. 94
Gray, Rob, Colorado Public Employees' Retirement Association,
Denver, CO, statement.......................................... 94
Griffin, Brian, Merced, CA, letter............................... 96
Guild, Donna, San Luis Coastal Unified School District, Pismo
Beach, CA, letter.............................................. 97
Guild, Thomas, Santa Maria Joint Union High School District,
Pismo Beach, CA, letter........................................ 97
Harlan, Mary, Maine Teachers Association, Nea, Staunton, VA,
statement...................................................... 97
Harpham, Lynn, Sugar Land, TX, letter............................ 98
Hatford, Wayne V., Palm Springs, CA, letter...................... 99
Hedstrom, Patricia, Sacramento, CA, letter....................... 100
Johnson, Joan, Santa Ana, CA, statement.......................... 102
Keegan, James, Belmont, MA, statement............................ 102
Kelley, Colleen, National Treasury Employees Union, statement.... 102
Kifer, Deborah, Rowlett, TX, statement........................... 104
Lacks, Cecilia, St. Louis, MO, letter............................ 104
LaFrana, William K., Versailles, KY, letter...................... 104
Lawrence, Ara, Brandenburg, KY, letter........................... 105
Levine, Mark, Littleton Educators Association, Littleton, MA,
letter......................................................... 105
Lichtman, Valerie, San Bernardino, CA, statement................. 106
Lovison Smith, Ruth, Escondido, CA, letter....................... 106
Lucier, Richard, Baypath Regional Vocational Technical High
School, Holland, MA, statement................................. 107
Marks, Carole, Marietta, GA, statement........................... 107
Marvin, Mary, Fed Govt & Private Industry Retiree, Punta Gorda,
FL, letter..................................................... 108
Mason, Patricia, Syracuse St, CO, statement...................... 108
Masters, Sally, Hampshire Regional High School, Easthampton, MA,
statement...................................................... 109
Millen, George, Warrensburg, MO, statement....................... 109
Miller, Merle, Broomfield, CO, letter............................ 110
Morrissey, Natalie, Mass. Retired State, County and Municipal
Employees Association, Naples, FL, letter...................... 110
National Conference of State Legislatures, joint statement....... 111
National Education Association, statement........................ 113
Nelson, Patricia, Cleveland, TX, letter.......................... 116
Nesbitt, Frederick, National Conference on Public Employee
Retirement Systems, statement.................................. 116
Ratto, Anne, Gavilan College, Corralitos, CA, statement.......... 118
Reddington, John, Lawrenceburg, IN, statement.................... 118
Reed, Amy, Newbury Park High School, Newbury Park, CA, statement. 118
Richard, Sharon, Hardin-Jefferson Isd, Sour Lake, TX, statement.. 118
Sallee, Andrew, Lexington, KY, statement......................... 120
Sapienza, Marilyn, Cheshire, CT, letter.......................... 121
Saunders, Linda, South Hamilton, MA, letter...................... 121
Saxman, Rosalie, Culver City, CA, letter......................... 121
Shaughnessy-Harding, Barbara, Rimforest, CA, statement........... 122
Shaw, Suzanne, Penobscot, ME, statement.......................... 122
Shultz, Marna, Pembroke High School, Plympton, MA, statement..... 127
Spehek, Paulette, Mentor, OH, letter............................. 127
Stefancik, Dan, Mogadore, OH, statement.......................... 128
Stenlund, Connie, Vancouver, WA, statement....................... 129
Sterrett, Frank, Lakeville, MA, letter........................... 129
Swain, Bonnie, Beaumont, TX, letter.............................. 130
Terrell, Juanita, Mont Belvieu, TX, statement.................... 131
Wakefield, Carol, Homer, IL, letter.............................. 131
Walczewski, Sharyn, Stow, MA, letter............................. 131
Wetzel, David, Baton Rouge, LA, statement........................ 132
White, Ralph, Retired State, County and Municipal Employees
Association of Massachusetts, Plymouth, MA, letter............. 132
Zimmerman, Pete, Mission Viejo, CA, statement.................... 133
FOURTH IN A SERIES OF SUBCOMMITTEE
HEARINGS ON PROTECTING AND
STRENGTHENING SOCIAL SECURITY
----------
THURSDAY, JUNE 9, 2005
U.S. House of Representatives,
Committee on Ways and Means,
Subcommittee on Social Security
Washington, DC.
The Subcommittee met, pursuant to notice, at 1:15 p.m., in
room B-318, Rayburn House Office Building, Hon. Jim McCrery
(Chairman of the Subcommittee) presiding.
[The advisory announcing the hearing follows:]
ADVISORY
FROM THE
COMMITTEE
ON WAYS
AND
MEANS
SUBCOMMITTEE ON SOCIAL SECURITY
CONTACT: (202) 225-1721
FOR IMMEDIATE RELEASE
June 9, 2005
No. SS-4
McCrery Announces Fourth in a Series of
Subcommittee Hearings on Protecting and
Strengthening Social Security
Congressman Jim McCrery (R-LA), Chairman, Subcommittee on Social
Security of the Committee on Ways and Means, today announced that the
Subcommittee will hold the fourth in a series of Subcommittee hearings
on protecting and strengthening Social Security. This hearing will
examine Social Security provisions affecting certain public employees.
The hearing will take place on Thursday, June 9, 2005, in room B-318
Rayburn House Office Building, beginning at 2:00 p.m.
In view of the limited time available to hear witnesses, oral
testimony at this hearing will be from invited witnesses only. However,
any individual or organization not scheduled for an oral appearance may
submit a written statement for consideration by the Subcommittee and
for inclusion in the printed record of the hearing.
BACKGROUND:
Social Security benefits paid to Federal, State, and local
government employees who contribute to a government pension plan
instead of Social Security are affected by two benefit adjustment
provisions in current law, the Government Pension Offset (GPO) and the
Windfall Elimination Provision (WEP). While these provisions were
intended to help equalize, not penalize, the treatment of workers, many
of the approximately one million individuals whose benefits are
affected by these provisions believe the GPO and WEP are unfair.
Legislative proposals have been introduced in the 109th Congress and
previous Congresses to modify or repeal the GPO and WEP.
Alternatively, some have suggested that requiring newly-hired
government employees to pay Social Security taxes would ensure equal
treatment of both government and private-sector employees, would
eventually eliminate the need for the GPO and WEP, and would reduce
Social Security's long-term deficit by an estimated 11 percent.
However, such mandatory coverage could adversely affect the financing
and benefits of State and local government pension plans.
In announcing the hearing, Chairman McCrery stated, ``As we work to
strengthen Social Security for the future, we should examine proposals
to ensure teachers, police officers, firefighters, and other public
employees are treated fairly under the program.''
FOCUS OF THE HEARING:
The Subcommittee will examine the history and policy rationales for
the GPO, WEP, and exempting certain public employees from Social
Security coverage. The effects of these policies on beneficiaries and
the distributional and financial effects of options for their
modification will also be considered.
DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:
Please Note: Any person(s) and/or organization(s) wishing to submit
for the hearing record must follow the appropriate link on the hearing
page of the Committee website and complete the informational forms.
From the Committee homepage, http://waysandmeans.house.gov, select
``109th Congress'' from the menu entitled, ``Hearing Archives'' (http:/
/waysandmeans.house.gov/Hearings.asp?congress=17). Select the hearing
for which you would like to submit, and click on the link entitled,
``Click here to provide a submission for the record.'' Once you have
followed the online instructions, completing all informational forms
and clicking ``submit'' on the final page, an email will be sent to the
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submission for the record. You MUST REPLY to the email and ATTACH your
submission as a Word or WordPerfect document, in compliance with the
formatting requirements listed below, by close of business Thursday,
June 23, 2005. Finally, please note that due to the change in House
mail policy, the U.S. Capitol Police will refuse sealed-package
deliveries to all House Office Buildings. For questions, or if you
encounter technical problems, please call (202) 225-1721.
FORMATTING REQUIREMENTS:
The Committee relies on electronic submissions for printing the
official hearing record. As always, submissions will be included in the
record according to the discretion of the Committee. The Committee will
not alter the content of your submission, but we reserve the right to
format it according to our guidelines. Any submission provided to the
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written comments must conform to the guidelines listed below. Any
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guidelines will not be printed, but will be maintained in the Committee
files for review and use by the Committee.
1. All submissions and supplementary materials must be provided in
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Committee relies on electronic submissions for printing the official
hearing record.
2. Copies of whole documents submitted as exhibit material will not
be accepted for printing. Instead, exhibit material should be
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3. All submissions must include a list of all clients, persons,
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Note: All Committee advisories and news releases are available on
the World Wide Web at http://waysandmeans.house.gov.
The Committee seeks to make its facilities accessible to persons
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call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four
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materials in alternative formats) may be directed to the Committee as
noted above.
ADVISORY
FROM THE
COMMITTEE
ON WAYS
AND
MEANS
SUBCOMMITTEE ON SOCIAL SECURITY
CONTACT: (202) 225-1721
FOR IMMEDIATE RELEASE
June 7, 2005
Change in Time for Fourth in a Series of
Subcommittee Hearings on Protecting and
Strengthening Social Security
Congressman Jim McCrery (R-LA), Chairman, Subcommittee on Social
Security of the Committee on Ways and Means, today announced that the
fourth in a series of Subcommittee hearings on protecting and
strengthening Social Security, examining Social Security provisions
affecting certain public employees, previously scheduled for 2:00 p.m.
on Thursday, June 9, 2005, in room B-318 Rayburn House Office Building,
will now be held at 1:00 p.m.
All other details for the hearing remain the same. (See
Subcommittee Advisory No. SS-4, dated June 2, 2005).
Chairman MCCRERY. Meeting will come to order. Welcome to
the fourth Subcommittee hearing in our series on protecting and
strengthening Social Security. Today, we will examine program
provisions that affect certain government employees. Many
Americans are surprised to learn that some State and local
government employees, as well as some Federal employees hired
before 1984 do not pay Social Security taxes on their earnings.
Some believe it is only fair for those employees to pay the
same Social Security taxes the other 96 percent of American
workers pay since they, their parents or other family members
very likely would benefit from the Social Security program.
In addition, requiring these government employees to pay
Social Security taxes could modestly improve the program's
long-term finances. Yet, requiring Social Security coverage of
teachers, fire fighters, police officers, and other public
employees could harm the long-term financing of their
respective retirement plans. These workers educate our
children, ensure our safety, and provide essential public
service. Their views are very important to this Subcommittee,
and we will listen carefully to what they have to say today.
Two other provisions that affect Federal, State and local
government employees are known as the government Pension Offset
(GPO), and the Windfall Elimination Provision (WEP). Congress
enacted these provisions to help ensure that workers who pay
into a government pension system instead of Social Security are
treated similarly to all other workers. Although the GPO and
WEP were intended to equalize and not penalize treatment of
workers, these complex provisions are often misunderstood. This
hearing will examine why these provisions exist, how
effectively they serve their intended purpose, their impact on
beneficiaries' lives and options to modify or repeal these
provisions. I look forward to hearing the views of our
witnesses today in making progress to identify ways to improve
Social Security's fairness for all Americans. With that, I
would ask the Ranking Member of the Subcommittee, Mr. Levin,
for any opening remarks he may have.
Mr. LEVIN. Thank you very much. I am glad you called this
hearing in a series of hearings. By the way, our schedule has
changed somewhat. That isn't the first time. I think you will
find Members moving in and out a bit, including myself, but I
will be back and other Members may have to leave. In no way
should anyone think there isn't a strong interest in this
subject. The schedule for today is quite different from what we
expected in terms of its duration.
Today's hearing focuses on Social Security issues affecting
public employees, as the Chairman has said. As you know, a
small but significant number of public employees are enrolled
in a State pension system and others in place of Social
Security, and they are understandably concerned about the
disruption that would be caused if States were required to
change their pension systems to enroll them in Social Security.
We will hear from them today and appropriately. However, the
majority of the witnesses today are here because, for a variety
of reasons, they are unable to fully access Social Security's
guaranteed benefits. Although their specific barriers vary,
they share one thing with each other and all of us: They
understand how valuable Social Security is, and they want and
need its guaranteed benefits now and in the future.
In the State of the Union Address, as we know, President
Bush launched a national campaign to privatize Social Security.
Proposals he has laid out over the past five months would
dramatically cut Social Security benefits and, over time,
replace them with what I think are risky private accounts. In
recent months, I, along with other Democrats, have spent a lot
of time talking with our constituents and with Americans across
the country about the President's approach; and one thing is
quite consistent, the more people learn about privatization,
the less they like it. It is that insistence on private
accounts that continues to stand in the way of what we truly
need, a truly bipartisan consideration of the way to address
Social Security's shortfall.
Mr. NEAL. Could I ask permission or offer a statement for
the record?
Chairman MCCRERY. You may, without objection.
[The opening statement of Mr. Neal follows:]
Opening Statement of The Honorable Richard E. Neal, a Representative in
Congress from the State of Massachusetts
Thank you Mr. Chairman, for holding this important hearing today.
Social Security reform as it applies to public employees is very
important to me. The threat of mandatory coverage for these employees
and the repeal of both the Government Pension Offset (GPO) and the
Windfall Elimination Provision (WEP) are of critical interest to the
public employees and retirees in the Commonwealth of Massachusetts.
As we consider Social Security reform today, I agree that it is
essential that we examine all aspects of the current system and make
choices that are informed and in the interest of everyone. I look
forward to hearing the testimony presented this afternoon.
As we meet as a Subcommittee and conduct this series of hearings,
we will hear many proposals aimed at shoring up the Trust Fund. Some
will come before the Congress and this committee saying that mandatory
Social Security coverage for the public employees in California,
Colorado, Illinois, Louisiana, Massachusetts, Ohio and Texas should be
required for newly hired public employees. They believe that mandatory
coverage and this influx of new contributions will improve the Social
Security Trust Fund.
Let me join the chorus of many in reiterating what a bad idea this
is. According to a study conducted by the Congressional Budget Office,
the long-term impact of including non-Social Security states into the
Social Security system would be expensive to initiate and would create
a drain on the Trust Fund over time.
The Segal Company issued a report estimating that the cost to the
non-covered state and local governments if they were to be forced into
Social Security would be a staggering $44 billion over five years.
According to the Massachusetts Retirees Association, Massachusetts'
officials have recently estimated the cost within the state to reach as
high as $3 billion over 10 years. Though alluring as a distance,
including public employees in mandatory Social Security coverage is
expensive and does not help with the solvency of the Trust Fund. In
fact, once these employees begin to collect their Social Security, they
will negatively impact the system.
The two issues I hear most often from my constituents on are the
repeal of the Government Pension Offset and the Windfall Elimination
Provision. The GPO has already affected approximately 335,000 retired
federal, state and local employees. For the majority, the GPO totally
eliminates the Social Security spousal/widow benefit. For others it is
a dramatic benefit reduction.
The Windfall Elimination Provision applies to individuals who
receive a pension from a public-service job that is not covered by
Social Security. If a public employee also worked in a Social Security
covered job for the required 40 quarters, the WEP creates a pension
offset that greatly reduces the person's earned Social Security
benefit. More than 635,000 retired federal, state and local employees
are currently affected by the WEP.
Both the GPO and the WEP are unfair provisions that negatively
impact the public employees I represent. They dramatically and severely
impact the retirement of thousands of the seniors I represent, and I
support the repeal of both. I look forward to hearing detailed
testimony from groups today that share my concern.
Mr. Chairman, in closing, thank you again for conducting this
hearing today. These are complicated issues that deserve to have
proper, discerning attention paid to them. As we consider reforming our
Social Security system, I am pleased that the committee is paying
attention to the issues of concern to public employees in my home
state. The public employees I represent reject any attempt to include
them under mandatory Social Security coverage, and oppose private
accounts and any other reform efforts to Social Security that will
result in reduced benefits to retirees in the future.
Today, we have two panels of witnesses. Our first panel is
Ms. Barbara D. Bovbjerg, Director of Education, Workforce, and
Income Security with the U.S. government Accountability Office
(GAO); and Frederick G. Streckewald, Assistant Deputy
Commissioner, Disability and Income Security Programs with the
Social Security Administration (SSA). Welcome, both of you. Ms.
Bovbjerg, if you will summarize your testimony in about five
minutes, we would appreciate it.
STATEMENT OF BARBARA D. BOVBJERG, DIRECTOR, EDUCATION,
WORKFORCE, AND INCOME SECURITY, U.S. GOVERNMENT ACCOUNTABILITY
OFFICE
Ms. BOVBJERG. Thank you, Mr. Chairman and Members of the
Subcommittee. It is a pleasure to be before you today to talk
about Social Security coverage of public employees. Social
Security is designed to be a universal social insurance system
and indeed covers about 96 percent of American workers. The
noncovered status of the other 4 percent, who are nearly all
public employees, poses issues of fairness in the program.
Proposals to bring these employees under Social Security have
been made as part of the program's potential reforms.
My testimony is in three parts: first, a discussion of
Social Security's coverage of public employees; second, a
description of Social Security's special provisions affecting
noncovered public employees; and third, the potential
implications of reform proposals affecting such employees. My
statement is based on the body of work we have published on
these topics in the past.
First, public employee coverage. Approximately one-fourth
of the Nation's public employees are not covered by Social
Security, which means they don't pay Social Security taxes on
their earnings from government employment. At its inception,
Social Security did not cover government employees because they
had their own retirement systems and there was a concern over
Federal authority to impose a tax on State governments. Since
then, many State and local governments have elected Social
Security coverage, and Congress has covered all Federal workers
hired after 1983. However, about five million State and local
government workers today remain outside the Social Security
system. Even though noncovered employees may have many years of
earnings on which they did not pay Social Security taxes, they
can still become eligible for benefits. Their Social Security
earnings records would show low or no covered earnings, under
Social Security benefit formulas, and these workers would be
treated like low earners and would benefit from the program's
progressive benefit formula.
To avoid paying windfall benefits to such workers, Congress
enacted provisions designed to recognize these special
circumstances. Let me turn to those provisions, two in
particular. The GPO and the WEP are intended to prevent
awarding such windfall benefits to those who worked in
noncovered employment. The GPO, enacted in 1977, reduces Social
Security spousal benefits for those receiving noncovered
government pensions. The reduction is equal to two-thirds of
the noncovered pension. The WEP, which was enacted in 1983,
employs a modified benefit calculation formula for those with
careers in noncovered employment.
The administration of these provisions has been
problematic. The SSA needs to know whether beneficiaries
receive noncovered pensions. However, work we did in 1998 found
that SSA is often unable to obtain this information,
particularly for State and local workers. To address this
problem, we have suggested that Congress direct the Internal
Revenue Service (IRS) to collect and report this information.
Doing so would save millions of dollars for the trust funds and
reduce uneven and inequitable enforcement of these provisions.
Although language requiring this change was indeed included in
the Social Security Protection Act (P.L. 108-203) last year,
the bill was signed into law without it. We still believe this
approach would be beneficial to the program, but let me now
turn to reform proposals affecting these employees.
Some proposals specifically seek to reduce or repeal the
GPO and the WEP. These provisions are viewed by many as
confusing and unfair, but eliminating them would cost about $60
billion over 10 years and would increase the long-range trust
fund deficit by about 6 percent. Further, repeal would, in
fact, redistribute income from those who have contributed to
Social Security for a working lifetime to those who have not,
which creates other issues of fairness. Other proposals would
make Social Security mandatory for all. Mandating coverage for
public employees would reduce the long-term trust fund deficit
by about 11 percent, and it could also enhance benefits for
many employees who would remain outside the Social Security
system, but such a mandate could also increase costs for the
affected State and local governments. Or if the governments
decided to keep their costs level, employees could experience
benefits lower than those promised today.
Finally, mandatory coverage would not immediately address
the issues and concerns regarding the GPO and the WEP, although
ultimately these provisions would become obsolete. In
conclusion, there are no easy answers to the difficulties of
equalizing Social Security's treatment of covered and
noncovered workers. Any reductions in the GPO or the WEP would
ultimately come at the expense of other Social Security
beneficiaries and taxpayers. Mandating universal coverage would
promise eventual elimination of the GPO and the WEP, but at a
potentially significant cost to affected State and local
governments. Whatever the decision, it is important to
administer all elements of the Social Security program
effectively and equitably. To do so, I urge you to give IRS the
authority it needs to identify recipients of noncovered
pensions and to help the SSA maintain the integrity of its
programs. That concludes my statement, Mr. Chairman.
[The prepared statement of Ms. Bovbjerg follows:]
Statement of Barbara D. Bovbjerg, Director, Education, Workforce, and
Income Security, U.S. Government Accountability Office
Mr. Chairman and Members of the Subcommittee:
I am pleased to be here today to discuss how Social Security
affects public employees and how reforms may change those effects.
Social Security covers about 96 percent of all U.S. workers; the vast
majority of the rest are state, local, and federal government
employees. One option for Social Security reform is extending coverage
to all state and local government employees who are not currently
covered. While these non-covered workers do not pay Social Security
taxes on their government earnings, they may still be eligible for
Social Security benefits. This poses difficult issues of fairness, and
Social Security has provisions that attempt to address those issues.
Still, these provisions have been difficult to administer. They have
also been a source of confusion and frustration for the workers they
affect.
I hope I can help clarify and provide some perspective on the
complex relationship between Social Security and public employees.
Today, I will discuss Social Security's coverage of public employees,
Social Security's current provisions affecting non-covered public
employees, and proposals to modify those provisions or make coverage
mandatory for all public employees. My testimony is based on a body of
work we have published over the past several years.\1\
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\1\ See the list of related GAO products at the end of this
statement.
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In summary, Social Security does not cover about one-fourth of
public employees, for various historical reasons. As a result, these
employees do not pay Social Security taxes on earnings from their non-
covered jobs. Nevertheless, they can still be eligible for Social
Security benefits based on their spouses' or their own earnings in
covered employment. Currently, Social Security has two provisions to
address the resulting fairness issues. The Government Pension Offset
(GPO) affects spouse and survivor benefits, and the Windfall
Elimination Provision (WEP) affects retired worker benefits. Both
provisions reduce Social Security benefits for those who receive non-
covered pension benefits. However, the Social Security Administration
(SSA) cannot effectively and fairly apply these provisions because it
does not have access to complete and accurate information on receipt of
such non-covered pension benefits. Implementation of some of our
recommendations has improved the availability and tracking of key
information for federal retirees, which we estimate will save hundreds
of millions of dollars. However, Congressional action is still needed
to improve access to information on state and local government
pensions.
In recent years, various Social Security reform proposals that
would affect public employees have been offered. Some proposals
specifically address the GPO and the WEP and would either revise or
eliminate them. While we have not analyzed these proposals, we believe
it is important to consider both the costs and the fairness issues they
raise. Still other proposals would make coverage mandatory for all
state and local government employees. According to Social Security
actuaries, doing so for all newly hired state and local government
employees would reduce the 75-year actuarial deficit by about 11
percent. It could also enhance inflation protection, pension
portability, and dependent benefits for the affected beneficiaries, in
many cases. However, to provide for the same level of retirement
income, it could increase costs for the state and local governments
that would sponsor the plans. Moreover, the GPO and the WEP would
continue to apply for many years to come, even though they would become
obsolete in the long run.
Background
Social Security provides retirement, disability, and survivor
benefits to insured workers and their dependents. Insured workers are
eligible for reduced benefits at age 62 and full retirement benefits
between age 65 and 67, depending on their year of birth.\2\ Social
Security retirement benefits are based on the worker's age and career
earnings, are fully indexed for inflation after retirement, and replace
a relatively higher proportion of wages for career low-wage earners.
Social Security's primary source of revenue is the Old Age, Survivors,
and Disability Insurance (OASDI) portion of the payroll tax paid by
employers and employees. The OASDI payroll tax is 6.2 percent of
earnings each for employers and employees, up to an established
maximum.
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\2\ Beginning with those born in 1938, the age at which full
benefits are payable will increase in gradual steps from age 65 to age
67.
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One of Social Security's most fundamental principles is that
benefits reflect the earnings on which workers have paid taxes. Social
Security provides benefits that workers have earned to some degree
because of their contributions and those of their employers. At the
same time, Social Security helps ensure that its beneficiaries have
adequate incomes and do not have to depend on welfare. Toward this end,
Social Security's benefit provisions redistribute income in a variety
of ways--from those with higher lifetime earnings to those with lower
ones, from those without dependents to those with dependents, from
single earners and two-earner couples to one-earner couples, and from
those who don't live very long to those who do. These effects result
from the program's focus on helping ensure adequate incomes. Such
effects depend to a great degree on the universal and compulsory nature
of the program.
According to the Social Security Trustees' 2005 intermediate, or
best-estimate, assumptions, Social Security's cash flow is expected to
turn negative in 2017. In addition, all of the accumulated Treasury
obligations held by the trust funds are expected to be exhausted by
2041. Social Security's long-term financing shortfall stems primarily
from the fact that people are living longer and having fewer children.
As a result, the number of workers paying into the system for each
beneficiary has been falling and is projected to decline from 3.3 today
to about 2 by 2030. Reductions in promised benefits and/or increases in
program revenues will be needed to restore the long-term solvency and
sustainability of the program.
About One-Fourth of Public Employees Are Not Covered by Social Security
About one-fourth of public employees do not pay Social Security
taxes on the earnings from their government jobs. Historically, Social
Security did not require coverage of government employment because
there was concern over the question of the federal government's right
to impose a tax on state governments, and some had their own retirement
systems. However, virtually all other workers are now covered,
including the remaining three-fourths of public employees.
The 1935 Social Security Act mandated coverage for most workers in
commerce and industry, which at that time comprised about 60 percent of
the workforce. Subsequently, the Congress extended mandatory Social
Security coverage to most of the excluded groups, including state and
local employees not covered by a public pension plan. The Congress also
extended voluntary coverage to state and local employees covered by
public pension plans. Since 1983, however, public employers have not
been permitted to withdraw from the program once they are covered. Also
in 1983, amendments to the Social Security Act extended mandatory
coverage to newly hired federal workers and to all members of the
Congress.
SSA estimates that in 2004 nearly 5 million state and local
government employees, excluding students and election workers, are not
covered by Social Security. In addition, about three-quarters of a
million federal employees hired before 1984 are also not covered. Seven
states--California, Colorado, Illinois, Louisiana, Massachusetts, Ohio,
and Texas--account for 71 percent of the non-covered payroll.
Most full-time public employees participate in defined benefit
pension plans. Minimum retirement ages for full benefits vary. However,
many state and local employees can retire with full benefits at age 55
with 30 years of service. Retirement benefits also vary, but they are
usually based on a specified benefit rate for each year of service and
the member's final average salary over a specified time period, usually
3 years. For example, plans with a 2 percent rate replace 60 percent of
a member's final average salary after 30 years of service. In addition
to retirement benefits, members generally have a survivor annuity
option and disability benefits, and many receive some cost-of-living
increases after retirement. In addition, in recent years, the number of
defined contribution plans, such as 401(k) plans and the Thrift Savings
Plan for federal employees, has been growing, and such plans are
becoming a relatively more common way for employers to offer pension
plans; public employers are no exception to this trend.
Even though non-covered employees may have many years of earnings
on which they do not pay Social Security taxes, they can still be
eligible for Social Security benefits based on their spouses' or their
own earnings in covered employment. SSA estimates that nearly all non-
covered state and local employees become entitled to Social Security as
workers, spouses, or dependents. However, their non-covered status
complicates the program's ability to target benefits in the ways it is
intended to do.
Current Provisions Seek Fairness but Pose Administrative Challenges
To address the fairness issues that arise with non-covered public
employees, Social Security has two provisions--the Government Pension
Offset, to address spouse and survivor benefits, and the Windfall
Elimination Provision, to address retired worker benefits. Both
provisions depend on having complete and accurate information that has
proven difficult to get. Also, both provisions are a source of
confusion and frustration for public employees and retirees.
Under the GPO provision, enacted in 1977, SSA must reduce Social
Security benefits for those receiving noncovered government pensions
when their entitlement to Social Security is based on another person's
(usually a spouse's) Social Security coverage. Their Social Security
benefits are to be reduced by two-thirds of the amount of their
government pension. Under the WEP, enacted in 1983, SSA must use a
modified formula to calculate the Social Security benefits people earn
when they have had a limited career in covered employment. This formula
reduces the amount of payable benefits.
Regarding the GPO, spouse and survivor benefits were intended to
provide some Social Security protection to spouses with limited working
careers. The GPO provision reduces spouse and survivor benefits to
persons who do not meet this limited working career criterion because
they worked long enough in non-covered employment to earn their own
pension.
Regarding the WEP, the Congress was concerned that the design of
the Social Security benefit formula provided unintended windfall
benefits to workers who had spent most of their careers in non-covered
employment. The formula replaces a higher portion of pre-retirement
Social Security covered earnings when people have low average lifetime
earnings than it does when people have higher average lifetime
earnings. People who work exclusively, or have lengthy careers, in non-
covered employment appear on SSA's earnings records as having no
covered earnings or a low average of covered lifetime earnings. As a
result, people with this type of earnings history benefit from the
advantage given to people with low average lifetime earnings when in
fact their total (covered plus non-covered) lifetime earnings were
higher than they appear to be for purposes of calculating Social
Security benefits.
Both the GPO and the WEP apply only to those beneficiaries who
receive pensions from non-covered employment. To administer these
provisions, SSA needs to know whether beneficiaries receive such non-
covered pensions. However, SSA cannot apply these provisions
effectively and fairly because it lacks this information, according to
our past work.\3\ In response to our recommendation, SSA performed
additional computer matches with the Office of Personnel Management to
get non-covered pension data for federal retirees. These computer
matches detected payment errors; we estimate that correcting these
errors will generate hundreds of millions of dollars in savings.\4\
However, SSA still lacks the information it needs for state and local
governments and therefore it cannot apply the GPO and the WEP for state
and local government employees to the same degree that it does for
federal employees. The resulting disparity in the application of these
two provisions is yet another source of unfairness in the final
outcome.
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\3\ See GAO, Social Security: Better Payment Controls for Benefit
Reduction Provisions Could Save Millions, GAO/HEHS-98-76 (Washington,
D.C.: Apr. 30, 1998).
\4\ SSA performed the first such match in 1999 and advised that it
will be done on a recurring basis in the future. SSA identified about
14,600 people whose benefits should have been calculated using WEP's
modified formula. We estimate that detecting these payment errors will
generate $207.9 million in lifetime benefit reduction for this cohort.
We further estimate each year's match will generate about $57 million
in lifetime benefit reductions for each new cohort.
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In our testimony before this committee in May 2003,\5\ we
recommended that the Congress consider giving the Internal Revenue
Service (IRS) the authority to collect the information that SSA needs
on government pension income, which could perhaps be accomplished
through a simple modification to a single form. Earlier versions of the
Social Security Protection Act of 2004 \6\ contained such a provision,
but this provision was not included when the final version of the bill,
was approved and signed into law.
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\5\ GAO, Social Security: Issues Relating to Non-coverage of Public
Employees, GAO-03-710T (Washington, D.C.: May 1, 2003).
\6\ Pub. L. No. 108-203.
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Some Reform Proposals Would Affect Public Employees
In recent years, various Social Security reform proposals that
would affect public employees have been offered. Some proposals
specifically address the GPO and the WEP and would either revise or
eliminate them. Still other proposals would make coverage mandatory for
all state and local government employees.
Some Proposals Focus on the GPO or the WEP
The GPO and the WEP have been a source of confusion and frustration
for the more than 6 million workers and 1.1 million beneficiaries they
affect. Critics of the measures contend that they are basically
inaccurate and often unfair. For example, some opponents of the WEP
argue that the formula adjustment is an arbitrary and inaccurate way to
estimate the value of the windfall and causes a relatively larger
benefit reduction for lower-paid workers. In the case of the GPO,
critics contend that the two-thirds reduction is imprecise and could be
based on a more rigorous formula. A variety of proposals have been
offered to either revise or eliminate the GPO or the WEP. While we have
not studied these proposals in detail, I would like to offer a few
observations to keep in mind as you consider them.
First, repealing these provisions would be costly in an environment
where the Social Security trust funds already face long-term solvency
issues. According to the most recent estimates from SSA eliminating the
GPO entirely would cost $32 billion over 10 years and cost 0.06 percent
of taxable payroll, which would increase the long-range deficit by
about 3 percent. Similarly, eliminating the WEP would cost nearly $30
billion and increase Social Security's long-range deficit by 3 percent.
Second, in thinking about the fairness of the provisions and
whether or not to repeal them, it is important to consider both the
affected public employees and all other workers and beneficiaries who
pay Social Security taxes. For example, SSA has described the GPO as a
way to treat spouses with non-covered pensions in a fashion similar to
how it treats dually entitled spouses, who qualify for Social Security
benefits on both their own work records and their spouses'. In such
cases, spouses may not receive both the benefits earned as a worker and
the full spousal benefit; rather they receive the higher amount of the
two. If the GPO were eliminated or reduced for spouses who had paid
little or no Social Security taxes on their lifetime earnings, it might
be reasonable to ask whether the same should be done for dually
entitled spouses who have paid Social Security on all their earnings.
Otherwise, such couples would be worse off than couples that were no
longer subject to the GPO. And far more spouses are subject to the dual
entitlement offset than to the GPO; as a result, the costs of
eliminating the dual entitlement offset would be commensurately
greater.
Mandatory Coverage Has Been Proposed
Making coverage mandatory for all state and local government
employees has been proposed to help address the program's financing
problems. According to Social Security actuaries, doing so for all
newly hired state and local government employees would reduce the 75-
year actuarial deficit by about 11 percent.\7\ Covering all the
remaining workers increases revenues relatively quickly and improves
solvency for some time, since most of the newly covered workers would
not receive benefits for many years. In the long run, however, benefit
payments would increase as the newly covered workers started to collect
benefits. Overall, this change would still represent a net gain for
solvency, although it would be small.
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\7\ SSA uses a period of 75 years for evaluating the program's
long-term actuarial status to obtain the full range of financial
commitments that will be incurred on behalf of current program
participants.
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In addition to considering solvency effects, the inclusion of
mandatory coverage in a comprehensive reform package would need to be
grounded in other considerations. In recommending that mandatory
coverage be included in the reform proposals, the 1994-1996 Social
Security Advisory Council stated that mandatory coverage is basically
``an issue of fairness.'' Its report noted that ``an effective Social
Security program helps to reduce public costs for relief and
assistance, which, in turn, means lower general taxes. There is an
element of unfairness in a situation where practically all contribute
to Social Security, while a few benefit both directly and indirectly
but are excused from contributing to the program.''
Moreover, mandatory coverage could improve benefits for the
affected beneficiaries, but it could also increase pension costs for
the state and local governments that would sponsor the plans. The
effects on public employees and employers would depend on how states
and localities changed their non-covered pension plans to conform with
mandatory coverage. For example, Social Security offers automatic
inflation protection, full benefit portability, and dependent benefits,
which are not available in many public pension plans. Creating new
pension plans that kept all the existing benefit provisions but added
these new ones would increase the cost of the total package. Under this
scenario, costs could increase by as much as 11 percent of payroll,
depending on the benefit packages of the new plans. Alternatively,
states and localities that wanted to maintain level spending for
retirement would likely need to reduce some pension benefits.
Additionally, states and localities could require several years to
design, legislate, and implement changes to current pension plans.
Mandating Social Security coverage for state and local employees could
also elicit a constitutional challenge. Finally, mandatory coverage
would not immediately address the issues and concerns regarding the GPO
and the WEP. If left unchanged, these provisions would continue to
apply for many years to come for existing employees and beneficiaries.
Still, in the long run, mandatory coverage would make these provisions
obsolete.
Conclusions
In conclusion, there are no easy answers to the difficulties of
equalizing Social Security's treatment of covered and non-covered
workers. Any reductions in the GPO or the WEP would ultimately come at
the expense of other Social Security beneficiaries and taxpayers.
Mandating universal coverage would promise eventual elimination of the
GPO and the WEP but at potentially significant cost to affected state
and local governments, and even so the GPO and the WEP would continue
to apply for some years to come, unless they were repealed.
Whatever the decision, it will be important to administer the
program effectively and equitably. The GPO and the WEP have proven
difficult to administer because they depend on complete and accurate
reporting of government pension income, which is not currently
achieved. The resulting disparity in the application of these two
provisions is yet another source of unfairness in the final outcome. We
therefore take this opportunity to bring the matter back to your
attention for further consideration.
Matter for Congressional Consideration
To facilitate complete and accurate reporting of government pension
income, the Congress should consider giving IRS the authority to
collect this information, which could perhaps be accomplished through a
simple modification to a single form.
Mr. Chairman, this concludes my statement, I would be happy to
respond to any questions you or other members of the subcommittee may
have.
GAO Contributions and Acknowledgments
For information regarding this testimony, please contact Barbara D.
Bovbjerg, Director, Education, Workforce, and Income Security Issues,
on (202) 512-7215. Individuals who made key contributions to this
testimony include Daniel Bertoni, Ken Stockbridge, and Michael Collins.
Related GAO Products
Social Security Reform: Answers to Key Questions. GAO-05-193SP.
Washington, D.C.: May 2005.
Social Security: Issues Relating to Non-coverage of Public
Employees. GAO-03-710T. Washington, D.C.: May 1, 2003.
Social Security: Congress Should Consider Revising the Government
Pension Offset ``Loophole.'' GAO-03-498T. Washington, D.C.: Feb. 27,
2003.
Social Security Administration: Revision to the Government Pension
Offset Exemption Should Be Considered. GAO-02-950. Washington, D.C.:
Aug. 15, 2002.
Social Security Reform: Experience of the Alternate Plans in Texas.
GAO/HEHS-99-31, Washington, D.C.: Feb. 26, 1999.
Social Security: Implications of Extending Mandatory Coverage to
State and Local Employees. GAO/HEHS-98-196. Washington, D.C.: Aug. 18,
1998.
Social Security: Better Payment Controls for Benefit Reduction
Provisions Could Save Millions. GAO/HEHS-98-76. Washington, D.C.: April
30, 1998.
Federal Workforce: Effects of Public Pension Offset on Social
Security Benefits of Federal Retirees. GAO/GGD-88-73. Washington, D.C.:
April 27, 1988.
Chairman MCCRERY. Thank you, Ms. Bovbjerg. Mr. Streckewald?
STATEMENT OF FREDERICK G. STRECKEWALD, ASSISTANT DEPUTY
COMMISSIONER, DISABILITY AND INCOME SECURITY PROGRAMS, SOCIAL
SECURITY ADMINISTRATION
Mr. STRECKEWALD. Mr. Chairman and Members of the
Subcommittee, thank you for inviting me here today to discuss
mandatory Social Security coverage for State and local
government employees, as well as the WEP and the GPO. Let me
begin by discussing mandatory Social Security coverage. State
and local government employees were excluded from Social
Security coverage until 1951 because of a constitutional
question about the Federal Government's authority to tax State
and local governments. Legislation enacted in 1950 provided
that States could enter into voluntary agreements to provide
Social Security coverage to public employees not under a
retirement system. After the 1950 legislation, coverage of
State and local government employees was further expanded.
Today, only about 28 percent of State and local public
employees are not covered by Social Security.
Extending Social Security coverage to all newly hired State
and local government employees would favorably affect the long-
range solvency of Social Security, addressing about 11 percent
of the 75-year program deficit. Supporters of this change note
that it would improve the protection of those that have jobs in
covered employment before or after their government employment.
However, critics note it would adversely affect the funding of
some State and local government defined benefit plans.
Let me turn now to GPO and WEP. The GPO affects government
retirees who are eligible for both a pension based on their own
work in a Federal, State or local government job that was
noncovered by Social Security and a Social Security spouse's or
surviving spouse's, benefit based upon their husband's or
wife's work in covered employment. Under the GPO, a Social
Security spouse's benefit is reduced by an amount equal to two-
thirds of the worker's government pension. As of June 2004,
about 399,000 beneficiaries had benefits fully or partially
offset by GPO. Before GPO, a person who worked in a government
job not covered under Social Security could receive a
government pension and a full Social Security spouse's benefit.
Of course, a worker covered under Social Security is subject to
an offset under the dual entitlement provision, which means
that Social Security benefits payable to a person as a spouse
are offset by the amount of that person's own Social Security
benefit. Thus, the GPO acts as a surrogate for the dual
entitlement offset. Several bills have been introduced to
address the GPO. A bill that would completely eliminate GPO
over 10 years would cost an estimated $32.2 billion. Other
bills that would alter the GOP are estimated to cost between
$9.6 to $21.4 billion over 10 years.
I would now like to discuss the WEP, which primarily
affects government workers. Before the WEP, some workers were
treated as low-income earners for Social Security benefit
purposes and received the advantage of the ``weighted'' Social
Security benefit formula in addition to their own government
pension. The WEP was intended to eliminate this advantage by
using a different, less heavily weighted, Social Security
benefit formula. The maximum reduction under WEP is $313.50 per
month. Unlike the GPO, the WEP can never eliminate a person's
entire Social Security benefit. A number of bills have been
introduced that would change WEP. These proposals include:
eliminating it entirely; providing higher Social Security
benefits for government workers whose pensions from noncovered
employment and Social Security benefits are below certain
levels; and replacing the WEP benefit formula with an alternate
computation. This last approach is embodied in Representative
Brady's bill, H.R. 1714, the ``Public Servant Retirement
Protection Act.''
Under this bill, a hypothetical primary benefit would first
be computed based on all the worker's available covered and
noncovered earnings after 1950. This hypothetical benefit would
then be multiplied by the proportion of the worker's total
earnings that were covered under Social Security to obtain the
primary benefit payable to the worker. The bill also includes a
guarantee to ensure that a worker whose government pension is
based on noncovered earnings in the year of enactment or
earlier would receive no less than the present law WEP benefit.
The bill would apply to both current and future beneficiaries.
Let me commend Representative Brady for his efforts to find
ways to replace the current WEP with an approach that is
intended to more accurately reflect an individual's complete
earning history. We have appreciated the opportunity to work
with his and other congressional offices on legislation
affecting the WEP. However, we continue to be concerned about
some aspects of the bill. The primary issue is that the
computation would count noncovered earnings after 1950, but SSA
only has records of noncovered earnings beginning in 1978, when
it began receiving W-2 information from employers. Also,
because the bill would affect those on the rolls, SSA would
have to review benefits of more than 738,000 retired and
disabled workers; and I would note, the workloads generated by
passage of such legislation would be tremendous for Social
Security and would take us several years.
In conclusion, I want to thank the Chairman and the
Subcommittee for giving us this opportunity to discuss these
complex and important issues. The SSA welcomes the opportunity
to work with you to provide additional information, and I would
be glad to answer any questions.
[The prepared statement of Mr. Streckewald follows:]
Statement of Frederick G. Streckewald, Assistant Deputy Commissioner,
Disability and Income Security Programs, Social Security Administration
Thank you for inviting me to discuss the idea of mandatory Social
Security coverage for State and Local government employees as well as
the Windfall Elimination Provision, or WEP, and the Government Pension
Offset, or GPO.
Mandatory Social Security Coverage
State and local government employees were excluded from Social
Security coverage from 1935 until 1951 because there was a
constitutional question of the Federal government's authority to tax
State and local governments. Legislation enacted in 1950 provided that,
beginning in 1951, States were allowed to enter into voluntary
agreements with SSA to provide Social Security coverage to public
employees not under a retirement system. This authority is in section
218 of the Social Security Act; thus, the agreements are referred to as
section 218 agreements.
After the 1950 legislation, there were a number of changes that
expanded coverage of State and local government employees. The major
changes were:
The 1954 amendments made coverage available to State and
local employees covered under a retirement system, at the election of
the employer and employees.
In 1983, Congress repealed a provision that allowed
States to rescind earlier decisions to elect coverage of their
employees.
Legislation enacted in 1986 provided mandatory coverage
under Medicare for all State and local employees hired after March 31,
1986.
Legislation enacted in 1990 made Social Security
mandatory for State and local employees who are not under a retirement
system.
Currently, all 50 States, Puerto Rico, and the Virgin Islands have
a section 218 agreement with SSA. Because the coverage is voluntary,
the extent of Social Security coverage varies from State to State. It
is estimated that 28 percent of State and local public employees are
not covered by Social Security. Most of the public employees not
covered are police, firefighters, and teachers.
Extending Social Security coverage to newly hired State and local
government employees favorably affects the long-range (75 year)
solvency of Social Security. This change, if it were applied to new
employees hired in 2005 and later, would reduce the long-range OASDI
deficit by about 0.21 percent of taxable payroll. This would address
about 11 percent of the 75 year program deficit. This change would
initially bring in payroll tax revenue with little effect on benefit
payments. However, in the longer term, because of benefit payments to
these workers, the estimated improvement in the annual balance (cash
flow) in the 75th year is only 0.01 percent of taxable payroll.
More than seventy percent of the people who would be affected by
mandatory coverage work in seven States (California, Ohio, Texas,
Massachusetts, Illinois, Colorado, and Louisiana). There are over 700
State and locally administered retirement plans in these seven States.
Supporters of this change note that extending Social Security
coverage to newly hired State and local government employees would
improve the protection of those who have jobs in covered employment
before or after their government employment. Thus, this change would
improve the portability of their pension coverage.
Further, Social Security includes a number of features that may not
be found in some State and local retirement plans, such as annual cost-
of-living increases, benefits for disabled workers and benefits for
spouses and children of retired, disabled, and deceased workers.
However, critics of such a change note that extending mandatory
Social Security coverage would adversely affect the funding of some
State and local government defined benefit pension plans. This would be
particularly true if the retirement plan was already underfunded (had
insufficient assets to pay promised benefits) and/or relied on new
employee's contributions to fund current retirees' benefits. (A 1998
GAO report found that many public pension plans have unfunded
liabilities.
State and local governments could be expected to oppose mandatory
Social Security coverage of newly hired employees, especially on the
grounds of cost. Concerns have been expressed that many public
employers would not be able to absorb the higher costs. If that
happened, State and local governments would need to raise taxes or cut
spending on other services.
GPO Provision
I would like to begin by drawing a distinction between the GPO
provision and the WEP. Like the WEP, the GPO affects workers who
receive pensions based on employment not covered by Social Security.
GPO is often confused with the WEP. For ease of discussion, when
referring to government employment, I am referring to all levels of
Federal or State government employment that are not covered by Social
Security.
The GPO affects government retirees who are eligible for both:
A pension based on their own work in a Federal, State, or
local government job that was not covered by Social Security, and
A Social Security spouse's or surviving spouse's benefit
based on their husband's or wife's work in covered employment.
Under the GPO, a person's Social Security spouse's or surviving
spouse's benefit is reduced by an amount equal to two-thirds of the
amount of the person's government pension based on work not covered by
Social Security. As of June 2004, about 399,000 beneficiaries had their
benefits fully or partially offset due to the GPO.
The GPO provision removed an advantage that some government workers
had before the GPO was enacted. Before GPO, a person who worked in a
government job that was not covered under Social Security could
receive, in addition to a government pension based on his or her own
earnings, a full Social Security spouse's or surviving spouse's
benefit.
However, a person who works in a job that is covered under Social
Security is subject to an offset under the dual entitlement provision.
This provision, which has applied since 1940 when benefits were first
payable to a worker's family members, requires that Social Security
benefits payable to a person as a spouse or surviving spouse be offset
by the amount of that person's own Social Security benefit. Thus,
dually entitled beneficiaries receive the equivalent of their own
worker's benefit or the spouse's/surviving spouse's benefit, whichever
is higher.
The GPO acts as a surrogate for the dual-entitlement offset for
workers receiving a government pension based on work not covered under
Social Security because, if that work had been covered, any spouse's or
surviving spouse's benefit would have been reduced by the person's own
Social Security worker's benefit.
Legislation Affecting GPO
Several bills have been introduced that address the GPO. A bill
introduced by Representative McKeon (H.R. 147) includes a provision
that would completely eliminate the GPO. Over five years, this proposal
would cost nearly $11.6 billion; over 10 years, the estimated cost
increases to $32.2 billion. The long-range cost is estimated to be
significant--0.06 percent of taxable payroll.
Representative Shaw has included, as part of the Social Security
Guarantee Act of 2005, a provision that would reduce the offset from
two-thirds of the amount of the person's government pension to one-
third. The proposal would cost about $3.5 billion over 5 years and $9.6
billion over 10 years. This change is estimated to increase the long-
range cost of the program by 0.02 percent of taxable payroll.
In the last session of Congress, Representative Jefferson
introduced H.R. 887, which would have exempted an individual from GPO
if his or her combined non-covered pension and Social Security benefits
were less than or equal to $2,000 per month (indexed). A dollar-for-
dollar offset would have applied only to the amount of combined
benefits in excess of $2,000 per month, with the proviso that the
offset could not be more than two-thirds of the amount of the non-
covered pension. The cost of this proposal was estimated at $7.8
billion over five years, and $21.4 billion over 10 years. The long-
range cost was estimated to be 0.02 percent of taxable payroll.
Windfall Elimination Provision
I would now like to discuss the WEP provision. The Social Security
Amendments of 1983 (P.L. 98-21) included the WEP provision as a means
to eliminate ``windfall'' Social Security benefits for retired and
disabled workers receiving pensions from employment not covered by
Social Security. Generally, while the WEP applies to any pension based
on non-covered employment, it primarily affects government workers.
(The WEP does not affect the Social Security benefits payable to
survivors of workers who received pensions based on non-covered
employment.)
The purpose of the WEP was to remove an advantage that the
weighting in the regular Social Security benefit formula would
otherwise provide for persons who have substantial pensions from non-
covered employment. This weighting is intended to help workers who
spent their lives in low-paying jobs by providing them with a benefit
that is relatively higher in relation to their prior earnings than the
benefit that is provided for higher-paid workers.
However, benefits are based on average earnings in employment
covered by Social Security over a working lifetime (35 years for
retired workers). In determining average earnings for Social Security
benefit purposes, years with no covered earnings are counted as years
of zero earnings, as if the person had not worked at all. Without the
WEP, a worker who spent a substantial part of his or her career in
employment not covered by Social Security would be treated as a low-
lifetime earner for Social Security benefit purposes and receive the
advantage of the weighted benefit formula. The WEP provides for a
different, less heavily weighted benefit formula to compute benefits
for such persons.
Under the regular (non-WEP) benefit computation rules, a three-step
weighted benefit formula is applied to a worker's average indexed
monthly earnings (AIME) to determine his or her primary insurance
amount (PIA). The PIA is the monthly benefit amount payable to a
retired worker first entitled at the full retirement age or a disabled
worker. The PIA formula applicable to workers who reach age 62 or
become disabled in 2005 is:
90 percent of the first $627 of AIME, plus
32 percent of the next $3,152 of AIME, plus
15 percent of AIME above $3,779.
Under the WEP computation, a worker who is receiving a pension from
non-covered earnings generally receives 40 percent of the first $627
instead of the 90 percent provided to workers whose entire careers were
in covered employment. The 32 and 15 percent factors are the same for
workers affected by the WEP and those that are not.
For a worker first eligible in 2005, the maximum WEP reduction is
$313.50 per month--or the difference between 90 percent and 40 percent
of $627. Unlike the GPO, the WEP can never eliminate a person's Social
Security benefit.
WEP does not apply at all to workers who have 30 or more years of
substantial earnings under Social Security. For workers who have 21 to
29 years of substantial covered earnings under Social Security, the
reduction under the WEP is phased out gradually.
The WEP provision includes a guarantee designed to help protect
workers with relatively low pensions based on non-covered employment.
This guarantee provides that the reduction in Social Security benefits
can never exceed one-half the amount of the pension based on non-
covered work.
Educating the Public
As you can see, the WEP and GPO provisions are complicated and,
consequently, there have been misunderstandings about who is affected.
You may recall from last year's testimony that SSA has made revisions
to the Social Security Statement highlighting and making clearer the
potential impact of WEP and GPO on a worker's Social Security benefit
if he or she receives a pension based on non-covered employment. The
Statement refers individuals to SSA publications that explain how
benefits can be affected by the WEP and GPO. It also refers individuals
to an SSA website, which was recently revised to make sure that there
is ample information and links to fact sheets that explain the impact
of the GPO and WEP. The website includes benefit calculators that allow
individuals to estimate the effects that WEP or GPO may have on their
monthly benefit.
Additionally, SSA offices nationwide provide pre-retirement
seminars to government employees who request them. If government
employees request the seminar, we inform them of the potential impact
that WEP and GPO may have on their monthly Social Security benefit.
As you know, the Social Security Protection Act of 2004 (SSPA)
required SSA to make a disclosure form available for State and local
government employers to use to notify new non-covered employees of the
potential effect of this work on their Social Security benefits. This
provision was effective January 1, 2005. As we considered our
implementation strategy for this provision, I met with representatives
of several interested groups (some of them are here today as witnesses)
to get their input and hear their concerns.
SSPA also required that Social Security Statements issued after
December 31, 2006 contain language to explain the maximum potential
effects of the WEP and GPO to any person whose records indicate that
they may be subject to those provisions. We are currently examining
ways to use our administrative records of non-covered earnings to
identify individuals whose benefits are likely to be affected by the
GPO or WEP.
Legislation Affecting WEP
A number of bills have been introduced that would change the WEP.
These proposals include:
eliminating the WEP entirely;
providing less of a WEP reduction (or no reduction) for
government workers whose pensions from non-covered employment, in
combination with their Social Security benefits, are below certain
levels; and
replacing the WEP benefit formula with an alternative
computation.
Let me start with the elimination of the WEP. If the WEP were
eliminated, approximately 738,000 retired and disabled workers would
see their benefits increase. It is estimated that elimination of the
WEP would have a 5-year cost of $10.8 billion and a 10-year cost of
$29.7 billion. The long-range cost would be significant--estimated to
be 0.06 percent of taxable payroll.
The second type of proposal that has been introduced would provide
less of a WEP reduction, or no WEP reduction, if the combined amount of
the worker's non-covered pension and Social Security benefits is below
a certain threshold. Representative Frank has introduced such a bill
(H.R. 1690). This bill would exempt an individual from WEP if his or
her combined benefits were less than $2,500 per month (indexed) when he
or she is first eligible for both Social Security and a non-covered
pension. The legislation provides for graduated implementation of this
provision on amounts above $2,500 monthly. Such a proposal would cost
$20.4 billion over the next 10 years and increase long-range costs by
0.03 percent of taxable payroll.
The third type of bill that has been introduced would replace the
current WEP formula with an alternative computation. This is the
approach embodied in H.R. 1714, as introduced by Representative Brady.
Under this bill, a hypothetical primary benefit would first be computed
based on all of the worker's available covered and non-covered earnings
after 1950. This hypothetical benefit would then be multiplied by the
proportion of the worker's total earnings that were covered under
Social Security to obtain the primary benefit payable to the worker.
The bill also includes a guarantee provision that would ensure that
workers whose government pension is based on non-covered earnings in
the year of enactment or earlier would receive no less than the benefit
under the present law WEP provision. The bill would apply to
beneficiaries already on the rolls, as well as to future beneficiaries.
SSA's Office of the Chief Actuary estimates that enactment of H.R.
1714 would increase program costs by $2.7 billion over the first 5
years; the 10-year cost would be $7.0 billion. The long-range cost of
the program would increase by 0.01 percent of taxable payroll. These
cost estimates assume that only the available non-covered earnings data
on SSA's records, for years 1978 and later, would be used in
calculating the proposed benefit. The actuaries used this assumption
because they believed that the availability of non-covered data for
years before 1978 would be problematic for many non-covered workers. To
the extent that workers' pre-1978 non-covered earnings are available
and could be included in the proposed benefit computation, the cost of
the bill would be somewhat lower.
Let me first commend Rep. Brady for his efforts to find ways to
replace the current WEP with an approach that is intended to more
accurately reflect an individual's complete earnings history. And we
have appreciated the opportunity to work with his and other
congressional offices on legislation affecting the WEP. However, we
continue to be concerned about some aspects of this bill. The primary
issue is that the computation would count non-covered earnings after
1950, but SSA only has records of non-covered earnings beginning in
1978, when it began receiving Form W-2 information from employers, and
some of these records are incomplete--particularly for the years soon
after SSA began collecting this earnings information.
We are concerned about the availability of records documenting pre-
1978 earnings. Unfortunately, the data needed for these calculations--
much of it wages paid to individuals as many as 30 or more years ago--
will not be available for many cases, making it difficult for SSA to
equitably administer the provisions of the bill. While the bill
includes provisions for ``deeming'' non-covered earnings when such
earnings are not available, these provisions would be complex to
administer, and would result in a benefit not based on the individual's
true earnings. Because the bill would apply to those on the rolls as of
the effective date, SSA would be required to review the benefits of
more than 738,000 retired and disabled workers affected by the WEP to
determine if their monthly benefits should be adjusted. In addition,
the workloads that would be generated by passage of such legislation
would be tremendous and take years for SSA to complete.
We are also concerned about willingness to cooperate on the part of
individuals who would be affected by this provision, because we would
be seeking evidence of earnings that would only serve to lower the
benefit amount payable under the bill. A worker whose non-covered
earnings were entirely before 1978 would fully avoid the WEP reduction
under the proposed computation if those earnings were not disclosed by
the worker or otherwise determined by SSA.
Because of the large volume of recomputations required and
associated manual actions, the workload impact on SSA would be
substantial--and would create delays in other workloads.
While we have raised a number of concerns with this bill, we look
forward to working with the committee on these issues.
Conclusion
I want to again thank the Chairman and the Subcommittee for giving
me this opportunity to discuss the Social Security coverage for State
and local government employees and the related topics of WEP and GPO.
As always, SSA welcomes the opportunity to work with you to provide any
additional information you need as you continue to look at these
complex and important issues. I would be glad to answer any questions
you might have.
Chairman MCCRERY. Thank you, Mr. Streckewald. We have been
joined in the Subcommittee by the distinguished Ranking Member
of the full Committee on Ways and Means. Welcome, Mr. Rangel;
nice to have you with us.
Mr. BECERRA. Mr. Chairman, we are pleased to have another
gentleman on that side of the aisle, who we hope will do some
good questioning from your side of the aisle.
Chairman MCCRERY. We know him to be an able advocate. I
would like to take you through a couple of examples, because
these can be confusing to someone who is just trying to
understand the concept here. So, I want to take you through a
couple of examples to illustrate the GPO and the WEP and try to
get, as I am walking through these examples, a sense for
fairness/unfairness of the provisions.
Let us assume we have two teachers, Mary and Jane. Both of
them make the same salary, but Mary paid into Social Security
and Jane didn't. They were in two different systems. One system
paid Social Security; the other system had its own retirement
system and didn't pay into Social Security. Mary paid in, Jane
didn't. Mary will receive her pension benefit if she was under
a teacher's pension plan, and she will also receive her Social
Security benefit because she paid into both. Jane on the other
hand, will receive her teacher's pension benefit, but obviously
won't receive any Social Security benefits since she didn't pay
into the system. Is that correct?
Ms. BOVBJERG. It would depend on her marital status.
Chairman MCCRERY. Let us just assume right now they are
single. So, that is correct; that makes sense, doesn't it.
Ms. BOVBJERG. Yes.
Chairman MCCRERY. Mary gets both. Jane didn't, so, she just
gets her pension. Now let us assume that they are both married
and they are married to workers who paid into Social Security.
Both husbands earn spousal benefits for their wives, right?
Ms. BOVBJERG. They paid in?
Chairman MCCRERY. Both husbands paid into Social Security.
They earned spousal benefits. However, Mary, the teacher who
paid into both, her spousal benefit will be reduced $1 for
every dollar of her own worker benefit under Social Security;
is that right?
Ms. BOVBJERG. Correct.
Chairman MCCRERY. So, basically she gets to take the higher
of her own earned benefit or her husband's?
Ms. BOVBJERG. That is right.
Chairman MCCRERY. Now, Jane, when she gets a spousal
benefit, hers will be offset $2 for every $3 of her husband's
benefit; is that right?
Ms. BOVBJERG. That is right.
Chairman MCCRERY. You have two teachers in identical
situations, the only difference being that one paid into Social
Security and the other didn't. The higher spousal benefit goes
to the teacher that paid into Social Security--actually, I am
wrong. It goes to the teacher who did not pay into Social
Security. Would you say that unfairly treats the spouse who did
not pay into Social Security?
Ms. BOVBJERG. I think it is more than fair. The fundamental
principle behind Social Security is that it is a contributory
program. The situation that you describe is designed to be
comparable, that if you have two working spouses and you are
offsetting the working spouse's benefit, even though she paid
into Social Security, you certainly should not treat a spouse
that did not pay into Social Security, but also worked, as if
they have no other resources. They are not dependents, and that
is the key reason that you need to compare them to working
spouses.
Chairman MCCRERY. For those who say the GPO is unfair, if
it is unfair to reduce spousal benefits for workers who don't
pay Social Security, it should also be fair to reduce spousal
benefits for workers who do pay Social Security taxes, since
those workers, husbands and wives, earn spousal benefits just
like the husbands and wives of public employees.
Ms. BOVBJERG. That is right. I think the people who are
concerned about fairness often don't know about this provision
until they get very close to retirement and find that it is a
complete surprise, a very unpleasant surprise. It just does not
meet their expectation. I think some of the provisions in the
Social Security Protection Act from last year that require
State and local governments with noncovered employment to
notify participants in their plans of their status with Social
Security will help.
Chairman MCCRERY. I think that is right. When you look at
it in the context of how Social Security treats other spouses
who have both a pension and a Social Security benefit, I think
certainly it becomes clearer that there is some justification
for that reduction.
Ms. BOVBJERG. It is designed to be equitable.
Chairman MCCRERY. Now let us do the same thing with the
WEP. Let us take two public employees, two men this time, Ray
and Jack. Both of them make the same salary, but Ray's
employment is covered under Social Security and Jack's is not.
Both of them also have private sector jobs at night to
supplement their public income, their public jobs' income, and
they earn exactly the same amount at night.
Now, Ray's average earnings subject to Social Security
taxes were $58,000, while Jack's equaled only $16,000. Oviously
one of them is whole--his public job salary was subject to
Social Security and his moonlighting job, whereas Jack's, only
the moonlighting job was subject to Social Security. So, in the
eyes of Social Security, Ray's earnings were $58,000 while
Jack's were only $16,000. The Social Security benefit formula
only recognizes earnings that are only subject to Social
Security taxes and replaces a greater percentage of earnings
with those with low wages, so, if we were to repeal the WEP,
Ray's Social Security benefits would replace 36 percent of his
Social Security earnings while Jack's Social Security benefits
would replace 58 percent of his Social Security taxed earnings.
So, is it fair for Jack to be paid relatively more generous
benefits than Ray if they had identical earnings?
Ms. BOVBJERG. That is why they call it the Windfall
Elimination Provision. It would be a windfall to Jack.
Chairman MCCRERY. So, is this the situation that the WEP
was designed to avoid?
Ms. BOVBJERG. Absolutely, the double-dipping situation.
Chairman MCCRERY. Okay. I just wanted to get that out there
for everybody, so we all understand the context of these
provisions. You shouldn't look at them in isolation. You should
look at them in the context of Social Security, the goals of
Social Security, and how similarly situated people with the
same earnings are treated in these situations. I know I took a
lot of time to do that. So, I am going to stop and go to Mr.
Becerra.
Mr. BECERRA. Thank you, Mr. Chairman, and I appreciate your
efforts to try to clarify. I know most people, like Ms.
Bovbjerg said, don't realize they fall within the GPO or within
the WEP exceptions until they get there; and it can be somewhat
startling to find out this news when you are close to retiring.
We appreciate that. Mr. Chairman, thank you for holding this
particular hearing. I think it is important to get this
information out there. Let me see if I can ask--and, Mr.
Streckewald, you are probably more appropriate since you work
directly for the Administration. The President has been talking
since the beginning of the year about changes to Social
Security, privatization as part of his proposal or the idea--
although we don't have a specific proposal, but so far the
ideas he has included privatization--by changing the indexing
formula that is used to determine benefits. He is talking about
reducing the benefits that middle-class Americans who retire
would receive. Has the Administration put forward any proposals
to address these longstanding concerns of public employees that
we are addressing today, the GPO and the WEP, within Social
Security?
Mr. STRECKEWALD. Let me make sure I understand the
question. Has the SSA put forth any proposals to address the
GPO or the WEP provisions?
Mr. BECERRA. Either the SSA or the President, since the
President has been going around the country and talking about
changing or replacing Social Security.
Mr. STRECKEWALD. I am not aware of any proposals or
suggestions that have been put out there. The Administration is
looking at all options and, I think, considering everything in
the broader context of the Social Security solvency discussion.
Mr. BECERRA. Do you know if the Administration, through SSA
or otherwise, has taken a position on these issues of the GPO
and the WEP?
Mr. STRECKEWALD. I don't know that. I don't know if they
have a position one way or the other. Most of what I have heard
has been a discussion of putting all the issues on the table
and sorting through them.
Mr. BECERRA. Do you know if the Administration has any
plans to address these concerns being raised by public
employees with regard to the GPO and the WEP?
Mr. STRECKEWALD. I don't know whether they do or not. I
came more prepared to talk about the issues related to just
those two provisions outside of the solvency issue. The general
issue on solvency is that the SSA works with the Administration
to try to staff out some of the proposals. Again, I think the
Administration looks to see if everything is on the table.
Mr. BECERRA. If everything is on the table, that means GPO
and WEP are on the table?
Mr. STRECKEWALD. Most of what I am hearing is yes.
Mr. BECERRA. If it is on the table, what does the President
put on the table with regard to GPO and WEP?
Mr. STRECKEWALD. I don't know.
Mr. BECERRA. Have you had any discussions within Health and
Human Services or--I am sorry, Social Security or within the
White House to address or at least discuss the issue of GPO and
WEP?
Mr. STRECKEWALD. In relation to the broader solvency
discussion?
Mr. BECERRA. Right.
Mr. STRECKEWALD. I am a career civil servant, so, I haven't
been invited to those meetings.
Mr. BECERRA. I am just trying to get information to find
out what the thinking might be, because we have, piecemeal,
some ideas from the President about how he believes we could
address Social Security, making it stronger and so forth. It is
unclear where he would want to go, as President, on GPO or WEP,
and I was hoping maybe you would have some information.
Mr. STRECKEWALD. I don't have any insight to offer other
than what I said before. My understanding is that the President
believes everything is on the table and should be looked at and
all ideas should be sorted through for the right combination.
Mr. BECERRA. I suspect after your testimony, a whole bunch
of public employees are going to say that it is time to write
to the President to ask him to articulate what he might be
thinking of doing with GPO and WEP. I yield back the balance of
my time.
Chairman MCCRERY. I would just say that I don't know of any
proposal that the President has made with respect to these two
provisions, but I do know that the entire Social Security law
is written by Congress, not by any President; and it is our job
to explore this, and that is what we are doing today. We may
indeed recommend changes in the legislation which we hope the
President would sign if we could ever give him a bill. Mr.
Johnson.
Mr. JOHNSON. Thank you, Mr. Chairman. Mr. Streckewald, last
time the SSA was before this Committee on this issue, we heard
you thought it would be both expensive and difficult to
administer the Public Service Retirement Protection Act because
of old recordkeeping problems. Have your views changed at all?
Mr. STRECKEWALD. I couldn't quite hear. To administer the
change in the WEP?
Mr. JOHNSON. Yes.
Mr. STRECKEWALD. Yes. We have looked at it since the last
hearing. We have concluded that basically the same problem
exists now that existed last year. We don't have any noncovered
earnings information before 1978 because we did not receive any
W-2s from IRS before then. For the period 1978 to 1983, we have
some, but not fully complete, information. So, if we were to
try to look at some of the changes that have been suggested in
relationship to the WEP and going back and looking at the
entire noncovered earnings and covered earnings, and then
taking a proportion of them, and then applying a reduction
based on that, we would have a hard time finding those pre-1978
earnings. We would have to have people in our offices contact
these entities within the State and local governments, figure
out what the average employment was for that position during
that timeframe and try to extrapolate some sort of an estimated
cost. That would be one way of doing it.
If the person had their pay stubs from back then, that
would be great. Most people don't save them that long. So, we
have estimated it would take nearly 2200 work-years over a 5-
year period to try to go back and look at everybody's WEP
computation to see if we could change it based upon pre-1978
earnings, and to do the rest of the change in the computation
as well.
Mr. JOHNSON. Ms. Bovbjerg, have you updated your computers
yet? We gave you money many years ago to do that, and you still
can't tell people whether their Social Security card is current
or not.
Ms. BOVBJERG. That we can't tell people what? I am sorry, I
didn't hear your question.
Mr. JOHNSON. You still can't tell whether people have a
good Social Security card or not.
Mr. STRECKEWALD. We have managed to put a number of
upgrades in place on a lot of different program areas, and the
enumeration which is the Social Security card, we have systems
in place that an employer who hires a new worker--through a
Web-based system, can actually verify that name and number with
us and make sure we have the same name and number.
Mr. JOHNSON. I understand, but you don't know if it is a
real guy or not.
Mr. STRECKEWALD. If it is not a real guy, we won't say that
we can verify that name and number. You mean if it is a
deceased person?
Mr. JOHNSON. Some guy who has three or four cards. You were
in the habit of replacing cards just on a phone call. I don't
think you do that anymore. All I am saying is, are your
computers upgraded enough to handle the situation? If they
can't handle that, they can't handle this program either.
Ms. BOVBJERG. I am from the GAO, not SSA.
Mr. STRECKEWALD. I would say that our computers are set up
to verify the name and the number in a very sophisticated way,
but the card itself is not an identity document. Employers are
supposed to verify the person's identity separately and then
verify the name and number on the card with us.
Mr. JOHNSON. I understand what is supposed to happen.
Ms. BOVBJERG. Could I jump in? We have done a report for
this Subcommittee fairly recently on the earnings suspense file
at the SSA, and it is quite clear that employers do not check
and do not use the verification available to them.
Mr. JOHNSON. Can you tell me or give us an estimate of how
many State and local public sector employees would receive
higher benefits if this legislation were passed?
Mr. STRECKEWALD. Would this be the Brady type of
legislation?
Mr. JOHNSON. Yes.
Mr. STRECKEWALD. I think about 88 percent of the workers,
if they were to retire in 1999, 88 percent of the workers would
receive increased benefits if we instituted H.R. 1714, which is
often called the Brady bill. If you carried that a little
further out to people that retired in 2018, it would be a
little bit less, but still 61 percent of the people would do
better under that computation. It would be under current law
computation; a significant number would see increased benefits.
Mr. JOHNSON. Thank you, Mr. Chairman.
Chairman MCCRERY. Ms. Tubbs Jones.
Mrs. JONES. Thank you, Mr. Chairman. Good afternoon. On our
panels coming up, we are going to hear from representatives of
some of the government employee unions, but if I were someone
walking up to you and saying, What is the detriment for me as a
noncovered worker to have my funds placed into Social Security,
what would your answer be?
Ms. BOVBJERG. What would the detriment be? I would say it
is an advantage, because you would be assured of a lifetime
annuity with a cost-of-living adjustment. That is not something
that everyone in State government has.
Ms. TUBBS JONES. Those that do have it would not get a
benefit?
Ms. BOVBJERG. It would depend on how the State coordinated
the matching together of Social Security and their plan.
Depending on the State's plan, it could in fact cost more for
the State and potentially for the employee.
Ms. TUBBS JONES. What has been proposed, that you are
familiar with? You say, how it matches it or--what are States
proposing to match?
Ms. BOVBJERG. States have merely told us what actions they
thought they would have to consider if the Congress required
all State and local employees to be covered by Social Security.
Ms. TUBBS JONES. What have they told you that Congress
would require them to consider?
Ms. BOVBJERG. They told us that if there is what we call
the State and local mandate, if everybody was brought in to
Social Security, that they would have to consider that, to
provide both Social Security and their current pension plan,
would clearly cost them more. So, what would they do? Would
they simply pay more? Or would they reduce something in the
current pension plan? Clearly, this would not happen right away
because it would only apply to people newly hired after the law
took effect. State and local governments would have to consider
how to integrate the two plans.
Ms. TUBBS JONES. The costs would be borne by the State or
the costs by the Feds?
Ms. BOVBJERG. By the State.
Ms. TUBBS JONES. Not many States are going to run up to do
that, are they? That is just a commentary. Let me ask about
employees who end up in disability for a period of time and
then they come back into the workforce under Social Security,
how are they treated in terms of what their retirement income
would be, Mr. Streckewald?
Mr. STRECKEWALD. The disability provisions for the WEP, I
believe you are talking about, are very similar to those for
retirees. There is a very small percentage of people who are
affected by the WEP.
Ms. TUBBS JONES. I wasn't talking about the WEP. I was just
talking in general. It is something I don't know, and I was
interested in getting a response.
Mr. STRECKEWALD. What happens if you are disabled and come
back to work? We have changed a lot of our return-to-work
policies, and we are looking at changing more. We are trying to
encourage people to try to go back to work. If they have a
successful working experience and manage to stay with that job
for quite awhile and go back in the workforce permanently, then
basically their wages get on their earnings record. When they
retire, we do a computation that looks at their wages while
they were not disabled, but doesn't include those years for
which they were disabled. That is the computation.
Ms. TUBBS JONES. What is the work requirement? If we say 40
quarters to be eligible for Social Security, is it 40 other
than the disability, or 40 including the time I have been out
on disability?
Mr. STRECKEWALD. I believe I do not want to hazard a guess.
I will take it for the record. I think most people have the 40
quarters with or without the disability, but if I could submit
that for the record.
[The information follows:]
Generally, an individual has disability insured status if he or she
has at least 20 quarters of coverage (QC) during the 40-quarter period
ending with the quarter in which the disability waiting period begins,
and is fully insured in that quarter. In determining the 40-quarter
period, we do not count any quarter or part of which is in a prior
period of disability except the beginning or ending quarter if they are
QC's. To be fully insured, the individual must have the number of QC's
that he or she would have required to be fully insured had he or she
filed an application for retirement insurance benefits and attained age
62 in the first month of the waiting period.
The five month waiting period begins with the first full month in
which an individual is both insured for disability and disabled. No
waiting period is required for individuals who were previously entitled
to disability benefits, or a period of disability at any time within 5
years of the month the individual again became disabled.
Ms. TUBBS JONES. I would love for you to submit it for the
record. I yield back the balance of my time, Mr. Chairman.
Chairman MCCRERY. Mr. Brady.
Mr. BRADY. Thank you, Mr. Chairman. Ms. Bovbjerg. Mr.
Streckewald. First let me say, Sam, your effort to limit the
number of repeat cards is already having an effect. For some
reason, we have lost our 3-year-old's Social Security card at
least twice a year. I told my wife, I don't want to end up on
Sam Johnson's bad list of repeat offenders. I always appreciate
Ms. Bovbjerg's policy laying out the issues, especially on
issues like mandatory coverage being one of them. I understand
the policy of it. For whatever it is worth, I strongly oppose
pursuing mandatory coverage.
I watch our teachers, fire fighters, and police, that 4
percent of the workforce that are in substitutes for Social
Security. They put real money in real accounts and invest in
real assets, and their retirees have stronger retirement
systems than our own. My belief is that our teachers and fire
fighters and police retirement systems shouldn't look more like
Social Security; Social Security should look more like them. I
think they have a stronger underpinning and do more for workers
in the long term. I understand the policy of trying to simplify
and move away from some of these confusing terms, but I watch
what they do and wonder how we can make our own Social Security
system better.
For Mr. Streckewald, last May, Martin Gerry testified there
would be significant administrative burdens on the Public
Servant Retirement Protection Act, which a number of us are
working together on. I thank the team over at the SSA for
working with us this past year on this issue. The bill, this
year, was rewritten with the guidance of the SSA to find a way
to better formulate the wage histories so that we can have a
system that is tailored to the worker and their work history
rather than an arbitrary formula. The goal is equal treatment
for those who have earned two pensions, one in Social Security
and one in a substitute where they received the full benefits
for the years and the contributions they put in, not that they
work 10 years in Social Security and get all 10 years, full
benefit--15 years.
We have rewritten it to deal--at your urging--with the
administrative burden. To ease it by giving the SSA the
authority to either extrapolate those wage earnings or use
average wage rates when attempts to create the full work
history have been exhausted. Aren't we creating a far more
workable solution for the agency with the new bill, because I
think we significantly have reduced that burden, have given you
some real common-sense tools. Especially when the gaps aren't
large or they stay in the same profession, it is fairly easy to
move that up, and especially with default, that they always
have the existing revenue underneath them no matter what.
Mr. STRECKEWALD. I would like to thank you and your staff
for working with us, because this is a very complicated issue
and it takes some pretty thorough analysis. I think for one of
the points you make, it would very much depend upon each
individual. There are some circumstances that we don't have any
problem at all doing the new computation, looking at the
proportion of covered wages and noncovered wages and figuring
what reductions should be based upon that. If a person has
noncovered wages back into the period before 1978, and for some
people between 1978 and 1983, we will have some significant
work to be done. We have estimated it would take an hour-and-a-
half to get the information, contact the employer and figure
out what the average wage should have been in that profession
at that time of year and in that county, because different
counties pay different rates for teachers.
We would have to do the computation. We would either have
to build a pretty big computer system to make that computation
or we would build a system where we could manually compute it--
a little less than Martin Gerry's testimony last year, but
still about 2,200 work-years over a 5-year period. So, it is
about 400 work years per year that we would put onto this
workload and it would take us about five years to get through
it.
Mr. BRADY. I am surprised it hasn't changed, because in our
meetings with the SSA, we basically incorporated the agency's
solutions on how we can do this easier and better. Frankly, I
can't think at this point of a better way to really tailor this
solution than to try to get us as close to the actual wages as
possible and give you some easy tools.
Mr. STRECKEWALD. This would change as we got into it, of
course, because one of the tools that you did put into your
bill would allow us to have an attestation that if the person
could corroborate their attestation with the person who has
knowledge, that is a lot quicker for us than having to go
contact an employer. If we have a large proportion of people
that can do that, then some of the costs would go down.
Mr. BRADY. For the Committee, that is a key point, because
there are a number of workers and substitutes who come very
close, very quickly to their wage histories, and stayed in the
same profession--teaching, fire fighting, and police--and can
recreate those fairly soon; and the ability to corroborate that
with someone who has knowledge, I think, is going to be a
better tool than we think at the outset. I appreciate the
Chairman bringing this issue up. One of the frustrations is the
issue of dependency. Apples to apples are two workers where
both spouses work, so, dual entitlement, two workers, and the
GPO really tries to match at least. The issue of dependency
where they see someone who has a wife who hasn't worked, the
Ozzie and Harriet model from a generation ago, that almost
doesn't exist today, can you explain the issue of dependency? I
know it is a confusing issue for a lot of our public servants.
Mr. STRECKEWALD. When Social Security first started, the
model that you talked about, the working husband and stay-at-
home wife, was a common model. So, the spousal benefits were
set up with the assumption that a lot of women would be
dependent upon their husband. When the husband retired, died,
or became disabled, there would be a spousal benefit because
she was dependent upon him. As the workforce changed and more
and more women came into the workforce after World War II and
beyond, the fifties and sixties, it really started changing.
Women became insured for Social Security under their own
earnings, so, they were no longer dependent as much on the
earnings of their husband as somebody who had never worked and
stayed at home to work.
So, I think the dual entitlement provision that Congress
has put into law recognized that, that someone who has stayed
at home and not worked will get a full spousal benefit because
they are totally dependent on the husband in this case; but
someone who has gone out and worked on their own and received
their own retirement benefit from Social Security, we want to
offset that against the spouse's. They can't get both, in other
words, and that seems to be Congress' intent there, not to give
them both. A full spousal benefit was based upon full
dependency and their own, which was originally dependent upon
their own lost wages.
Mr. BRADY. Just to conclude, and I would ask the agency one
time to identify just how many people fit that past mold, never
having worked ever in their lifetime or at least not qualified.
The response to that was that at this point, the amount is too
small to measure, because people work after school before they
have children; even if they are able to stay home, go back to
help pay for college costs. It is just rare these days to have
people who are completely dependent on their whole lifetime of
earnings, and that ought to be our factor as we go forward.
Chairman MCCRERY. I hate to do two people in a row on the
majority side, but Mr. Rangel, do you have any questions.
Mr. BECERRA. We won't object.
Mr. RANGEL. Thank you, Ms. Bovbjerg, for the good work that
the GAO always does in a very bipartisan and professional way.
Mr. Streckewald, at some point, in answer to a question, you
had pointed out that you were a civil servant, as distinguished
between what?
Mr. STRECKEWALD. I am career civil servant. I started my
career in 1974 in the SSA and worked my way up to the position
I hold now. I am not politically appointed into this position.
Mr. RANGEL. Having said that, would there be any difference
in the competency or the accuracy of the testimony of a person
who was politically appointed?
Mr. STRECKEWALD. No. I think that some of the political
appointees in our agency deal with different issues than some
of us career executives. I generally deal with the current
program as it exists now. If there are discussions of a
political nature on proposed changes in the future, then it is
more of a political appointee's role to get involved in that
and get involved with the Administration and interact with the
Hill.
Mr. RANGEL. Would it be included in the responsibilities of
a career civil servant, explanations as to the fiscal condition
of the Social Security system as it exists now?
Mr. STRECKEWALD. I think, in general, most of the career
civil servants at my level, if their job requires them to work
on that, they can articulate some of the basic solvency points
in terms of when the trust fund will run out of money, that
type of thing. Again, most of my work in the last several years
has trying to administer the current Old-Age Survivors and
Disability Insurance (OASDI) and Supplemental Security Income
(SSI) programs.
Mr. RANGEL. They are civil servants that give this
information to the general public as to the solvency of the
Social Security system?
Mr. STRECKEWALD. Yes.
Mr. RANGEL. Do they do this in response to questions or do
they volunteer?
Mr. STRECKEWALD. I think both. Out in our field offices and
regional offices, we have public affairs people.
Mr. RANGEL. How long have you worked with the Federal
government?
Mr. STRECKEWALD. Thirty-one years.
Mr. RANGEL. Have you known in any other agency where civil
servants offer information to the beneficiary as to the
solvency of a particular program?
Mr. STRECKEWALD. I am not aware that they have or they
haven't.
Mr. RANGEL. Let us get back to Social Security. How would
you think this fits within the responsibility of a civil
servant, non policy Member of the Social Security system to
volunteer what they believe is the solvency of a Social
Security system? Have you ever heard of anything like this
before?
Mr. STRECKEWALD. We do have some official kind of
publications that we use to educate our own people on, so if
they are in a situation, either under official business where
we try to go out and inform.
Mr. RANGEL. I understand that. I have come to find out what
my Social Security benefits are now, and I am talking to a
civil servant and not a political appointee. Can you explain
how it is conceivable that that person could go beyond my
request and tell me how long the Social Security system was
going to be solvent. I am 75, and they will be telling me what
is going to happen in the next 20 years.
Mr. STRECKEWALD. I can't explain that. That is certainly
not a role that we ask our field office people who have contact
with the public to take on.
Mr. RANGEL. When the political appointees are advising the
President as to policy, do they sometimes talk with the career
civil servants to find out what their ideas are?
Mr. STRECKEWALD. Sometimes, yes.
Mr. RANGEL. Has anyone ever come to you, based on your
three decades of service, to ask you your advice as to how we
can make the Social Security system operate better?
Mr. STRECKEWALD. Actually, no they haven't. Certainly my
relatives constantly ask me, but my superiors and my colleagues
at work, they know that is not my area of expertise, so, I have
not been asked my opinion of that officially.
Mr. RANGEL. So, I would not ask the question as to whether
or not this is a political proposal or one that is based on the
experience of Social Security, you being a civil servant. They
would never come to someone who knows what they are talking
about. Thank you, Mr. Chairman.
Chairman MCCRERY. Thank you, Mr. Rangel. I would ask of
each of you, if we submit some questions in writing, would you
respond to those? Thank you very much. We probably will do
that. Thank you for your testimony and for answering our
questions. Now we call up the second panel. Second panel, come
forward. As they are coming forward, I will announce the names
of the second panel: The Honorable Nan Grogan Orrock, State
Representative, Georgia General Assembly, Atlanta, Georgia, and
Chair of the Labor and Workforce Development Standing
Committee, National Conference of State Legislatures (NCSL);
Teresa Bierdeman, Chairman, Coalition to Preserve Retirement
Security in Alexandria, Virginia; Chuck Canterbury, President,
Grand Fraternal Order of Police; Randall Iglehart, President,
Association of Texas Professional Educators; Patricia Wolfe,
President of federally Employed Women; Charles Loveless,
Director of Legislation, American Federation of State, County
and Municipal Employees. Thank you all for coming today. You
have submitted written testimony, which will be included in its
entirety in the record. We would ask each of you to summarize
your testimony in about five minutes each. We will begin with
Ms. Orrock. Thank you for joining us today, and we look forward
to hearing your testimony.
STATEMENT OF THE HONORABLE NAN GROGAN ORROCK, STATE
REPRESENTATIVE, GEORGIA GENERAL ASSEMBLY, AND CHAIR, LABOR AND
WORKFORCE DEVELOPMENT STANDING COMMITTEE, NATIONAL CONFERENCE
OF STATE LEGISLATURES
Ms. ORROCK. Chairman McCrery, Ranking Member Levin and
distinguished Members of the Committee, thank you for the
opportunity to share the positions of the National Conference
of State Legislatures on the issue of mandating Social Security
for State and local government employees and the GPO and WEP
that reduces Social Security benefits of State and local
government retirees. I am State Representative Nan Grogan
Orrock, a Member of the Georgia General Assembly, and I
currently serve as Chair of NCSL's Standing Committee on Labor
and Workforce Development. That is the Committee tasked with
articulating NCSL's positions on public pensions and Social
Security.
The NCSL's opposition to mandateory coverage for State and
local government employees is one of our longest-held policy
positions. We oppose mandatory coverage because it impinges on
the ability of State and local employers to create and maintain
retirement systems that address the unique needs of State and
local governments. We oppose mandatory coverage because
compliance would impose serious costs and disruption to State
and local governments and their programs, while providing
minimal short-term value and adding long-term liabilities to
Social Security. Further, we oppose mandatory coverage because
it unfairly penalizes those State and local governments that
structured and funded benefits outside the Social Security
system while destabilizing State and local programs that are
effectively providing retirement security to a large number of
Americans.
State and local governments today provide pensions to
roughly 15 million employees. Of these employees, approximately
28 percent receive a pension that does not include Social
Security coverage. Approximately 40 percent of teachers receive
pensions not covered by Social Security, and roughly 75 percent
of the Nation's State and local first responders receive
uncovered pensions. These pensions take into account early
retirement ages, higher incidence of disability and death in
these occupations and survivor benefits. The tax increase on
States, localities, and our employees that would result from
mandatory coverage, even if only new hires were forced into
Social Security, would amount to a very large unfunded mandate
on States and it would have a substantial negative effect on
our State budgets and on the financing of our retirement
systems. The cost of mandatory coverage is $44 billion over the
first 5 years for new hires alone. Every State has some public
employees who do not pay into the Social Security system; thus,
every State would feel the impact of mandatory coverage.
Now, my own State of Georgia has over 180,000 State and
local employees outside of Social Security according to
estimates prepared by the SSA. The cost to Georgia, if
mandatory coverage is imposed, is over a billion dollars in the
first 5 years alone, and this is an expense, I will tell you,
that my State simply cannot shoulder. State retirement systems
that don't include Social Security have evolved over time to
meet the unique needs of State and local government employers
and the retirement savings needs of our workforce. To impose
mandatory coverage on these systems now would require vast
alteration of contributions and distribution of benefits in
order to provide funding for this Federal tax increase.
I caution you to strongly oppose including mandatory
coverage in any plan to protect and strengthen Social Security.
The reduction or loss of contributions coming from new hires to
the plans will hamper the ability of plans to reduce their
unfunded liability over time, leaving of course the plans more
vulnerable to underfunding. In the aggregate, public pension
plans currently are funded at around 88 percent. In terms of
benefits paid, 62 percent of State and local pension funding
comes from investment income, 26 percent comes from employer
contributions and 12 percent from employees' contributions.
Reducing contributions today in order to comply with mandatory
Social Security will lower investment earnings to the detriment
of planned participants, employers and taxpayers. Mandatory
coverage fails to strengthen Social Security or to improve its
solvency. While mandatory coverage will extend solvency for
roughly two years in the short run, ultimately these State and
local government employees will become future beneficiaries. In
the end, mandatory coverage will merely move liabilities
forward at the expense of existing stable and well-funded
retirement systems in the States.
The NCSL also supports reform of the GPO and the WEP, which
reduce the Social Security benefits of State and local
government employees who earned government pensions through
work not covered by Social Security. The NCSL is concerned that
the GPO and the WEP unfairly and imprecisely reduce Social
Security benefits. These reductions have unintentionally harmed
a disproportionate number of women and moderate and lower
income State and local government retirees.
The NCSL supports efforts to reduce or eliminate the impact
of the GPO and the WEP on State and local government retirees,
particularly those who have earned lower or partial pension
benefits. The NCSL does not, however, support reform of the GPO
and the WEP at the expense of mandatory coverage on State and
local government. Finally, the NCSL endorses increasing the
rate of return on Social Security's assets and supports efforts
to restore long-term solvency to the system because it is the
primary source of retirement income for millions of Americans
and a system that over 70 percent of State and local government
employers and employees pay into and coordinate retirement
benefits with. For the vast majority of State and local
government retirees, their employer-provided pension benefit is
linked to their Social Security benefit and as such, State
government employers have a vested interest in strengthening
this program. The NCSL supports a broad range of policies
designed to restore solvency to the program which we attached
to our written testimony.
Finally, the NCSL trusts that you will continue to
encourage private savings and employer-provided pension plans
as important components of retirement savings. You face a
difficult choice as you consider the options available to you
to strengthen and preserve Social Security. I say to you that
State legislatures stand ready to assist you in these efforts,
and I thank you again for the opportunity to share the
positions of the NCSL, and we look forward to answering any
questions you may have, any remarks or our written statements.
Thank you, Mr. Chairman.
[The prepared statement of Ms. Orrock follows:]
Statement of The Honorable Nan Grogan Orrock, State Representative,
Georgia General Assembly, Atlanta, Georgia, and Chair, Labor and
Workforce Development Standing Committee, National Conference of State
Legislatures
Chairman McCrery, Ranking Member Levin and distinguished members of
the Committee, thank you for the opportunity to share the positions of
the National Conference of State Legislatures on the issue of mandating
Social Security for state and local government employees and the
Government Pension Offset (GPO) and the Windfall Elimination Provision
(WEP) that reduce the Social Security benefits of state and local
government retirees.
The National Conference of State Legislatures was founded in 1975
with the conviction that legislative service is one of democracy's
worthiest pursuits. NCSL is a bipartisan organization that serves the
legislators and staffs of the nation's 50 states, its commonwealths and
territories. NCSL provides research, technical assistance and
opportunities for policymakers to exchange ideas on the most pressing
state issues and provides a voice for the interests of state
governments before Congress and federal agencies.
NCSL's opposition to mandatory coverage for state and local
government employees is one of our longest held policy positions. The
basis for our opposition to mandated Social Security is three-fold. We
oppose mandatory coverage because it impinges on the ability of state
and local employers to create and maintain retirement systems that
address the unique needs of state and local governments; we oppose
mandatory coverage because compliance would impose serious costs and
disruption to state and local governments and their programs, while
providing minimal short-term value and added long-term liabilities to
Social Security; and further, we oppose mandatory coverage because it
unfairly penalizes those state and local governments that structured
and funded benefits outside the Social Security system while
destabilizing state and local programs that are effectively providing
retirement security to a large number of Americans.
State and local governments provide pensions to roughly 15 million
government employees; of these employees approximately 28 percent
receive a pension that does not include Social Security coverage. The
largest percentage of employees receiving pensions who do not include
Social Security coverage are in the public safety professions and
teaching. Approximately 40 percent of teachers receive pensions not
covered by Social Security and roughly 75 percent of the nation's state
and local first responders, police and firefighters, receive uncovered
pensions. These pensions provide a higher level of retirement earnings
than pensions that coordinate with Social Security, taking into account
early retirement ages, higher incidence of disability and death and
survivor benefits.
The costs to states that would be imposed from mandatory coverage,
even if only new hires were forced into Social Security, far exceed the
limits on unfunded federal mandates set in the Unfunded Mandates Reform
Act of 1994 and would have a substantial negative effect on state and
local budgets and on financing of retirement benefit systems. The
estimated cost of the compliance for mandatory coverage of all state
and local employees is $44 billion dollars over the first five years.
While the majority of uncovered employees are employed in a dozen or so
states, every state in the country has some public employees who do not
pay into the Social Security system. Thus, every state would feel the
impact of mandatory Social Security coverage.
Congress has long recognized that state and local pension systems
are creatures of state law and while the federal tax code governs the
tax treatment of contributions and distributions to and from these
plans, a comprehensive set of state laws provide the primary
legislative and legal frameworks for the administration of these
systems. Many of the state systems that would be most affected by the
imposition of mandatory coverage actually predate the creation of
Social Security or were created during a time when state and local
governments were prohibited from contributing to Social Security. These
systems have grown up, so to speak, apart from the Social Security
systems and have evolved to meet the unique needs of state and local
government employers and the retirement savings needs of our workforce.
To impose mandatory coverage on these systems now would require vast
alteration of contributions and distribution of benefits in order to
provide funding for this federal tax increase. The diversion of
contributions on the part of employers and employees away from existing
plans to pay for Social Security coverage would destabilize existing
benefits and would reduce asset accumulation over time.
Many of the proposals to strengthen Social Security would do so by
increasing the rate of return on Social Security's assets. This is a
concept that NCSL wholeheartedly endorses, in great part because state
and local pension systems are creatures of the markets. Both state
defined benefit systems and defined contribution system assets are
invested in the markets. The largest percentage of benefits received by
our retirees and their beneficiaries comes from investment earnings,
not contributions from state and local employers or our employees,
making these systems a good deal for plan participants, state
governments and taxpayers. Recent estimates by the National Association
of State Retirement Administrators found that 62 percent of state and
local pension funding comes from investment income, 26 percent comes
from employer contributions and 12 percent comes from employee
contributions.
Some in Washington have argued that if Congress only imposes
mandatory coverage for new hires then the impact on state pension
systems will be minimized. This is simply not true. Because state and
local systems are funded systems and not pay-as-you-go (PAYGO) systems
any reduction in payments to the system today will have a dramatic
impact on future benefits. Unlike PAYGO systems, state and local
systems rely on compound interest and asset accumulation to pay the
majority of benefits to our retires. Because all of these plans
maintain some level of unfunded liability, the reduction or loss of
contributions coming from new hires to the plans will hamper the
ability of plans to reduce their unfunded liability over time, leaving
the plans more vulnerable to under funding. At present, state pension
systems are approximately 90 percent funded, a true testament to our
long-term investment strategy of professional money management, pooled
assets and pooled risk.
The tax increase on employers and employees associated with
mandatory coverage cannot be borne by our existing pension systems.
Thus state and local governments will be forced to reduce existing
benefits or increase contributions to the plans in order to make the
required payments to Social Security. The cost of these contributions
as well as the foregone interest income will destabilize existing state
retirement systems and the retirement security of future employees.
This is not to say that state retirement systems are immovable archaic
systems. On the contrary state and local pension systems continue to
evolve, but we would argue that these changes are made best at the
state and local level as a response to the evolving needs of government
employers and in recognition of our needs to remain competitive
employers.
NCSL further opposes mandatory coverage because it fails to
strengthen Social Security and increase the solvency of the program.
While mandatory coverage will extend solvency for roughly two years in
the short run, or close ten percent of the solvency gap, ultimately
state and local government employees forced into the system will become
future beneficiaries. In the end, mandatory coverage will merely move
liabilities forward at the expense of existing stable and well-funded
retirement systems in the states.
NCSL supports efforts to restore long-term solvency to the Social
Security system because it is the primary source of retirement income
for millions of Americans, and a system that over 70 percent of state
and local government employers pay into and coordinate retirement
benefits with. For the vast majority of state and local government
retirees, their employer-provided pension benefit is linked to their
Social Security benefit, as such state government employers have a
vested interest in strengthening the program. NCSL supports a broad
range of policies designed to restore solvency to the program as
illustrated in our current policy ``Maintaining the Solvency of Social
Security,'' which is attached to this testimony.
The National Conference of State Legislatures also supports reform
of the Government Pension Offset and the Windfall Elimination
Provision, which reduce the Social Security benefits of state and local
government employees who earned government pensions through work not
covered by Social Security. While these employees do not contribute to
Social Security through their state or local government work, they
often earn Social Security benefits through other employment covered by
Social Security or may also earn a Social Security benefit as the
spouse of a beneficiary who paid into the Social Security program. NCSL
is concerned that the GPO and WEP unfairly and imprecisely reduce the
Social Security benefits of government employees. These reductions have
unintentionally harmed a disproportionate number of women and moderate
and lower-income state and local government retirees. Thus, NCSL
supports efforts to address the inequities and unintended consequences
to state and local government retirees caused by the GPO and WEP. NCSL
supports reducing or eliminating the impact of the GPO and WEP on state
and local government retirees, particularly those who have earned lower
uncovered government pension benefits or partial benefits. NCSL does
not however support reform of the GPO and WEP at the expense of
mandatory coverage on state and local governments.
The National Conference of State Legislatures strongly believes
that the federal government must preserve the financial integrity of
the Social Security system and assure the long-term solvency of the
program. NCSL believes that efforts to assure solvency should
strengthen the existing programs upon which so many Americans rely.
NCSL further maintains that solvency efforts must continue to encourage
private savings and employer-provided pension plans as important
components of retirement savings. Congress and the President face
difficult choices and state legislatures stand ready to assist our
federal partners in your efforts to strengthen and protect Social
Security.
Official Policy
Maintaining the Solvency of Social Security
Joint policy of the NCSL Human Services & Welfare and Labor & Workforce
Development Standing Committees
The National Conference of State Legislatures (NCSL) strongly
believes that the federal government must preserve the financial
integrity of the Social Security system and assure the long-term
solvency of the program. State legislatures believe that Social
Security must ensure a safety net for low-income older retirees as well
as provide survivor benefits and disability insurance. It is critical
that all workers paying into the system have confidence that Social
Security will continue to be available to them at retirement or to
provide for their survivors after their death. NCSL believes that
efforts to assure solvency should strengthen the existing program upon
which so many beneficiaries and their families rely. Social Security
reform should continue to encourage private savings and employer-
provided pension plans as important components of retirement savings.
The Administration and Congress face difficult choices in
maintaining the solvency of Social Security. State legislatures stand
ready to assist our federal partners in this effort. NCSL believes that
state and local retirement systems provide valuable models for
consideration in the Social Security debate.
While Social Security currently has a surplus, the Social Security
Actuaries 2005 report predicts that in 2020 trust fund expenditures
will begin to exceed payroll tax revenues and interest on accumulated
assets will need to be drawn down to pay benefits. By 2041, current
payroll tax rates will be sufficient to pay only 73 percent of benefit
obligations. To avoid this shortfall, members of Congress and the
Administration have put forth a variety of reform proposals.
There are serious implications for the states in these reform
proposals. As Congress considers alternatives to maintain Social
Security solvency, it must analyze and understand the impact of these
proposals on states, taxpayers, state budgets, and state laws. These
proposals for Social Security reform have major impacts on state
employees, teachers, local government, private employers and taxpayers.
As employers and policymakers, state legislators oppose reform
proposals that finance this shortfall by shifting federal costs to
state budgets. If Social Security does not continue to provide a stable
form of assistance to the elderly, state low-income programs and state
budgets would be severely impacted. NCSL strongly opposes any efforts
to reform Social Security that create unfunded mandates for the states
or preempt state laws and authority.
NCSL encourages federal policymakers to consider the following
concerns when deliberating Social Security reform proposals:
Mandatory Social Security Coverage of State and Local Government
Employees
NCSL has long opposed further involvement of the federal government
in the administration of public retirement plans including the
expansion of mandated Social Security coverage to state and local
employees not currently covered under the system. NCSL maintains that
state and local governments should be allowed to affiliate their
retirement plans voluntarily with Social Security, as was the case
before passage of the Omnibus Budget Reconciliation Act of 1990. The
imposition of mandatory coverage on state and local employees who are
not currently required to contribute to the system constitutes a direct
cost shift to states and will have a detrimental effect on state
budgets, state retirement plans and the retirement savings of state and
local employees. The extension of mandatory coverage to new categories
of state and local employees does not solve the insolvency problem and
creates new obligations for the system. NCSL's policy, ``Mandatory
Social Security Coverage of State and Local Government Employees,''
continues to oppose this mandate.
Increasing the Return on Social Security Investments
States and local retirement system choices provide models for
federal reform of Social Security. We encourage Congress and the
Administration to review state laws, funding choices and programs,
whether they choose to create individual private accounts, authorize
public investment in private markets, or pursue other options for
reform. The return on Social Security has historically been far below
the return on public and private pension plan investments in the
market. NCSL believes that Congress and the Administration must act to
increase the return on Social Security investments. NCSL believes that
the best means to increase the return on Social Security investments is
through some level of investment in the private markets. NCSL maintains
that this investment must:
Be administered through an independent board well
insulated from political interference;
Include Social Security beneficiaries on the board;
Be invested for the exclusive benefit of Social Security
beneficiaries as in state pension law;
Guarantee the current level of Social Security benefits;
Be protected from steep administrative costs;
Be used solely for retirement, survivor benefits and
disability; and
Not preempt state laws governing securities fraud;
General revenue from sources other than FICA should not
be used to finance changes to the existing system that would allow
market investment or private accounts and changes to the existing
system should not increase the federal deficit, compromise funding of
state-federal partnerships or require more borrowing that would add to
the federal debt.
A strong public education program must accompany reform that would
create individual accounts or provide for market investment so that
beneficiaries will have the knowledge necessary to make good investment
decisions.
Guarding Against Fraud and Abuse
NCSL strongly opposes any proposal that would preempt state
authority to regulate securities or give sole authority to regulate
investment fraud to the Securities and Exchange Commission (SEC).
States traditionally have been the protectors of individual and small
investors and should maintain this role without federal intervention or
preemption.
Many states have created special laws and consumer protection
programs to prevent white-collar crimes, particularly against the
elderly. These laws are critical to the protection of senior citizens.
NCSL strongly opposes any effort to preempt state authority to regulate
crimes against the elderly. Individuals must be protected from fraud
through the strong enforcement of laws governing securities fraud.
Raising the Retirement Age
Prior Social Security reform efforts, to adjust for longer life
expectancies, included a gradual increase in the ``full retirement
age''. In 2002, the full retirement age, the age at which beneficiaries
are eligible to receive unreduced Social Security benefits, began to
rise gradually from 65 to 67. Contemporary solvency proposals that
would increase the full retirement age even higher raise serious
concerns for beneficiaries. While Americans are living longer, many
workers are choosing to retire earlier than before. Conversely, some
workers may be unable to continue working due to physical limitations,
age discrimination or other limitations. Still other workers with
shorter than average life expectancies, particularly African Americans,
may experience little return from Social Security for themselves and
their survivors if the full retirement age is increased.
Currently, public safety employees of state and local government
are exempt from actuarial reductions to their public pension benefits.
Efforts to raise the full retirement age disproportionately harm both
private sector employees and non-public safety state and local
employees who do not contribute to Social Security. Under current law,
the age at which a more highly paid beneficiary may receive an
unreduced private pension benefit is tied to the Social Security full
retirement age. Due to this coupling, relatively highly compensated
long-term private pension beneficiaries who choose to retire before age
65 receive an actuarially reduced benefit for life even if their
employer deems them eligible to receive a full private pension benefit
prior to age 65. The age at which public employees, excluding public
safety employees, may receive an unreduced public pension benefit is
not tied to the Social Security full retirement age but is instead
defined in federal Internal Revenue Code policy, which sets the age at
62. In recognition of public safety concerns, public safety workers,
like police and fire, are exempt from these actuarial reductions. More
highly-compensated long-term non-public safety state and local
employees who do not contribute to Social Security rely on their public
pensions for the bulk of their retirement security. Actuarial
reductions to public pension benefits disproportionately burden these
employees. NCSL believes that public employers should be allowed to
provide full pension benefits to all of their employees without the
imposition of these Internal Revenue Code limits. Further, for purposes
of consistency, NCSL supports the uncoupling of private sector benefit
limits from the Social Security full retirement age.
NCSL encourages Congress and the Administration to consider the
impact that raising the retirement age may have on various groups of
workers. NCSL opposes further increases of the full retirement age.
Raising the Payroll Tax Rate
Raising the payroll tax rate constitutes a direct cost shift to
employers and employees for the cost of Social Security solvency.
States, as employers, would bear increased costs if the payroll tax
rate were increased. As well, the payroll tax is regressive and an
increase would disproportionately affect workers making less than the
wage base. An increase in the payroll tax rate may also provide
disincentives to employer-provided pension benefits. NCSL opposes an
increase in the payroll tax rate.
Maintaining Benefits for the Poor Elderly and Survivors
Social Security provides 90% or more of the total income for 44% of
all nonmarried women 65 or older; 74% of nonmarried African American
women 65 or older; 66% of nonmarried Hispanic women 65 or older; and
35% of all nonmarried men 65 or older. Social Security prevents massive
poverty among the elderly. Without Social Security, over half of all
women 65 or older (married and nonmarried) and 40% of all older men
would be poor.
Similarly, Social Security replaces lost income for workers and
their spouses and children when a worker becomes disabled, dies or
retires. For a young family, Social Security provides the equivalent of
a $400,000 life insurance policy and a $350,000 disability insurance
policy. Just half of all Social Security beneficiaries receive benefits
solely as retired workers. Roughly 37% of beneficiaries re disabled
workers and survivors and 13% of beneficiaries are dual eligible--
receiving both retired worker and survivor benefits).
8% of beneficiaries are children of deceased or disabled workers.
About 5.4 million children under the age of 18 receive part of their
family income from Social Security. In contrast, about 4 million
children receive family income through TANF. The role Social Security
benefits play in alleviating and preventing childhood poverty should
not be lost in efforts to restore solvency or reform Social Security.
Similarly, Social security provides lifetime income support to about
750,000 disabled adult children based on a parent's work record.
Modification of the Earnings Limit
NCSL has long supported increasing the earnings test for older
workers, especially those who provide essential child care services.
NCSL acknowledges the federal government for responding to state
concerns by repealing the earnings limitation for workers aged 65 to
69. Under current law, beneficiaries under the full retirement age may
earn up to $12,000 annually without reducing the amount of benefits
they receive from Social Security, after that amount Social Security
benefits are reduced by $1 for every $2 of earnings. Beneficiaries who
retire at their full retirement age may earn up to $31,800 in the year
that they retire without receiving a reduced benefit. In the year that
beneficiaries reach full retirement age earnings above the annual limit
reduce benefits by $1 for every $3 of earnings.
The earnings penalty under age 65 severely hampers the ability of
seniors to continue working once they begin to receive Social Security.
NCSL supports the elimination of or an increase in the earnings limit
on wages earned by Social Security beneficiaries. As the worker-to-
beneficiary ratio continues to fall, older workers may become
increasingly important to productivity. This penalty severely inhibits
seniors who would prefer to and continue to be able to work.
Means-Testing of Beneficiaries
Social Security benefits are calculated based on earnings and time
in the workforce. Although workers contribute the same percentage of
payroll taxes to the system, a combined employer-employee contribution
of 12.4% of payroll up to $90,000, lower-income workers receive a
higher proportion of their contributions in benefits than to higher-
income workers. NCSL opposes proposals to means-test eligibility to
receive Social Security. Such proposals may reduce overall public
support for Social Security and are not necessary to achieve Social
Security solvency.
Adopted: 2005 NCSL Spring Forum, April 13-16, 200, Washington, D.C.
Chairman MCCRERY. Thank you, Representative Orrock. Ms.
Bierdeman.
STATEMENT OF TERESA BIERDEMAN, CHAIRMAN, COALITION TO PRESERVE
RETIREMENT SECURITY, ALEXANDRIA, VIRGINIA
Ms. BIERDEMAN. Chairman McCrery, Ranking Member Levin,
distinguished Members of the Subcommittee, my name is Terri
Bierdeman. I am Director of governmental Relations for the
State Teacher's Retirement System in Ohio, and am testifying
today in my capacity as Chairman of the Coalition to Preserve
Retirement Security. On behalf of that coalition, I thank you
for the opportunity to appear before the Subcommittee to
discuss mandatory coverage of State and local workers. The
Coalition to Preserve Retirement Security is a nonprofit
organization composed of members representing State and local
governments, public employee unions, and public pension systems
throughout the United States.
The purpose of our organization is to assure the continued
financial integrity of our members' public retirement systems
opposing efforts for mandate Social Security coverage on these
employees. We have 47 members from States across the country.
They administer retirement benefits for about 12,000 public
employers and represent more than four million public employees
and retirees. In addition to our members, we have national
associations and public pension unions representing more than
15 million public workers, about a third of whom are outside of
Social Security.
The problem has been clearly stated by the previous
witness, so, I will skip some of my background comments, but to
give you a flavor of some real life situation, I want to talk a
little bit about my own State. I come from Ohio, the State
Teacher's Retirement System predates Social Security. The
system was begun in 1920 and has been paying benefits for over
85 years now. The system is a reserve funded defined benefit
plan, although we do offer hybrid plans and defined
contribution plans as alternatives, but it is prefunded. The
members, when they get to retirement, expect the benefit, which
is guaranteed, to be there. Forcing newly hired State and local
public workers outside of Social Security into the program to
participate is attractive to the system as generating
additional revenue, but that revenue is short term, and we
believe the position is flawed for the following reasons. What
has been talked about most recently and in most recent years is
limiting it to new hires only, but new hire application has an
impact on everyone in the system, not just those new hires or
future hires, but also current employees and retirees who are
already in collection status.
Public sector benefits, defined pension benefits depend on
a constant and reliable stream of revenue in order to meet
their actuarial goals. A constant stream of revenue keeps the
contributions level so, for the employers and the employees the
contributions do not bounce up and down year to year depending
on investment performance. Without that continuing stream of
revenue with a closed plan, it leaves the funding of the system
for both the normal cost and any unfunded benefits that might
exist to be funded by a shrinking pool of workers, hence,
increasing the individual employee's cost.
The normal cost varies across the country, but on average,
employees contribute about 9 to 10 percent of their salary, and
it is a mandated contribution. With States and localities under
extreme budget pressures for a variety of reasons, finding more
revenue to fund mandatory Social Security benefits is highly
unlikely. My retirement board requested that their consulting
actuary do a study of the impact of mandating new hiring be
included in Social Security and what would that mean for just
my system.
They came back with essentially two choices for the board.
One if they wanted to maintain the current existing benefit
structure for all current employees retirees and an adequate
benefit for new hires, it would require additional
contributions by the State of Ohio and the employees amounting
to about $103 million annually. That is highly unlikely in
Ohio. The other alternative if there is no more revenue would
be to cut the benefits and it would not be benefits just for
the new hires. Obviously, those future employees would have
Social Security as their basis and the State could probably
afford to wrap around some very small benefit from the State.
It also affects current employees. Those people who are already
in the system counting on a benefit in retirement. For example
a mid career teacher today would be expecting about 66 percent
of their salary average when they retired at the end of a
career. Mandating coverage would require benefit cut of about
25 percent to that current employee. It would also cut back
their disability and survivor benefits for current employees.
For retirees, those who are already collecting a guaranteed
benefit which cannot be reduced under law, it would eliminate
future cost of living adjustments which they do receive in Ohio
and health care, which they also receive in Ohio. The funding
for health care, as you know, across the country for everyone
is exorbitant. We have reserves take us out 10 to 12 years.
Those reserves would have to be put into funding pension so, it
would impact everyone, not just the new hires to the system. We
believe that funding mandatory coverage in order to shore up
the Social Security system for a very short period of time, the
GAO report has said about two years, would cause essentially
very major disruption to the systems that are already existing,
both the funding and the benefits that are being provided.
We think the 44 billion over the first 5 years that was
mentioned by the previous witness which is the cost in all 50
States is a very large price to pay for not a solution to the
Social Security funding problem. In the written testimony, I
have supplied, the coalition has given a breakdown for you from
a recent study by the Segal Company on the cost of the
individual States for the Members of the Committee and what
that impact would be on your own constituents. There would be
tough choices involved for States and localities. Benefit
reductions could also expand, as the previous witness
mentioned, to other services that the State would have to
provide. In Ohio, like many States, education funding is a
problem and employers and education are looking at cutting back
left and right, putting levy on the ballot every year. To have
more money going toward pension funding and let alone going out
of State means they have to look at other areas to cut as well.
Hidden impacts of the differences in some of the structure
of some of the public benefits. Since we represent specialized
employee groups such as safety forces in particular, there are
varieties in the benefit structures of those systems geared to
the needs of special workforces. Especially for the safety
forces, early retirement is an option in the States under the
public plans. They do not have to work until age 62 or 65 or
whatever. It allows variety based on the needs of that
particular profession.
In conclusion, the coalition believes that mandating Social
Security coverage for all public sector workers would also
create huge costs and burdens for public employers without
contributing significantly to the solvency of the program. We
all understand the importance of the Social Security system,
even those of us who participate and contribute to public
pension funds have spouses, family, friends, and neighbors who
are relying on the support of Social Security and the future of
that program. We do also believe though that mandating coverage
does not solve the problem of Social Security, it causes
significant disruption and decreased security for well
established public systems that have been in existence for
decades providing benefits for decades. This is a time when we
are all trying to find solutions to the same larger problem,
retirement security for all Americans. Thank you very much for
your time today.
[The prepared statement of Ms. Bierdeman follows:]
Statement of Teresa Bierdeman, Chair, Coalition to Preserve Retirement
Security, Alexandria, Virginia
Chairman McCrery, Ranking Member Levin and distinguished members of
the subcommittee, my name is Terri Bierdeman and I am the director of
government relations for the State Teachers Retirement System of Ohio.
I am testifying today in my capacity as chairman of the Coalition to
Preserve Retirement Security. On behalf of the Coalition, I thank you
for the opportunity to appear before the subcommittee to discuss the
issue of mandating Social Security coverage for public sector workers.
The Coalition to Preserve Retirement Security (CPRS) is a non-
profit organization composed of members representing state and local
governments, public employee unions, and public pension systems
throughout the United States. The purpose of our organization is to
assure the continued financial integrity of our members' public
retirement systems. By successfully opposing efforts to mandate Social
Security coverage for all newly hired public employees we achieve the
principle goal of our coalition.
Our 47 members are found in Alaska, California, Colorado,
Connecticut, Florida, Illinois, Kentucky, Louisiana, Massachusetts,
Missouri, Nevada, Ohio, and Texas and represent more than 4 million
public employees and retirees. They administer retirement benefits for
about 12,000 public employers in these states.
In addition, our national associations and public pension unions
represent more than 15 million public workers, about one-third of whom
are outside of Social Security.
The Problem
Over the years, some have recommended bringing all public workers
into the Social Security program. However, mandating that all newly
hired public workers must participate in the Social Security system
would create significant new cost pressures for the affected state and
local government jurisdictions while providing only minimal benefit to
the program.
These jurisdictions, with their own long-standing defined benefit
retirement plans, would have to make difficult choices. Adding an
additional 6.2 percent payroll tax per worker to the benefit costs of
public employers could result in cutbacks to their existing defined
benefit plans, cuts in government services, or even increases in taxes
or fees to absorb the added costs. The disruption that would likely
occur for these public jurisdictions and their workers seems a high
price to pay for adding an estimated two years of solvency to the
Social Security program. It is estimated that mandatory Social Security
coverage would cost the affected states and localities $44 billion over
5 years. This additional financial burden on affected states could be
an insurmountable budgetary hurdle particularly during these very
difficult days of huge revenue shortfalls hitting virtually every
state.
Background
When the Social Security system was created in 1935, state and
local government employees were not allowed to participate in the
system. Beginning in the 1950s, state and local government employers
could elect to have their employees covered by the Social Security
program and were allowed to opt-in or -out of the system.
In 1983, there was a major revision of the Social Security and
Medicare laws, triggered primarily by a concern about the long-term
solvency of these two trust funds. Congress decided not to require
state and local employees who were outside the system to be covered,
but did end the opt-out for public employees who had chosen to be
covered.
In 1986, as part of the Consolidated Omnibus Budget Reconciliation
Act of 1985 (``COBRA''), Congress required universal participation in
the Medicare system on a ``new hires'' basis, but chose to leave public
employee retirement plans in place, and did not change the law with
respect to Social Security.
In 1990, Congress enacted a law requiring that all public
employees, not covered by a state or local retirement plan meeting
specified standards, must be covered by Social Security. That law,
adopted as part of the Omnibus Budget Reconciliation Act of 1990 (the
``1990 Act''), ensures that all public employees will be covered either
under Social Security or under a public retirement plan that provides
comparable benefits. Today, about one-third of all state and local
government employees, 6.6 million public servants, are outside the
Social Security system because they are covered by their employer's
public retirement plan. In addition, millions of current retirees from
non-Social Security public pension plans depend on those plans for a
significant share of their retirement income.
From 1994 to 1996, the Advisory Council on Social Security examined
the mid-term and long-term solvency of Social Security and the Social
Security Trust Fund. The panel submitted its report in January 1997 but
there was no majority on the council for any single set of
recommendations. Three proposals were put forth by different groups of
members. However, a majority of the Advisory Council recommended
mandatory Social Security coverage of public employees, although the
three labor members of the council opposed this proposal ``because of
the financial burden that would be placed on workers and employers who
are already contributing to other public pension systems.''
In 2001, the President's Commission to Strengthen Social Security
made history by being the first commission to not recommend mandatory
Social Security coverage in its proposals for Social Security reform.
This is particularly remarkable, since the late New York Senator Daniel
Patrick Moynihan, a vociferous proponent of forced coverage, co-chaired
the Commission.
Based upon the assumptions in the 2005 Social Security trustees'
annual report, if left unchanged, the program will be insolvent--that
is unable to pay all benefits owed--beginning in 2041. However, some
experts warn that Social Security reform is needed soon. As so-called
baby boomers begin retiring over the next decade, there will be
increased pressure on the solvency of the program and by 2017 costs
will exceed revenues, according to the trustees' report.
Accordingly, forcing newly hired state and local public workers
outside of the Social Security program to participate is seen by some
as an attractive way of generating additional revenues for the program
in the short term. This position is flawed and, for the reasons
discussed below, mandatory coverage should not be included in any
Social Security reform package.
The Myth of Covering Just New-Hires: Covering Only New-Hires is Still
Harmful
Proponents of mandatory coverage contend that applying the mandate
only to newly-hired workers would make it less onerous for public
employers--nothing could be further from the truth. Public sector
defined benefit plans rely on a constant and reliable revenue stream in
order to meet actuarial goals and provide a retirement benefit for plan
participants at affordable contribution levels.
Proponents of this solution fail to understand that the normal cost
of the existing retirement plan will increase as a percentage of
payroll as younger members are eliminated from the plan. Thus,
employers and new workers will not only have to add an additional 6.2
percent for the new payroll tax, but employers may also have to
increase contributions to the existing plan or cut benefits. When
states and localities are under extreme fiscal stress as they are
currently, this added expense will create enormous burdens with
negligible, if any, positive outcomes.
Mandatory Social Security Coverage Will Only Extend Social
Security's Solvency by Two Years, But Could Destabilize Public Pension
Systems Nationwide
The Government Accountability Office acknowledged in a May 6, 2005,
letter to House Ways and Means Committee Chairman Bill Thomas that
mandatory coverage would produce a ``small reduction in [the] actuarial
deficit'' and would ``increase long-term benefit levels,'' since the
new workers paying into the system would eventually become retirees
drawing on it. (The GAO had projected in a 1999 report, ``Social
Security: Implications of Extending Mandatory Coverage to State and
Local Employees,'' that bringing newly hired non-federal public workers
in the program would only ``reduce the program's long-term actuarial
deficit by about 10 percent and would extend the trust funds' solvency
by about 2 years.'')
According to a 1999 study by The Segal Company that was updated
this month, mandatory Social Security coverage could cause a reduction
in employee and employer contributions to existing defined benefit
plans, ``which are an essential part of their actuarial funding. This
could destabilize the existing plans on which current workers and
retirees depend.'' The report continued, ``Lower funding would not only
have an impact on retirement benefits, but could affect disability and
survivor benefits as well,'' which are often more generous than those
offered by Social Security.
The Costs of Mandatory Coverage Greatly Outweigh the Benefits
As noted above, mandatory coverage would only add two years of
solvency to the 75-year projection for the Social Security program.
But, it would cost public employees, their employers and ultimately
taxpayers nationwide more than $44 billion over the first five years,
according to the Segal report. Mandatory Social Security would be felt
in all 50 states and over time would add new beneficiaries to the
program who would draw down benefits like other Social Security
recipients, increasing financial pressures on the system.
The chart below illustrates how mandatory coverage would affect the
home state of each member of the Ways and Means Social Security
Subcommittee.
------------------------------------------------------------------------
5-Year Cost to
Employees Employees,
Congressman Home State Affected Employers and
Taxpayers
------------------------------------------------------------------------
Jim McCrery (Chair) La. 261,000 $1,384,711,000
------------------------------------------------------------------------
Clay Shaw Fla. 173,000 $1,170,240,000
------------------------------------------------------------------------
Sam Johnson Texas 836,000 $5,277,097,000
------------------------------------------------------------------------
J.D. Hayworth Ariz. 41,000 $301,697,000
------------------------------------------------------------------------
Kenny Hulshof Mo. 128,000 $806,807,000
------------------------------------------------------------------------
Ron Lewis Ky. 89,000 $614,272,000
------------------------------------------------------------------------
Kevin Brady Texas 836,000 $5,277,097,000
------------------------------------------------------------------------
Paul Ryan Wis. 62,000 $507,016,000
------------------------------------------------------------------------
Sander Levin Mich. 94,000 $852,099,000
(Ranking Dem.)
------------------------------------------------------------------------
Earl Pomeroy N.D. 10,000 $65,397,000
------------------------------------------------------------------------
Xavier Becerra Calif. 1,468,000 $8,205,240,000
------------------------------------------------------------------------
Stephanie Tubbs Ohio 820,000 $4,350,432,000
Jones
------------------------------------------------------------------------
Richard Neal Mass. 442,000 $3,644,093,000
------------------------------------------------------------------------
Subcommittee Totals ................... 4,424,000 $27,179,101,000
\1\
------------------------------------------------------------------------
National Totals 6,617,000 $44,242,670,000
------------------------------------------------------------------------
\1\ Source: ``State-by-State Cost Analysis of Mandatory Social
Security,'' The Segal Company, 2005.
Mandatory Coverage: Tough Choices for States and Localities
If all newly hired state and local employees are forced to
participate in the Social Security program, their employers--state and
local government entities--and policy makers will have to make
difficult decisions on how to offset these new taxes.
According to the Segal report, these taxes would likely be absorbed
through ``tax increases, cuts in existing benefits and/or reductions in
workforce and services,'' none of which are particularly popular and
all of which would be met with strong resistance by the affected
constituencies. Many states and localities are already facing large
financial challenges. Mandating Social Security coverage would only
exacerbate already troubled financial landscapes for jurisdictions
across the country.
Hidden Impacts
Mandatory coverage could also undermine other benefits of public
pension plans. These plans, in addition to offering sound and secure
retirement benefits for public workers also provide valuable benefits
that reduce pressure on federal government programs. These benefits are
overlooked by mandatory coverage proponents.
For instance, certain classes of public sector workers have special
needs that would not be met by the Social Security program. Safety
workers, like police and fire, because of working conditions and job
qualifications, retire earlier than other workers, often before age 62,
the earliest age at which one can collect Social Security.
Consequently, if these workers no longer had their traditional defined
benefit public retirement, they could be forced to retire from their
public safety jobs but have little or no retirement benefits until
reaching 62.
Public retirement plans also offer partial disability benefits,
unlike Social Security. These disability benefits go a long way toward
providing an income stream so partially disabled workers do not have to
depend on public assistance programs.
Most plans provide pre-retirement survivor benefits. For children,
Social Security's survivor benefits end at age 18. Many public plans
provide benefits after that age has been reached if the child is a
full-time student.
Early retirement, partial disability and survivor benefits are
among the benefits specifically tailored to meet the needs of public
workers that would be threatened by mandatory coverage.
Conclusion
Mandating Social Security coverage for all public sector workers
would only create huge costs and burdens for public employers without
contributing significantly to the solvency of the Social Security
program. The least disruptive and most cost-effective solution would be
to allow the well-established public sector retirement system to
continue in its current form. It has proved to be a stable and
financially sound system that ensures the retirement security of
millions of public sector workers.
Chairman MCCRERY. Thank you, Mrs. Bierdeman. Mr.
Canterbury.
STATEMENT OF CHUCK CANTERBURY, PRESIDENT, GRAND FRATERNAL ORDER
OF POLICE
Mr. CANTERBURY. Thank you, Mr. Chairman. I would like to
thank all the distinguished Members of this panel for allowing
me to be here today. I am Chuck Canterbury, the national
president of the Grand Lodge of the Fraternal Order of Police
(FOP), representing 321,000 of the rank and file police
officers of the United States. We are the largest law
enforcement labor organization in the country. I am pleased to
be here for the third time testifying on this very important
issue, and especially to offer our membership's view on the WEP
and the GPO. The membership of the FOP has designated the
repeal of the WEP and the GPO as our top legislative issue with
respects to Social Security. We obviously are in opposition to
mandatory inclusion, as is everyone on this second panel today.
Our members, the rank and file officers that patrol our streets
and neighborhoods every day, understand what is at stake, and
they appreciate that this Committee is looking at this issue.
I wanted to begin by urging this Subcommittee to consider
H.R. 147, the ``Social Security Fairness Act,'' either as a
stand-alone bill or part of the larger Social Security reform
package. This bill, which has been the subject of past hearings
in previous Congresses, would repeal both the WEP and the GPO.
The bill already has 260 cosponsors in the House, only 30
cosponsors short of the two-thirds majority. Any legislation
with that kind of support deserves legislative action.
The WEP has a disparate impact on law enforcement officers
because we retire earlier than employees in other professions
in part because of the physical demands of the job.
Unfortunately many law enforcement officers are then forced to
begin second careers after their retirement or to hold second
or third jobs throughout the entirety of their careers. This
creates an unjust situation for many of our members when they
find themselves at retirement age. They are entitled to a State
or local retirement benefit because they worked 20 or more
years keeping the streets and neighborhoods safe, but they
also, many times, worked jobs that paid into Social Security
during their careers, entitling them to that benefit as well.
Due to the WEP, if their second career resulted in less than 20
years of substantial earnings upon reaching the age they are
eligible to collect Social Security, they will discover that
they lose 60 percent of the benefit for which they were taxed.
Actuarially speaking, I doubt many officers will live long
enough to break even; that is to collect the money they paid
into the system, let alone receive any windfall. These men and
women earned their State and local retirement benefit as public
employees, and they paid Social Security taxes while employed
in the private sector. How is this a windfall? Bluntly put,
this provision has not eliminated a windfall for those who did
not earn it, but has created
a windfall for the Federal government at the expense of public
employees.
The GPO is an arbitrary formula with a similarly disparate
impact on law enforcement families. The GPO reduces the
surviving spousal benefit from Social Security by two-thirds of
the monthly amount received by the government pension. In 9 out
of 10 cases, this completely eliminates the spousal benefit,
even though the covered spouse paid Social Security taxes for
many years, thereby earning the right to this benefit and the
right to bequeath this benefit to the surviving spouse. It is
estimated that approximately 340,000, and I heard this morning
399,000, surviving spouses of State and local employees, have
been unfairly impacted by the GPO. According to the
Congressional Budget Office (CBO), the GPO reduces benefits for
some 200,000 individuals by $3,600 a year.
Mr. Chairman, according to the SSA, there are 5.25 million
governmental employees not covered by Social Security and the
Public Pension Coordinating Council estimates that 76 percent
of these are public safety personnel, far more than any other
category. Forcing State and local employees and employers to
participate in the Social Security system would be devastating
to these existing retirement plans. The employee and employer
would be required to pay 6.2 percent of their salary into the
Social Security Trust Fund, which may affect the ability of
both the employers the employees to contribute to the existing
retirement system. In addition, this new tax means less take
home pay for the employee and cutbacks on services and
equipment and other expenditures on the part of local
governments. Police departments and other law enforcement
agencies stretch every dollar to the limit now. These huge
costs will devastate their budgets and impact their ability to
function as first responders at a time when we need to improve
our homeland security.
The most recent estimate of cost to public employers is, as
you heard from the other speakers today, is $44 billion. What
benefit does this enormous cost have on the overall health of
the Social Security Trust Fund? According to the SSA, just two
years. Mr. Chairman, I thank you and the other Members of this
distinguished Subcommittee for a chance to appear before you
today, and I will be happy to stay for any of your questions.
[The prepared statement of Mr. Canterbury follows:]
Statement of Chuck Canterbury, National President, Grand Lodge,
Fraternal Order of Police
Good morning, Mr. Chairman, Ranking Member Levin, and distinguished
Members of the House Subcommittee on Social Security. My name is Chuck
Canterbury, National President of the Fraternal Order of Police. I am
the elected spokesperson of more than 321,000 rank-and-file police
officers--the largest law enforcement labor organization in the United
States.
I am very pleased to have this opportunity to come before you once
again and would like to thank the Chairman for inviting me to testify.
I am here this morning to share with you the views of the members of
the F.O.P. on several aspects of Social Security reform being
considered by Congress--the Windfall Elimination Provision (WEP), the
Government Pension Offset (GPO), and a proposal to require that all
future public employees be forced into the Social Security system.
The Fraternal Order of Police has been active on these issues for
several Congresses. In 1997, an overwhelming majority of the delegates
in attendance at the Fifty-Third National Biennial Conference voted to
designate the repeal of the WEP and GPO as one of the F.O.P.'s top
legislative priorities. Two years later, another overwhelming majority
of delegates adopted a resolution directing the F.O.P. to ``oppose any
legislative effort to require the participation of any public employee
in Social Security.''
I mention these facts to underscore both the length of time and
energy that the F.O.P. has invested in educating Members of Congress
about these issues, and to make Congress aware that our position is not
one adopted by F.O.P. leaders alone. Our members--the rank-and-file
officers that patrol our streets and neighborhoods every day--
understand what is at stake here, namely, their retirement security.
I want to begin by urging this Subcommittee to consider and pass
H.R. 147, the ``Social Security Fairness Act.'' This bill, which has
been designated as a ``top legislative priority'' by the F.O.P.
membership, would repeal both the WEP and GPO. The bill already has two
hundred and sixty (260) cosponsors--more than a House majority and only
thirty (30) cosponsors short of a two-thirds majority. Any legislation
with this kind of support deserves legislative action.
Ultimately, H.R. 147 is about fairness to the State and local
employees who paid for and ought to receive their Social Security
benefits. It is our hope that when this Subcommittee begins its work on
drafting legislation to reform the Social Security system, it will take
note of the manifest unfairness of the WEP and GPO and repeal them
both.
Let me begin by explaining the impact the WEP has on retired police
officers. Simply put, law enforcement officers who served communities
which are not included in the Social Security system may lose up to
sixty percent (60%) of the Social Security benefit to which they are
entitled by virtue of secondary or post-retirement employment which
required them to pay into the Social Security system. This sixty
percent (60%) is a lot of money, especially when you consider that the
officer and his family were likely counting on that benefit when they
planned for retirement.
The F.O.P. contends that this provision has a disparate impact on
law enforcement officers for several reasons. First of all, law
enforcement officers retire earlier than employees in many other
professions. Owing to the physical demands of the job, a law
enforcement officer is likely to retire between the ages of 45 and 60.
Secondly, after 20 or 25 years on the job, many law enforcement
officers are likely to begin second careers and hold jobs that do pay
into the Social Security system. Even more officers are likely to
``moonlight,'' that is, hold second or even third jobs throughout their
law enforcement career in order to augment their income. This creates
an unjust situation that too many of our members find themselves in:
they are entitled to a State or local retirement benefit because they
worked 20 or more years keeping their streets and neighborhoods safe,
and also worked at a job or jobs in which they paid into Social
Security, entitling them to that benefit as well. However, because of
the WEP, if their second career resulted in less than twenty (20) years
of substantial earnings, upon reaching the age they are eligible to
collect Social Security, they will discover that they lose sixty
percent (60%) of the benefit for which they were taxed! Actuarially
speaking, I doubt many officers will live long enough to ``break
even''--that is collect the money they paid into the system, let alone
receive any ``windfall.'' These men and women earned their State or
local retirement benefit as public employees and they paid Social
Security taxes while employed in the private sector. How is this a
windfall?
I think it is clear that Congress did not intend to reduce the
benefits of hard-working Americans who chose to serve their States and
communities as public employees and then went on to have second careers
or worked second jobs to make ends meet. After all, when Social
Security was established in 1935, it intentionally excluded State and
local employees. And though most public employees are now in the Social
Security system, all States have ``pockets'' of State and local
employees that are not covered by Social Security. In fifteen (15)
States--Alaska, California, Colorado, Connecticut, Georgia (certain
local governments), Illinois, Louisiana, Kentucky (certain local
governments), Maine, Massachusetts, Missouri, Nevada, Ohio, Rhode
Island, and Texas--significant percentages of State and local employees
are outside the Social Security system. It is these public employees
that need the help of Congress.
When the WEP was enacted in 1983, it was part of a large reform
package designed to shore up the financing of the Social Security
system. Its ostensible purpose was to remove a ``windfall'' for persons
who spent some time in jobs not covered by Social Security (like public
employees) and also worked other jobs where they paid Social Security
taxes long enough to qualify for retirement benefits. However, we can
now clearly see that the WEP was a benefit cut designed to squeeze a
few more dollars out of a system facing fiscal crisis. The fallout of
this effort has had a profoundly negative impact on low-paid public
employees outside the Social Security system, like law enforcement
officers.
To the F.O.P., which represents these rank-and-file officers, this
is a matter of fairness. The WEP substantially reduces a benefit that
employees had included and counted on when planning their retirement.
The arbitrary formula in current law, when applied, does not eliminate
``windfalls'' because of its regressive nature--the reduction is only
applied to the first bracket of the benefit formula and causes a
relatively larger reduction in benefits to low-paid workers. It also
over penalizes lower paid workers with short careers or, like many
retired law enforcement officers, those whose careers are split inside
and outside the Social Security system. Bluntly put, this provision has
not eliminated a windfall for individuals who did not earn it, but it
has resulted in a windfall for the Federal government at the expense of
public employees.
Let me now discuss the other aspect of H.R. 147, which would repeal
the Government Pension Offset. In 1977, Federal legislation was enacted
that required a dollar-for-dollar reduction of Social Security spousal
benefits to public employees and retired public employees who received
earned benefits from a Federal, State, or local retirement system.
Following a major campaign to repeal the provisions in 1983, Congress,
which was looking for ways to reduce the fiscal pressure on the Social
Security system, adopted instead the Government Pension Offset, which
limits the spousal benefits reduction to two-thirds of a public
employee's retirement system benefits. This remedial step falls far
short of addressing the inequity of Social Security benefits between
public and private employees. This ``offset'' provision should have
been repealed in 1983 and might have been were it not for the fiscal
condition of the Social Security system at that time.
The new GPO formula reduces the spouse's or widow(er)'s benefit
from Social Security by two-thirds of the monthly amount received by
the government pension. For example, the spouse of a retired law
enforcement officer who, at the time of his or her death, was
collecting a government pension of $1,200, would be ineligible to
collect the surviving spousal benefit of $600 from Social Security.
Two-thirds of $1,200 is $800, which is greater than the spousal benefit
of $600 and thus, under this law, the spouse is unable to collect it.
If the spouse's benefit were $900, only $100 could be collected,
because $800 would be ``offset'' by the officer's government pension.
In nine out of ten cases, this completely eliminates the spousal
benefit even though the covered spouse paid Social Security taxes for
many years, thereby earning the right to this benefit and the right to
bequeath the benefits to their surviving spouse. It is estimated that
approximately 349,000 spouses and widow(er)s of State and local
employees have been unfairly affected by the Government Pension Offset.
It should also be noted that these estimates do not capture those
public employees or retirees who never applied for spousal benefits
because they wrongly believed themselves ineligible. According to the
Congressional Budget Office, the GPO reduces benefits for some 200,000
individuals by more than $3,600 a year. Ironically, the loss of these
benefits may cause these men and women to become eligible for more
costly Federal assistance, such as food stamps.
The WEP and GPO create a tremendous inequity in the distribution of
Social Security benefits. The standard for this narrow class of
individuals--retired public employees who are surviving spouses of
retirees covered by Social Security--is inconsistent with the overall
provisions of the Social Security Act and does not apply to persons
receiving private pension benefits. This imbalance exists even though
Congress, through ERISA standards and tax code provisions, has more
direct influence over private employers than public employers. Clearly,
this is an issue that Congress must address.
I also want to mention the F.O.P.'s support for H.R. 1714, the
``Public Servant Retirement Protection Act.'' This legislation,
introduced by Subcommittee member Representative Kevin Brady, would
repeal the Windfall Elimination Provision (WEP) and replace it with an
individualized calculation of Social Security worker benefits based on
an individual's entire work history.
While the passage of H.R. 1714 is not a top priority of the F.O.P.,
we do regard it as an excellent first step in correcting the inequity
of current law. The repeal of the Windfall Elimination Provision has
triggered no organized opposition, allowing us to conclude that the
overwhelming majority of Members of Congress agree with the position of
the Fraternal Order of Police, which is that the current law is unfair
to public employees. Yet despite this agreement, the estimated costs
for a full repeal of the WEP are considerable, which leads me to I
believe that this is the primary reason that such proposals garner a
great deal of support, but little attention. The bill introduced by
Representative Brady, while it does not fully address the problem in
the estimation of the F.O.P., does represent a commendable compromise
between those who justly believe that public employees are being
treated unfairly and those who are concerned about the potential fiscal
consequences of repealing the WEP in its entirety.
I now want to address an issue that the F.O.P. and many other
public employee organizations thought was wholly discredited--mandatory
participation in Social Security, which was considered and rejected by
the President's Commission to Strengthen Social Security (CSSS) in its
final report issued on 21 December 2001. And for good reason--according
to the Social Security Administration (SSA), there are 5.25 million
governmental employees not covered by Social Security, and the Public
Pension Coordinating Council (PPCC) estimates that seventy-six percent
(76%) of this total are public safety personnel, far more than any
other category of public employee. State and local government employers
carefully designed pension plans and retirement systems to fit the
unique needs of law enforcement officers, public safety officials and
other public employees. These pension plans, which exist in every State
in the union, better serve State and local government employees and
deliver a greater benefit than participation in Social Security. As
just one example, State and local plans take into consideration the
significantly earlier retirement age of law enforcement officers and
other public safety officers as compared to other, more typical
government employees. Social Security does not.
Additionally, the cost to States, localities, and the individual
employees would be immense. The employee would be required to pay 6.2%
of his or her salary into the Social Security trust fund. This amount
would be in addition to the contribution already paid by the employee
into the State or local retirement system. The employer would have to
match the employees contribution--another 6.2% cost to the employing
agency for each employee. And that, too, would be in addition to
whatever matching contribution must be made by the employer into the
existing State or local retirement system, which would severely
compromise the financial solvency of the existing pension and
retirement plans into which public employees outside the Social
Security system currently contribute.
The result of this is obvious: less take home pay for the employee
and cut backs in services, equipment and other expenditures on the part
of State and local governments. Police departments and other law
enforcement agencies stretch every dollar to the limit now--these huge
new costs will devastate their budgets and certainly impact on their
ability to function as first responders at a time when we need to be
improving our homeland security.
Clearly, the damage that would be done to State and local
governments and the families of the employees cannot be overstated if
the Federal government forces them to pay a new tax of 12.4%. Collected
data shows that the first year cost to employers--local and State
governments--to cover only newly hired employees only would be over
$771 million. The most recent estimated cost to public employers and
employees for the first five years of mandatory participation in Social
Security is enormous--$44 billion. And what benefit does this enormous
cost have on the overall health of the Social Security trust fund?
According to the SSA, requiring newly hired employees to be covered by
Social Security will extend the solvency of the Social Security Trust
Fund for two years. Just two years--and this projection does not take
into account the effect of increasing Social Security's unfunded
obligations by adding this huge new influx of participants.
The Fraternal Order of Police understands that reforms in the
Social Security system are necessary and that certain steps need to be
taken if we are to avoid the expected shortfall in 2042. Sometimes
proposals sound good on the surface, but after careful examination are
revealed to be unsound policies with damaging consequences. We believe
that mandating the inclusion of all public sector employees into the
Social Security system falls into this category. It is wrong to change
the rules almost seventy years later because the Federal government is
looking for an easy way to fund Social Security without making hard
choices. It is also wrong to impose a $44 billion cost on State and
local governments and their employees just to extend the solvency of
Social Security for two years.
Ultimately, this is about fairness to them men and women that have
sworn to serve and protect our communities. The State and local
governments which employ these officers chose not to participate in
Social Security, but they did not create this problem, nor did their
5.25 million employees who do not pay into the system. But if
participation in Social Security is mandated by the Federal government,
all of them would be paying a hefty price for contributing into their
own retirement plans. Destroying the retirement programs of these hard-
working Americans and raiding the budgets of State and local
governments should not be part of the Federal government's solution,
and I urge Congress to reject any proposal requiring public employees
to participate in Social Security.
Similarly, the foundation of the F.O.P.'s position on the repeal of
the WEP and GPO is also about fairness. It is not unreasonable to ask
that the men and women who spent their careers putting their lives on
the line for their fellow citizens be treated fairly after they retire.
But because of the WEP and the GPO, they are treated differently and
are subject to arbitrary formulas which reduce benefits for which they
have been taxed and to which they are entitled. Both of these
provisions should be repealed, and I urge the Subcommittee to consider
and favorably report H.R. 147.
Mr. Chairman, I want to thank you and the other Members of this
distinguished Subcommittee for the chance to appear before you today. I
would be happy to answer any questions you have.
Chairman MCCRERY. Thank you, Mr. Canterbury. Is it
Iglehart?
Mr. IGLEHART. It is Iglehart.
Chairman MCCRERY. Mr. Iglehart, please proceed.
STATEMENT OF RANDALL IGLEHART, PRESIDENT, ASSOCIATION OF TEXAS
PROFESSIONAL EDUCATORS, AUSTIN, TEXAS
Mr. IGLEHART. Thank you. Good afternoon, I am Randall
Iglehart. I am the past State president of the Association of
Texas Professional Educators (ATPE). The ATPE represents over
105,000 public school employees. We are the largest
professional education association in Texas. We are also the
largest independent nonunion education association in the
United States. I am honored to be here today to address the
Subcommittee on Social Security and the concerns of Texas
educators. Specifically, I will discuss our concerns on the
possibility of mandating all public school employees into
Social Security and the negative impact of the GPO and the WEP
on the recruitment and retention potential for Texas public
schools. You should have our written testimony in front of you
so, let me start by giving you our recommendations on these
issues and our concerns on each.
The ATPE recommends that Texas public school employees not
be mandated into Social Security coverage because of the damage
doing so would cause to the teacher retirement system. Attached
to this testimony is a letter from the former Texas Retirement
System (TRS) Executive Director outlining how the additional
payroll taxes needed to support mandated Social Security
coverage would reduce the State's ability to contribute to TRS.
Although the letter is several years old, the conclusions are
still relevant. Furthermore, it was written when the system was
in its best financial shape of his history. This is not the
case today. In fact, our State legislature chose to cut pension
benefits this past session to help stave off actuarial
uncertainties in the future so, our concerns about diverting
future funding to Social Security are even more relevant. Even
with the cuts, monthly benefits paid by our State system are,
on the whole, substantially greater than those distributed by
Social Security. This as well as the other benefits that
teacher retirement system offers retirees like health insurance
and life insurance are a major reason Texas teachers stay in
the classroom for a full career. The ATPE believes mandating
Social Security would only serve to compromise TRS. It would
reduce benefits for retired educators and drive even more
experienced educators out of the profession.
Next, I would like to talk about the WEP. ATPE recommends
passage of H.R. 1714, the ``Public Servant Retirement
Protection Act,'' to address the inequities of the WEP, and
reduce its negative offsets on Texas public schools. The WEP
was meant to account for a windfall in the formula used to
figure Social Security benefits; however, the WEP uses an
arbitrary formula that is based partially on the number of
years paid into Social Security rather than the amount received
from a government pension. The Public Servant Retirement
Protection Act would repeal the WEP's arbitrary formula and
replace it with a formula that accurately figures the windfall
amount a government employee would have received allowing for a
proper adjustment in benefits. This would mean greater benefits
for most public educators qualified for Social Security
benefits and would remove some of the disincentive for talented
candidates to enter the profession. The ATPE thanks
Representative Brady and the cosponsors of H.R. 1714 for
working with our organization toward ending the inequities of
the WEP.
Although the Public Servant Retirement Protection Act takes
important steps toward addressing our concerns on the WEP, it
does not address the GPO. The GPO eliminates spousal or widow
benefits for most retired Texas public educators and has caused
an enormous strain on the morale of public educators in Texas.
The TRS reports that GPO-related issues resulted in a doubling
of the teacher retirement rate in 2004. The ATPE is hopeful,
both the Public Servant Retirement Protection Act and
legislation to lessen the effects of GPO on public educators
will pass the 109th Congress and become law. It is our hope
that this will bolster teacher morale and encourage qualified
public educators to remain in the classroom.
The ATPE understands the tremendous pressure you face and
the awesome complicated task before you. We ask that any
comprehensive Social Security legislation passed by Congress
address the problems of the WEP and the GPO. We want to make
sure that Congress does not cause our public school employees
undue problems and we want to make sure that they do not
jeopardize their State pension fund through mandated Social
Security coverage. The ATPE thanks the Members of the
Subcommittee for this opportunity to participate in this
hearing and for your willingness to receive our input on this
critical issue that affects so many public educators.
[The prepared statement of Mr. Iglehart follows:]
Statement of Randall Iglehart, President, Association of Texas
Professional Educators, Austin, Texas
The Association of Texas Professional Educators (ATPE) is the
largest professional educators' association in Texas. With more than
100,000 members, we are also the largest non-union educators'
association in the nation. ATPE is committed to advocating for better
benefits for all educators; promoting a collaborative work environment;
the right of educators' to choose membership in the association they
feel best represents their interests; and providing the best education
possible for Texas children. We thank you for the opportunity to
provide input to the Subcommittee on reforming the Social Security
system.
RECOMMENDATIONS
ATPE recommends that Texas public school employees not be
mandated into Social Security coverage because of the damage doing so
could cause to the Teacher Retirement System (TRS). (See attached
correspondence from former TRS Executive Director Charles Dunlap.)
Furthermore, mandating Social Security coverage would not solve the
problems caused for some Texas educators by the Government Pension
Offset (GPO) and the Windfall Elimination Provision (WEP).
ATPE recommends passage of HR 1714, the Public Servant
Retirement Protection Act (PSRPA), which would reduce the negative
effects of the WEP on Texas public school employees.
ATPE recommends passage of HR 147, the Social Security
Fairness Act, which would repeal both the WEP and the GPO.
ATPE recommends that any comprehensive Social Security
legislation passed by Congress address the WEP and the GPO without
damaging the TRS pension fund through mandated Social Security coverage
for public school employees.
ATPE opposes mandatory Social Security coverage for all public school
employees
ATPE opposes mandatory Social Security coverage because it would
require significant financial contributions from both employees and
employers. The additional payroll taxes needed to support mandated
Social Security coverage would inevitably reduce the state's ability to
contribute to TRS. ATPE believes the additional fiscal demands would
ultimately be reconciled through larger TRS contributions from active
and retired educators. This would produce additional strain on those
who are already overworked in an under-appreciated profession and could
have a devastating effect on the actuarial soundness of the TRS fund.
Attached to this testimony is a letter from former TRS Executive
Director Charles Dunlap outlining the effect mandatory Social Security
coverage would have on the TRS. The letter was written in 1998 but ATPE
believes the conclusions are still relevant today.
TRS is a far superior system to Social Security. Its monthly
benefits are, on the whole, substantially greater than those
distributed by Social Security. Plus, TRS offers retirees health
insurance, return-to-work benefits and life insurance. ATPE believes
mandating Social Security would only serve to compromise TRS and reduce
benefits for retired educators.
Some believe that mandatory Social Security coverage would solve
the problems some educators experience due to the GPO. The GPO is an
offset provision in Social Security law that reduces spousal Social
Security benefits for public employees (such as public educators) who
are eligible for government pensions (such as those provided by the
Teacher Retirement System [TRS]).
In reality, mandating that educators pay into Social Security would
not lessen the effects of the GPO. And, in the long run, mandatory
coverage would compromise TRS--a system that provides far better
retirement benefits than does Social Security.Educators currently can
gain GPO exemption by working their last five years before retirement
in positions covered by both Social Security and TRS. Because very few
Texas school districts participate in Social Security, most educators
must transfer to other districts to become exempt from the GPO. Some
believe mandatory Social Security coverage would allow educators to
gain GPO exemption without having to relocate.
However, in the history of Social Security, changes to the system
have applied only to employees hired after the enactment date. Most
likely, a switch to mandated coverage would follow the same rule, so
mandated coverage would apply only to educators hired after the date of
passage. Current employees would not be covered by Social Security and
would still have to relocate to new positions for the last five years
before retirement in order to gain GPO exemption.
Even if mandated coverage applied immediately to all employees, it
would not alleviate the effects of the GPO. The GPO exists to mirror
the effects of ``dual entitlement rules'' that apply to employees who
pay into Social Security. These rules state that a person may not
collect both a spousal Social Security benefit and his own benefit. If
Social Security coverage were mandated and public school employees paid
into Social Security, they would simply be subject to dual entitlement
rules instead of the GPO. Both exist to limit the collection of spousal
benefits by individuals eligible for their own retirement benefits, a
practice known as double dipping. The other offset provision that
concerns educators is the Windfall Elimination Provision (WEP), which
reduces Social Security payouts to government employees who are
eligible for both Social Security and government pensions such as those
provided by TRS. The WEP applies to those employees who have worked for
less than 30 years in positions that pay into Social Security.
It's true that mandated coverage would cause educators to pay into
Social Security longer and therefore could potentially lessen the WEP's
effects on some people's benefits. However, this benefit would be
insignificant compared to the great damage mandatory coverage would do
to TRS.
ATPE supports the PSRPA
The Windfall Elimination Provision (WEP) reduces the Social
Security benefits of persons who have worked in jobs that pay into the
Social Security system and in jobs that do not. The WEP was meant to
account for a windfall in the formula used to figure Social Security
benefits that is designed to provide low-income workers with a larger
percentage of their pre-retirement earnings than that provided to high-
income workers. The WEP modifies the formula to prevent providing
employees (such as Texas educators) who haven't paid into Social
Security with higher percentages of their pre-retirement earnings than
that given to employees who have paid into Social Security for their
entire careers. However, the WEP imposes an arbitrary formula on these
individuals that is based partially on the number of years they paid
into Social Security rather than the amount they will receive from
their government pensions. That means that a person who worked in a
Social Security-covered job for 20 years but who is also eligible for a
government pension benefit of $500 per month will have his Social
Security benefit reduced by the same amount as a person who paid into
Social Security for 20 years but receives a government pension benefit
of $1,200 per month. ATPE believes the WEP in its current form acts as
a deterrent to talented, private-sector employees who are vested in
Social Security and are interested in teaching as a second career, as
well as to professional educators who are thinking about moving to
Texas to teach from states that pay into Social Security. Texas is
facing a teacher shortage approaching 50,000; the state recently cut
benefits for active and retired educators due to state budget cuts and
retirements are at an all-time high. ATPE believes we must take steps
to recruit and retain the brightest individuals in the teaching
profession in order to ensure that every Texas student receives an
exemplary education. ATPE believes the PSRPA to be such a step. The
PSRPA would repeal the WEP's arbitrary formula and replace it with a
formula that uses the complete earnings history of a worker in both
Social Security covered employment and non-covered employment when
determining average monthly earnings over a worker's lifetime. This
would eliminate the windfall in the current formula used for figuring
Social Security benefits and would mean greater benefits for most
public educators qualified for Social Security benefits.
The new formula under the PSRPA is a fair compromise between the
arbitrary WEP and total repeal and will help the state of Texas recruit
and retain qualified public educators from other professions and from
other states. ATPE thanks Rep. Brady and the cosponsors of HR 1714 for
working with our organization toward ending the inequities of the WEP.
ATPE supports repealing the GPO for Texas educators
Because the PSRPA does not address the GPO, we urge your support
for an amendment to the bill that will address the harsh effects of the
GPO on public educators. By reducing the spousal or widow Social
Security benefits of persons eligible for government pensions by two-
thirds of the amount of the pension, the GPO eliminates spousal or
widow benefits for most retired Texas public educators. The GPO has
caused an enormous strain on the morale of public educators in Texas;
TRS reports that it resulted in a doubling of the teacher retirement
rate in 2004. Many experienced educators recently retired to meet the
July 1, 2004, deadline in HR 743 from the 108th Congress. By retiring
by that date and working their last days in districts that pay into
both TRS and Social Security, they avoided the GPO. Many other
educators are leaving the profession early and cashing in their TRS
accounts to avoid the GPO.
ATPE urges this Subcommittee to amend HR 1714 to lessen the effects
of the GPO on public educators. ATPE's suggestions include total repeal
of the GPO, an exemption for public educators or a partial repeal that
would exempt widows and those with combined pension and spousal
benefits that fall below a certain level.
HR 147, the Social Security Fairness Act, is legislation that would
repeal both the WEP and the GPO. That bill now has 260 bipartisan
cosponsors, including several of the cosponsors of HR 1714, but the
bill has yet to be marked up by this Committee and debated on the House
floor. ATPE is hopeful that both the PSRPA and legislation to address
the GPO will pass the 109th Congress and become law. This will bolster
teacher morale and encourage qualified public educators to remain in
the classroom.
ATPE thanks the members of this Subcommittee for the opportunity to
participate in this hearing and for your willingness to receive our
input on this critical issue that affects so many public educators.
Educators are the most important resource in providing children with
the knowledge they will need to succeed in life, and your efforts to
protect their retirement benefits will have a lasting impact on the
quality of the education received by students in the public school
system.
Chairman MCCRERY. Thank you, Mr. Iglehart. Ms. Wolfe.
STATEMENT OF PATRICIA WOLFE, PRESIDENT, FEDERALLY EMPLOYED
WOMEN
Ms. WOLFE. Thank you, Mr. Chairman, I am Patricia Wolfe,
the national president of federally Employed Women (FEW), and I
am testifying here today in that role, and not in my capacity
as an employee of the U.S. Department of Homeland Security. The
FEW appreciates the opportunity to appear before this
Subcommittee and testify about the GPO and the WEP and their
adverse and unfair impact on FEW.
On behalf of the one million women employed in the Federal
government and military, we thank Chairman McCrery and other
distinguished legislators serving on this Subcommittee for
conducting this important meeting. We continue to call on
Congress to repeal these provisions and allow Federal workers
to receive their rightful and well-deserved Social Security
benefits. As the Subcommittee Members are already aware and as
we have heard today, the WEP greatly reduces the Social
Security benefits of a retired Federal worker who has paid into
Social Security and is eligible for a Federal government
pension under the Civil Service Retirement System. The national
active and retired Federal employees association (NARFE), has
estimated that approximately 635,000 beneficiaries are
receiving fewer benefits than they deserve due to the WEP, and
this provision negatively impacts women much more than men.
Of equal importance to members of FEW is the GPO. The
victims of GPO are largely elderly women who have retired from
the civil service retirement system or are about ready to
retire, and are widows of private sector employees. The GPO
penalizes about 335,000 beneficiaries and this number rises by
about 15,000 per year. Of those affected by the GPO, 73 percent
are women. According to the CBO, the GPO reduces benefits for
more than 200,000 of these individuals by more than $3,600 a
year.
FEW supports the repeal of both these unfair provisions as
outlined in H.R. 147 introduced by Representative McKeon.
Another bill, H.R. 1714, sponsored by Subcommittee Member
Brady, and we thank you, would also repeal the WEP and replace
it with a more fair formula. The FEW supports both of these
bills. Both the GPO and the WEP affect women much more harshly
than men, and I ask you to consider the following: women are
likely to spend time out of the workforce, about 12 years, to
tend to family care giving responsibilities and that is time
she is not earning a pension or contributing to Social
Security. Four in 10 elderly widows rely on Social Security for
90 percent of their income. The majority of women Social
Security benefits are based on their husband's earnings while
less than 5 percent of male Social Security beneficiaries
depend on their wife's earnings. Women, on a whole, live longer
than men and are more likely to run out of personal savings.
Many members from across the country tell me they can never
afford to retire because of the impact of these provisions. One
71-year-old women from North Dakota says she is still driving
on icy roads to go to her job on Minot Air Force Base. As a
young wife, this woman worked to help her husband pay for
medical school. Her spouse paid the maximum into the Social
Security system but died unexpectedly at a young age. However
this women's spousal benefit is now being cut by two-thirds
because she has worked for the Federal government. Despite the
fact that it was because she worked to fund her husband's
education that then allowed him to make subsequent
contributions to Social Security, she will not be receiving
these full spousal benefits. This is simply not right. Another
member from Washington State told me that she has worked for
the Federal government for 25 years but had to also work a
part-time job as a single mom. Now she is 65 years old and is
eligible for approximately $500 in Social Security, but she
will only be receiving $200. This Federal employee will have to
continue working as long as health will allow and then will
likely have to live with her children.
FEW finds it particularly egregious that spousal and
retirement benefits are reduced for Americans simply because
they work for the Federal government. Quite frankly, public
servants who have dedicated their entire careers to serving the
American people through their work should not be punished in
their retirement benefits. After their long career with the
government, they should be enjoying their retirement years,
their families, and their free time as economically healthy
retirees. Again, Mr. Chairman, we thank you for holding this
hearing. We thank you for your support of Federal employees in
the past. We look forward to working with you and Members of
your Committee to repeal these unfair provisions.
[The prepared statement of Ms. Wolfe follows:]
Statement of Patricia Wolfe, President, Federally Employed Women
INTRODUCTION
Federally Employed Women (FEW) appreciates the opportunity to
appear before this Subcommittee and testify about the Government
Pension Offset (GPO) and Windfall Elimination Provision (WEP) Social
Security provisions, and their adverse and unfair impact on federally
employed women. On behalf of the one million women employed in the
federal government and military, we thank Chairman Jim McCrery and the
other legislators serving on this Subcommittee for conducting this
important hearing. We continue to call on Congress to repeal these
provisions and allow federal workers to receive their rightful and
well-deserved social security benefits.
BACKGROUND
As a private organization, FEW works as a constructive pressure
group to improve the status of women employed by the Federal
government. This includes contact with Congress to encourage
progressive legislation. FEW national officers also meet with agency
officials at all levels to demonstrate support of the Federal Women's
Program (FWP), encourage officials to support the program and to obtain
insight on the effectiveness of the FWP at agency and local levels.
For 37 years, FEW has been working to end sexual discrimination and
enhance opportunities for the advancement of women in government. Every
day, nationwide, FEW members work together to bring about an awareness
of the issues facing women throughout the federal government and
achieve positive reforms and equality for women in the federal
workplace.
In addition, FEW members support all efforts within the government
to improve operations and efficiencies in the federal workforce.
WINDFALL ELIMINATION PROVISION (WEP)
As the Subcommittee members are already aware, the Windfall
Elimination Provision (WEP) greatly reduces the Social Security
benefits of a retired federal worker who has paid into Social Security
and is eligible for a Federal Government pension under the Civil
Service Retirement System (CSRS). Further, the WEP negatively impacts
women much more than men.
Private sector retirees receive monthly Social Security checks
equal to 90% of their first $627 in average monthly career earnings,
32% of monthly earnings between $627 and $3,779, and 15% of earnings
above $3,779. However, federal retirees are only allowed to receive 40%
of the first $627 in career monthly earnings, a penalty of $313.50 per
month simply for working for the federal government.
The National Active and Retired Federal Employees Association
(NARFE) has estimated that approximately 635,000 beneficiaries are
receiving fewer benefits than they deserve due to the WEP. This number
continues to grow by 60,000 annually.
GOVERNMENT PENSION OFFSET (GPO)
Of equal importance to FEW members is the Government Pension Offset
(GPO). This provision was enacted in 1977 to prevent government
retirees from collecting both a government annuity based on their own
work and Social Security benefits based on their spouse's
contributions. This law decreases by two-thirds whatever social
security spousal benefits for which a retired government worker might
be eligible.
The GPO, in effect, prohibits federal retirees from collecting both
a full Civil Service Retirement System (CSRS) annuity based upon his or
her own government employment and full Social Security benefits based
upon a spouse's employment. The victims of GPO are largely elderly
women who are both CSRS annuitants and widows of private sector
employees. Many of these women worked in lower grade/salaried positions
and the loss of the Social Security benefit causes a major financial
hardship. Had these women spent their careers anywhere but the federal
government, they would be entitled to full, unreduced Social Security
spousal or survivor benefits. But because they earned their pensions
through federal service under CSRS, their Social Security benefit is
``offset'' by their own earned retirement benefits.
The GPO penalizes about 335,000 beneficiaries, and this number
rises by about 15,000 per year. Of those affected by the GPO, 73% are
women. According to the Congressional Budget Office, the GPO reduces
benefits for more than 200,000 of these individuals by more than $3,600
a year.
OUR VIEWS
FEW supports the repeal of both of these unfair provisions. Both
the GPO and WEP lower the retirement income of federal employees by
altering the Social Security benefit formula for certain groups. What
is particularly egregious is that spousal and retirement benefits are
reduced for Americans simply because they worked for the federal
government, and could have a serious negative impact on morale at
federal agencies. The end result is to penalize workers who trusted in
good faith that they would be treated fairly, not penalized, for public
service. This message regarding trust is a disincentive for new
government workers.
During these times of an aging workforce, we need to do what is
right for our public servants. Americans who choose to serve their
country by working for the federal government should not then be
penalized during their retirement years. These provisions need to be
repealed as soon as possible.
Additionally both the GPO and WEP affect women much more harshly
than men. Consider the following:
Women are more likely to spend time out of the workforce
(about 12 years) to tend to family care giving responsibilities. That
is time she is not earning a pension, vesting in a pension, or
contributing to Social Security. This absence from the paid workforce
translates into inadequate retirement income and an increased financial
dependency on their spouses.
Eighty percent of male beneficiaries get Social Security
benefits solely as retired workers. Only 33% of women receive benefits
solely as retired workers, but 55% of women receive benefits, at least
in part, as a spouse or former spouse of a retired, disabled or
deceased worker.
Four in ten elderly widows rely on Social Security for
90% of their income.
Women make up 60% of all Social Security beneficiaries,
and 70% of beneficiaries 85 and older. The system is the only source of
income for one-fourth of elderly women living alone.
Even though Social Security is gender neutral, often
times a woman's benefit ends up being less than 50% of her spouse's
because women's salaries are still often lower than men, and certainly
were lower when many women entered the workforce. The majority of
women's Social Security benefits are based on their husband's earnings,
while less than 5% of male Social Security beneficiaries depend on
their wife's earnings.
Women, on the whole, live longer than men and are more
likely to run out of personal savings before men.
Over the course of a career, the wage disparity (76 cents
to every dollar earned by a man) between men and women really adds up.
For example, women between the ages of 25 and 34 earning $30,000 a year
will lose over $815,000 over the course of their careers because of
this wage disparity. Lower earnings throughout their careers mean women
rely more heavily on Social Security in their retirement, and their
retirement incomes are lower. According to the National Association for
Female Executives, women over 65 earned 43% less income than men in
1999. Median Social Security benefits are $7,750 for women over 65
years of age, and $11,040 for men of the same age. Median pension
benefits are $5,600 for women over 65 years of age, and $10,340 for
men.
FEW MEMBERS
Many FEW members have told me that they can never afford to retire
because of the impact of these provisions on their benefits. One 71-
year old woman from North Dakota is still waking up before 5:00 am,
driving on icy roads in snow storms to go to her job at Minot Air Force
Base. As a young wife, this woman worked to help her husband go through
and pay for medical school. Her spouse paid the maximum into the Social
Security system, but died unexpectedly at a young age. However, this
woman's spousal benefit is now being cut by two-thirds because she
worked, and has to continue to work, for the federal government.
Despite the fact that it was because she worked to fund her
husband's education that then allowed him to make subsequent
contributions to the Social Security system, she is not receiving these
full spousal benefits, and cannot afford to retire. This is simply not
right.
Another member from Washington state told me that she had worked
for the federal government for 25 years, but also had to work a part-
time job to make ends meet during which time she was a single Mom. Now
that she is 65 years old, she has learned that, while she is eligible
for about $500 in Social Security monthly benefits, she will only be
receiving $200. Unfortunately her retirement from the government (about
$1,300 monthly) is simply not enough to live on. Her condo rent
payments alone are approximately $2,000 a month. This federal employee
cannot afford to retire, and will have to continue working as long as
health will allow, and then will likely have to live with her children.
On a more personal note, I too will be impacted by the GPO when I
retire. Although I have 37 years of Federal service and I am now
eligible for retirement, I am planning to work several more years in
order to ensure that my annuity will cover my expenses. This is because
my Social Security spousal benefit will be reduced so much.
IN CONCLUSION
Quite frankly, public servants who have dedicated their entire
careers to serving the American people through federal government work
should not be punished in their retirement benefits simply for working
for the federal government. After a long career with the government,
they should be enjoying their retirement years, their families and
their free time as economically healthy retirees.
Again, we very much appreciate the Subcommittee and Chairman's
interest in this issue and all the support you have given federal
workers in the past. I, and the thousands of other FEW members, am
proud of the work we do for the federal government, and simply want to
receive those retirement benefits to which we are entitled.
We look forward to working with the Subcommittee members and their
staffs to repeal these unfair provisions.
Sincerely,
Patricia M. Wolfe
Chairman MCCRERY. Thank you, Ms. Wolfe. Mr. Loveless.
STATEMENT OF CHARLES M. LOVELESS, DIRECTOR OF LEGISLATION,
AMERICAN FEDERATION OF STATE, COUNTY AND MUNICIPAL EMPLOYEES
Mr. LOVELESS. Mr. Chairman, Ranking Member Mr. Levin,
distinguished Members of the Subcommittee, my name is Charles
Loveless, I am Director of Legislation for the American
Federation of State County and Municipal Employees (AFSCME).
The AFSCME has 1.4 million members who primarily work for State
and local governments across the Nation. I am also testifying
today on behalf of the Coalition to Assure Retirement Equity,
which is a coalition that was formed about a decade and a half
ago of 50 national and State and local organizations which was
formed to support repeal or reform of the GPO and WEP. One
thing, Mr. Chairman, that I have learned in my career in
Washington is not to stand in the way of Members of Congress in
their rush to get their planes back to their districts at the
end of the Washington portion of the work week, so, I will be
mercifully brief.
First, I would like to associate my union with the remarks
that were made by previous witnesses on this panel in
opposition to mandatory coverage and on the need for repeal or
relief from the GPO and the WEP. If I could just go ahead and
make the following additional comments. I want to make it very
clear that my union is a strong supporter of Social Security
and its current benefit structure. As with most workers, the
great majority of AFSCME members, approximately 75 percent,
participate in Social Security and depend on it to protect
themselves and their families.
I want to emphasize that my union's opposition to mandatory
coverage is not based on a belief that Social Security does not
work. On the contrary, we think it does an extraordinary job of
providing basic income security and shielding participants from
poverty. We oppose mandatory coverage because of the adverse
consequences for those workers and retirees and their State and
local government employers, who, through no fault of their own,
were precluded from participating in Social Security, and also
out of our concern regarding the negative consequences for our
pension plans.
My union recently commissioned a report by the actuarial
consulting firm, The Segal Company, a summary which I have
attached to our statement, which graphically shows the high
costs associated with mandating coverage for newly hired State
and local government workers. The 5-year cumulative costs for
both public employers and employees having to pay the 6.2
percent payroll tax would be a staggering $44 billion. While
all States would be affected, interestingly, the States that
are represented by Members of this Subcommittee, Ohio,
California, Michigan, Louisiana, and Texas, bear, I think, an
even higher burden as you can see from the chart that I have
attached to my statement. Many of these same States are still
suffer from the lingering effects of a major fiscal crisis that
began earlier in this decade.
For the reasons that have already been stated by others on
this panel, my union believes it is extremely important to take
action to eliminate the serious inequities and the unintended
consequence of the application of the GPO and WEP. I want to
emphasize that there are tens of thousands of lower wage
people, people who are receiving very small benefits in
retirement, particularly women, who have lost their spousal
benefits as a result of the GPO, and also have been adversely
affected by the WEP. As others have stated, we are supportive
of legislative efforts to either repeal or to provide relief
from these unfair statutory provisions. I will stop here and I
remain open for any questions that you may have.
[The prepared statement of Mr. Loveless follows:]
Statement of Charles M. Loveless, Director of Legislation, American
Federation of State, County and Municipal Employees
Good morning, Mr. Chairman and members of the Subcommittee. I am
Charles M. Loveless, Legislative Director of the American Federation of
State, County and Municipal Employees (AFSCME). I appreciate the
opportunity to be here today. We are also testifying on behalf of the
Coalition to Assure Retirement Equity (CARE), which is a coalition of
50 national, state and local organizations established in 1991 to
reform or repeal the Social Security Government Pension Offset and the
Windfall Elimination Provision (WEP). The combined membership of these
organizations represents millions of federal, state and local
government workers and retirees affected by these two provisions.
AFSCME is a labor union that represents 1.4 million employees who
work for federal, state, and local governments, health care
institutions and non-profit agencies, as well as over 200,000 retiree
members. AFSCME and its members are strong supporters of the Social
Security system. As with most workers, the great majority of AFSCME
members depend on Social Security to protect themselves and their
families. One of our principal goals in the current debate over Social
Security is to ensure that future generations of workers will be able
to rely on the crucial protections that Social Security offers to
workers at their retirement and to their families in the event of a
breadwinner's death, disability or retirement.
Social Security is not in crisis although there will come a time--
about four decades into the future according to the Social Security
Trustees and the Congressional Budget Office (CBO)--when Social
Security, if left unchanged, will only be able to pay between 70 and 80
percent of the currently guaranteed level of benefits. Therefore, the
challenge facing Congress is to strengthen the Social Security program
so that it can continue to pay 100 percent of guaranteed benefits for
the next 75 years in a manner that will not deepen the projected
shortfall and saddle our children and grandchildren with mountains of
additional debt. At the same time, we should not reduce currently
guaranteed benefit levels; raise the retirement age beyond that
currently mandated; or destabilize the pension plans of those state and
local government workers not covered by the Social Security system. In
our view, a plan can be developed that would meet all these goals
without altering the basic structure of the Social Security program.
Mandatory Coverage
We hope that the Subcommittee would agree that any solution to the
very manageable shortfall in the Social Security Trust Fund should in
no way jeopardize the retirement security of any worker. This should
include the 25 percent of state and local government employees, and
even higher percentages of teachers, police, fire and public safety
officers, who do not participate in Social Security and would be
adversely affected if their employers were forced to join the program.
When Social Security was established, states, cities, counties and
other public entities were excluded from participation, and today,
approximately 6.6 million state and local government employees do not
participate in the Social Security system. These workers are presently
covered under public pension plans that were designed to replace Social
Security's basic retirement and disability protections as well as
provide a basic pension benefit. The vast majority of these plans are
well funded and actuarially sound. Furthermore, the Omnibus Budget
Reconciliation Act (OBRA) of 1990 has already ensured that any
temporary, part-time or seasonal employee not covered by one of these
public plans be included in Social Security. As a result, basic pension
protections are in place for all American workers--private and public
sectors. And there is no need to mandate Social Security coverage in an
effort to protect workers' interests.
On the contrary, mandated Social Security coverage would have
serious negative implications for public employees, their employers,
and their pension plans, and this is true even if the coverage applies
only to future hires. Among the adverse consequences are the huge
expenses that would be involved for workers and employers whose
combined current pension plan contributions total, in many cases, 21--
23 percent of payroll; the possible establishment of new tiers of
pension benefits, with lower benefits for the newly hired;
destabilizing pension plan finances for current participants; and
raising taxes to fund additional payroll contributions. Raising taxes
or cutting services would of course also negatively impact the general
public in a major way. And while mandatory coverage creates much
hardship, it still doesn't begin to address Social Security's long-term
solvency issues. Mandated coverage adds only two years to the solvency
of the trust fund, and in the long run, it could actually cost the
system more, as new participants become eligible for Social Security
benefits.
Any short-term financial gains for Social Security must be weighed
against the effect it would have on the retirement security of others.
AFSCME has studied this issue very carefully, and we recently
commissioned a report by the actuarial consulting firm, the Segal
Company, that outlines the costs and other problems associated with
mandatory Social Security coverage for all public employees. According
to a preliminary, updated analysis by the Segal Company, the five-year,
employer-employee cost of mandatory Social Security coverage for newly
hired employees is a staggering cumulative $44 billion over five years.
This reflects a substantial increase from the previous estimate of $26
billion by Segal in large part due to the improved efforts of the
Social Security Administration to report the number of uncovered
employees. A copy of the firm's state-by-state breakdown of the costs
is attached to my testimony.
Simply stated, mandatory coverage would negatively affect the
financing of many state and local government pension plans and would
adversely affect the retirement security of hundreds of thousands of
public sector workers.
Government Pension Offset
I also appreciate the opportunity to be here today to share our
views and experiences with the Government Pension Offset (GPO), a
federal law that's had a devastating effect on many Americans. The GPO
applies to nearly everyone receiving a public pension from work not
covered by Social Security. If the public pensioner is also eligible
for a Social Security spousal or widow's benefit, this law requires
that the benefit be offset by an amount equal to two-thirds of the
public pension.
Approximately 335,000 retired federal, state and local government
employees have already been affected by the GPO. For the great
majority, the GPO totally eliminates the Social Security spousal/widow
benefit. The remainder experience a dramatic benefit reduction.
Thousands more will be affected in the future.
Currently, the average pension for many affected retirees is less
than $500 a month. These relatively modest pensions are especially
common for lower-paying occupational positions, such as school district
employees. Our members in these positions include school cafeteria
workers, crossing guards, bus drivers and custodians. Many of these
employees retire after a full-length career, but may have worked only a
30-hour week. Others may have had less than a full career--say 15 or 20
years following divorce or child rearing. Most of those adversely
affected are women who began their careers expecting to retire with
both a public pension and a Social Security spousal benefit. It's a
shock when they realize that they will not receive a much-needed
portion of their expected retirement income.
According to current law, retirees cannot receive a Social Security
benefit based on their own work record and a full spouse/widow benefit.
They receive the larger of the two. This is known as the ``dual
entitlement'' rule. For the purpose of the GPO provision, Congress made
a determination in 1983 to equate two-thirds of a public pension (from
work not covered by Social Security) with a Social Security earned
benefit. The GPO essentially applies the dual entitlement rule to this
portion of the pension and assumes that the remaining 1/3 portion of
the public pension is equivalent to a private pension benefit. However,
we believe the reasoning behind this assumption is faulty because it
ignores the generally large contributions made to public pensions by
workers and employers. In non-covered jurisdictions, the average total
contribution can amount to 21% of pay or more, compared to a much lower
total of only 12.4% under Social Security. Furthermore, private sector
pensions have no such offset. Retirees can receive a full pension and a
full spousal benefit under Social Security. In addition, a retiree's
entire public pension is subject to federal income tax--including the
part that's deemed equivalent to Social Security. However most Social
Security benefits are tax-free. So, the public retiree is in effect hit
twice--once with taxes and again with the GPO. It's simply not fair.
To show how the GPO can adversely affect average Americans, let's
take a look at two of our Union's own members. One example is Shirley
Milburn of Windsor, Ohio, who worked for 26 years as a teacher's aide
and library technician. Her Ohio School Employees Retirement System
pension check is $405 per month. Her husband's monthly Social Security
benefit is $786.30. Normally, she could expect to receive a spousal
benefit equal to half his benefit, or $393.15. Instead, the GPO reduces
it to only $121.80, giving her a total retirement benefit--pension plus
Social Security--of only $526.80 a month.
Another example is Annette Williams from Los Angeles, California.
She retired in 2003 at the age of 58 from her job as a clerical worker
employed by the City of Los Angeles. She never knew about the GPO, and
while she thought she would be able to collect a widow's benefit when
she reached the age of eligibility, she found out that two-thirds of
her $1,300 pension would completely eliminate her widow's benefit of
$812 a month. She simply cannot understand why this is the case, since
as a city employee she contributed the same amount into her pension as
a private sector worker contributes to Social Security, and her
employer's contribution was substantial--as high as 16 and half percent
of payroll.
When the GPO was first enacted, it was meant to target retirees
receiving multiple government pensions, some of whom had higher incomes
in retirement than they had while working. I don't think Annette
Williams and Shirley Milburn fit the image of these so-called ``double
and triple dippers.'' Clearly, Congress did not have them in mind when
the GPO was passed.
It is for these reasons that AFSCME strongly supports efforts to
repeal or to significantly modify the impact of this unfair law.
Windfall Elimination Provision (WEP)
The Windfall Elimination Provision (WEP) is another federal
statutory provision that applies to individuals who receive a pension
from a public-service job that is not covered by Social Security. If
the public pensioner also worked in a Social Security-covered job for
at least a decade, the WEP creates a public pension offset that can
greatly reduce that person's earned Social Security benefit. The
maximum reduction in 2005 was $313.50 a month. Approximately 635,000
retired federal, state and local government employees are currently
affected by the WEP. That number grows by about 60,000 retirees each
year.
Under the WEP, part of a retiree's public pension (from non-covered
employment) is considered equivalent to a Social Security benefit. And,
Social Security won't let retirees collect two full benefits. So,
instead of Social Security's normal benefit formula, which is weighted
in favor of lower-wage workers, WEP retirees' benefits are calculated
using a modified benefit formula for higher-wage earners.
The WEP was created in 1983 by Congress to distinguish between two
types of retirees--those who receive good pensions from primary jobs in
non-covered employment, but whose low-wages or short work records from
secondary jobs make them appear to have had low-wage careers; and
others who actually spent their entire work lives in low-wage jobs.
Congressional supporters of WEP believed that those with secondary jobs
were getting an unfair advantage from a Social Security benefit formula
designed to give low-wage workers a decent income upon retirement.
However, the Social Security Administration does not determine what a
public employee has earned in total wages but treats him/her as a high
wage earner under WEP. This is especially unfair when you consider that
these workers pay the same percentage in payroll contributions on their
Social Security-covered earnings as all others, yet they are being
penalized by this unfair statutory provision.
For the foregoing reasons, AFSCME strongly supports legislation to
repeal or reform the WEP. Recognizing the unfairness of both the GPO
and WEP, Representatives McKeon and Berman, along with 260 cosponsors,
introduced H.R. 147 which would repeal these unfair statutory
provisions.
Conclusion
In conclusion, we again want to emphasize AFSCME's strong support
for strengthening Social Security--our nation's great system of income
protection that touches the lives of most American workers, including
75% of AFSCME members.
AFSCME opposition to mandatory coverage is not based on a belief
that Social Security doesn't work. We think it does a remarkable job of
providing basic security and shielding participants from potential
poverty. Rather, we oppose mandatory coverage because it will cause
serious problems for a discrete group of workers and retirees who have
been precluded through no fault of their own from being a part of that
system. For the majority who do participate in Social Security, we
advocate maintaining the system's current social insurance structure,
while making the moderate changes necessary to ensure the system's
long-term solvency.
At the same time, we think it is imperative that Congress take
swift action to eliminate the serious inequities and unintended
consequences of the application of the GPO and WEP laws. Their original
purposes have been subverted under their current application, and the
widespread bipartisan support that exists in Congress for making
changes in these laws is due to the gross injustices that have been
created by their misapplication. Congress should act immediately to
correct both these unfair laws.
Chairman MCCRERY. Thank you, Mr. Loveless. Well, I
appreciate all of you coming to the Capitol today and sharing
with us your views. For whatever reason, a number of States
chose to not opt into Social Security. Most States have. Most
States participate in Social Security and the vast majority of
public employees participate in Social Security. They pay taxes
and they receive benefits. So, I guess the question that keeps
coming back to me is why shouldn't everybody contribute to a
system like Social Security that is supposed to be a universal
system providing benefits, including disability benefits,
spousal benefits, survivor's benefits? Undoubtedly, families of
employees in Louisiana who are not covered by Social Security
benefit from Social Security. Some of their family members,
some of their relatives benefit from various elements of Social
Security. So, is the big reason that you are opposed to
participating just because of the adverse impact it would have
on your existing retirement systems? Is that the crux of your
opposition to this? You all seem to speak favorably about
Social Security. Mr. Loveless went out of his way to say we
like Social Security. We support Social Security. Yet, you do
not want to participate in it, you do not want to contribute to
it. So did Ms. Bierdeman.
Ms. BIERDEMAN. I will volunteer to respond to this. I am
Terri Bierdeman with the Coalition to Preserve Retirement
Security. I think the issue is if you were creating a brandnew
system today from scratch and looking at all the options out
there, whether it was Social Security, private plans, DB, DC,
et cetera, you might well design some combination plan that
involved pieces of many of these issues. I would think that
most of us at this table, and in the room, do not have any
problem with the Social Security program or any opposition to
it. I think the issue is primarily some of these systems, many
of these public systems, have existed for decades and were
created in a way that to now layer on a new mandate of Social
Security would have devastating financial impacts on those
programs and not just for the future hires, but for current
employees as well as retirees. I think, speaking personally
from my own State, that would be our primary problem. If we
were creating a brandnew system from scratch, it would be a
different situation, but we have an 80-some year old system
that is funded in a certain way and to now layer on a new
mandate would have significant detrimental effect financially.
Chairman MCCRERY. Anyone have a different thing?
Mr. LOVELESS. If I could add to that, there is, first of
all, the issue of the impact on our pension plans, but also,
the impact on the States which are a vital part of our Federal
system of government. We all know the States have been going
through some very hard economic times. This Congress saw fit to
provide $20 billion in aid to the States just a couple of years
ago because of the fiscal crisis facing the States. This would
be an enormous additional financial burden on the States at a
time had they are just not equipped to deal with it.
Chairman MCCRERY. At least those States that are in that
situation.
Mr. LOVELESS. Yes.
Chairman MCCRERY. How many? Is it 17 States?
Mr. LOVELESS. Well, interestingly enough, Mr. Chairman,
there are at least some public employees in every State that
are not covered, particularly public safety officers, by Social
Security. There are a certain number of States, 15 or 17, that
are going to be most heavily impacted by this. Yes.
Ms. ORROCK. Mr. Chairman, a couple of points and to
underscore Mr. Loveless's point, we have been, as State
governments, going through the worst fiscal crisis in the
memory of most of us still walking around and standing up.
Chairman MCCRERY. It is turning around, though.
Ms. ORROCK. Education is underfunded close to a billion
dollars in Georgia because we had to cut in order to survive
that fiscal crisis. So, a proposal that has implications for
State budgets such as we have documented here and as the study
shows in Georgia over a billion dollars alone, we are taking
people off, we are looking at reducing access to Medicaid. We
have already short listed the number of children covered by our
health insurance plan. We are in a posture now with zero
reserves in Georgia, and this is not atypical of States. We
have been one of the States that has had a healthier economy,
generally speaking. It hit us later and did not hit us as hard
as some other places we have been in that sunbelt level. But we
have--our reserves are depleted down to zero. We have gone
through all of our reserves. We have put children off of our
PeachCare for kids. We have--through no fault of their own. We
are now looking at retooling Medicaid and some very serious and
drastic ways shifting all of that population over into a
different arrangement with HMOs. I could go on and on, as I
said almost a billion dollars of underfunding in education. We
are delaying reducing our classroom sizes in Georgia. So, when
you talk dollars to State governments, the implications are
just monumental.
I would add the weight of history brought us where we are
today. For the proposition that for a 24-month fix, the States
go down this road of $44, $45, $50 billion, it is very
difficult on the face of things to make an argument that that
is a sound public policy approach to the issues we are trying
to address here. That is just difficult, that is hard for that
to survive scrutiny. 24 months, 45 billion to States that are
down bumping along the bottom and hoping that we can begin to
rebuild.
We hope to start putting some money in the reserve this
year. That is--and I think the other thing that you have to
look at is the tremendous destabilizing effect potentially all
of these funds that are invested through the public pension
plans on the market and on the economy. This isn't small
potatoes here. The implications when you start tackling
California's system, huge and tremendous. I would finally say,
and I think we heard a compelling statement over here, there
are funds that were set up and are working for first responders
addressing a whole different type of needs of the workforce
that are not typical all across our workforce. We are living
with what we have and this tremendously expensive fix is a 24-
month fix.
Chairman MCCRERY. Well, I certainly appreciate your
viewpoint. Try to put yourself in our place. We are looking for
pieces here and there and everywhere which, taken together,
would add up to 75 years solution. In fact, maybe even a
permanent solution to Social Security. Yes, in isolation, you
say that does not fix much of the problem but you put 10 of
those together and you have a pretty big chunk of the problem
fixed. So, try to understand what we are up against too in
trying to fix this problem.
Ms. ORROCK. The challenge is there is no question. I do
think the serious study of the impact on these funds on the
economy would be an essential component.
Chairman MCCRERY. That is why you are here today to tell us
about that, and I appreciate the testimony you have given us.
Let me move on. You mentioned a number of things like education
are underfunded. What about pension systems in the States? How
many State pension systems are underfunded today? Does anybody
have an idea?
Mr. LOVELESS. There was a recent study done by the National
Association of State Retirement Administrators, and we would be
happy to provide it for the record, which indicates that the
great majority of State and government pension plans are
extremely well funded, somewhere in the neighborhood of having
88 to 90 percent of the funds at this point that are going to
be necessary to meet their liabilities. They are professionally
managed. We have made tremendous strides in this area. Years
ago, my union really took the lead in advocating for Federal
ERISA-type standards for State and local plans. That did not go
anywhere. There has been a tremendous improvement on how these
plans run and are operated.
Chairman MCCRERY. If we were to include all public
employees in Social Security, would that, in and of itself,
have an impact on the funding of those pension systems?
Mr. LOVELESS. Our concern is that it will destabilize these
plans. Inevitably, you are not going to be able to pay the
entire Social Security payroll tax, the employer and employee
portions, and then maintain the current level of plan benefits.
There will have to be major adjustments, and we are concerned
about how this will play out in various States.
Chairman MCCRERY. Okay. Thank you very much. Mr.
Canterbury, are you just itching to say something?
Mr. CANTERBURY. I will wait.
Chairman MCCRERY. Mr. Levin?
Mr. LEVIN. I will yield.
Mr. CANTERBURY. Mr. Chairman, I think the one thing that
you are not taking into consideration, especially in my career
field and other first responders is that, for instance, I have
a very close friend on the St. Charles Parish sheriff's office.
He works three full-time jobs and has, since he started on that
police department. Substantial earnings will not equal what he
makes with the sheriff's office in a 20-year career, but he
will have paid a tremendous amount of money into Social
Security. In this example, St. Charles does pay Social
Security. I know in your State and many, especially southern,
States, the base salary of a police officer--and I just
finished a 26-year career. My wife was a schoolteacher before
she passed away, and we both worked second jobs our entire
careers and both paid into Social Security on those side jobs
the entire time. So, there is an assumption, and I think Mr.
Brady's bill takes that more into consideration than Congress
did when they passed the WEP and the GPO. We are not talking
about freeloaders. We are talking about people who do pay into
the Social Security system.
Chairman MCCRERY. I understand with respect to those
provisions. I was mainly addressing issue of bringing everybody
into the system, but those are good points. Mr. Levin.
Mr. LEVIN. You asked some very cogent question us and I
think you got some very cogent answers. Maybe too cogent in
some respects. Just one last question to the elected official
at the table. You mentioned in your testimony about that in
some cases the benefits, State benefits retirement benefits are
coordinated with Social Security benefits? Is that true in any
substantial number of cases?
Ms. ORROCK. In any substantial number of States?
Mr. LEVIN. Yes.
Ms. ORROCK. I believe that it is. My depth on that would
benefit more from some professional staff data gathered and
would be happy to get that for you. That is not the rarity. I
think that is typical.
Mr. LEVIN. Okay. Thank you. Thanks to all of you. Thank
you.
Chairman MCCRERY. Mr. Becerra.
Mr. BECERRA. Mr. Chairman, let me first begin by asking
that we introduce a letter that was submitted by the American
Federation of Teachers which represents about 1,300,000
educators in this country. A letter that they have drafted
dated June 9, 2005 on this issue and rather than read it all,
if I could introduce it. It does say that the AFT strongly
supports repeal of the WEP and the GPO. It goes on to say, to
this end if Social Security legislation is proposed that
couples the favorable repeal of WEP and GPO with the addition
of private accounts and massive benefit decreases to future
Social Security beneficiaries, the AFT would strongly oppose
its enactment. We believe that the solvency of the Social
Security system should be addressed on its own merits and we
offer assistance in drafting an equitable solution. I would
like to introduce this statement and letter into the record.
Chairman MCCRERY. Without objection.
[The information follows:]
June 8, 2005
Hon. Jim McCrery
Chairman
House Committee on Ways and Means
Subcommittee on Social Security
B-316 Rayburn House Office Building
Washington, D.C. 20515-6353
Dear Chairman McCrery:
The 1.3 million members of the American Federation of Teachers,
like many Americans, are concerned about the long-term financing
problems facing the Social Security system.
However, we strongly oppose the establishment of private accounts
and do not believe that using Social Security taxes will solve this
problem. In fact, it would lead to huge cuts in benefits for workers
and do nothing to help reach solvency. Privatizing the system would add
at least $4 trillion over the next 20 years to the already runaway
Federal deficit, and our children and grandchildren would be saddled
with the bill. Further, exclusive reliance on massive benefit cuts to
future generations would undermine a tremendously successful program
that for decades has helped hundreds of millions of Americans live with
dignity and security. Such cuts would also harm older and disabled
Americans as well as surviving spouses and children of workers who have
died. Overall, one in six families receives Social Security benefits.
The AFT strongly supports repeal of the Windfall Elimination
Provisions (WEP) and the government Pension Offset (GPO) because both
adversely affect many of our members who are in retirement systems not
covered by Social Security. But we believe such repeal should be
developed in separate legislation and not be coupled with proposed
Social Security legislation.
To this end, if Social Security legislation is proposed that
couples the favorable repeal of WEP-GPO with the addition of private
accounts and massive benefit decreases to future Social Security
beneficiaries, the AFT would strongly oppose its enactment. We believe
that the future solvency of the Social Security system should be
addressed on its own merits, and we offer assistance in crafting an
equitable solution.
Thank you for your consideration of our views on this important
issue.
Sincerely,
Kristor Cowan
Director, Legislation Department
KWC:gd
cc: Members of the Social Security Subcommittee
----------
Mr. BECERRA. Let me first thank you all for your testimony,
and thank you for the consistency in your testimony. I think
you all are trying to point out to us what Washington might
neglect, and that is what happens at the local level and the
State level by our actions. Thank you very much for the
testimony. This is something we will have to reckon with. The
more and more we talk about Social Security, the more we see
that everything is on the table, as I believe you may have
heard the previous witnesses say. The President has said that
everything is on the table, and rightfully so. Let me ask you
this, so, as the President goes around talking about his
proposal to privatize Social Security, he has talked about the
need to reduce benefits. Part of his plan calls for a
reindexing as a way to calculate benefits which would, for some
folks, middle income retirees lead to about a 30--to 40-percent
cut in benefits.
If we have to find moneys to try to offset the money that
is taken out by privatizing Social Security, and some people
say we collect money if we actually mandate that all State and
local government employees are included in Social Security,
tell me if you think there is going to be a great deal of
incentive on the part of those who want to privatize Social
Security to include all State and local employees in their
Social Security system to have revenues to offset the moneys
that will be lost through the privatization proposal that the
President has.
Mr. LOVELESS. If I could, we are very concerned about a
possible tradeoff on that issue. We understand that there are
people from the left side of the spectrum and on the right side
of the spectrum who believe as a matter of equity that State
and local workers should be brought into the system. The
reality is this is going to have a negative impact on hundreds
of thousands of lower and middle-income people who rely upon
their pension systems for their retirement, so we would
certainly oppose such a tradeoff under any scenario.
Mr. BECERRA. Do any of you favor any proposals to reform,
strengthen Social Security that would take any money out of the
existing Social Security system? I know this goes beyond GPO
and WEP, but I ask again, because there are some who say that
if you incorporate all State and local employees into Social
Security, that actually brings moneys into the Social Security
system, which, again, you might need if you are taking money
out through another door for other programs like privatization.
So, does anyone here, would anyone here support removing some
of the existing income that the Social Security system receives
through workers's pay their Federal Insurance Contribution Act
(FICA) tax contribution, does anyone support that?
Mr. LOVELESS. If you are asking would we support diverting
part of the FICA payroll tax into private accounts, absolutely
not.
Mr. BECERRA. Do any of you support diverting any of the
FICA tax for any purpose whether privatization or otherwise? I
will take your silence as indicating you are not----
Mr. CANTERBURY. I would think that most of us would have to
say that is not an issue that we have addressed yet. I don't
think there is enough information on the table for me as
president of my organization to say. We are open to looking at
any change that will make the system better. We obviously are
going to do so with the same jaded look that anybody does when
you talk about Social Security. We haven't taken a position.
Mr. BECERRA. If any of this reform calls for carving out
some of the money that currently goes into the system and
therefore makes the shortfall that comes in about 40 to 50
years bigger and therefore there is a need to find money to
plug the hole, and if including State and local employees is
seen as a way to try to bring in moneys to help make up for
that, would that concern you?
Mr. CANTERBURY. Yes, it would.
Mr. BECERRA. Time has expired. I appreciate you all being
here and testifying, thank you very much.
Chairman MCCRERY. Ms. Tubbs Jones.
Ms. TUBBS JONES. Thank you, Mr. Chairman. Good afternoon
ladies and gentlemen. Thank you very much for coming. Buck eye,
it is always good to see a buck eye. I think I could go down
the row and have some relationship with all of you, having been
an elected official in Ohio and a former District Attorney (DA)
in Ohio, a lot of FOP friends and on and on and on down the
list. I don't know what my other colleagues have said, I have
been running in and out. Seems like today is the day that
everybody wants to visit Capitol Hill, so, I have had a lot of
visitors. I am personally on record in opposition to taking
public employee systems and putting them into Social Security.
I am worried about proposals for private accounts that divert
money from Social Security into private funds. Although I am
encouraging all the young people in my congressional district
to invest their own dollars. That they should not solely rely
upon any system for their retirement.
I am curious--and add another thing to the table, my
father, my sister, my brother-in-law are employees of United
Airlines and what is going on with those private retirement
funds. Let me ask each one of you, Representative Orrock, in
Georgia, what is happening with private pensions in Georgia to
your knowledge? Another example in Ohio, lots of loss of steel
jobs, companies gone belly up, bankrupt, and so forth. What is
happening in your State?
Ms. ORROCK. Of course, we are concerned when we look at our
economy that has Delta Airlines based there. The airlines
industry, we are all aware of, they are out on thin ice and it
is not a good time for the industry and traditionally all large
carriers, and they have a significant liability contract with
their retirees. So, we are quite concerned when we look at the
situation with United to think what might be the next hammer to
fall as Delta is struggling to stabilize and stay in the game.
It is a huge employer. Its headquarters are there. Our airport
is a huge driver of our economy. The pensions of Delta
employees is something when you hear the United story, it is
cause for great concern. No question about the impact it would
have on our economy as a State and the region, the southeast.
Ms. TUBBS JONES. Mr. Iglehart, what about dollars for
education as opposed to dollars that might be required to come
from the State of Texas to shore up Social Security if your
accounts were placed into Social Security? What is the
education status in your State?
Mr. IGLEHART. Well, we are concerned about many of the
school districts in our State. We have over a thousand school
districts and many of them are having financial difficulties.
When you start talking about mandating Social Security, then
you are talking about taking away programs, you are talking
about perhaps personnel being laid off, overcrowded classrooms,
and jeopardizing the education of the students in Texas.
Ms. TUBBS JONES. Mr. Canterbury, recount for me, if you
would, an example of, say, for example, someone you know in law
enforcement who did 20 years or 25 or 30 years, what his or her
retirement is like.
Mr. CANTERBURY. Well, obviously it varies from State to
State.
Ms. JONES. Give me an example from your community.
Mr. CANTERBURY. In my community, 26 years law enforcement
would bring an employee about 54 percent of salary. Most in my
State would not have health insurance benefits, so that would
be coming out of retirement. In my State, almost everybody
participates in Social Security, but for those that do not, you
would have to add the 6.2 percent.
Ms. TUBBS JONES. Ohio.
Mr. CANTERBURY. For instance, your State, the 6.2 percent
is spend able income that underpaid police officers, you can't
compare the entire State of Ohio to Columbus or Cleveland or
Cincinnati with the 5,000 townships in the State of Ohio with
less than 35 employees, are talking about salaries that are not
commensurate with the big cities so the percent at retirement
is about the same, but the amount of wage that they retired on,
the salaries they retired against, it is just--and again, as I
said before, they are all second and third employers. In the
public sector, none of us just work one job.
Ms. TUBBS JONES. Have FEW--I guess I am out of time, Mr.
Chairman, can I have a little squeeze? Thank you--thought about
or made any proposals to any Members of Congress with regard to
the GPO as it affects women who have worked and their husband
retired, have you made any proposals that would, for lack of a
better term, sensitize Social Security to women's issues?
Ms. WOLFE. This has been a top legislative priority for
federally Employed Women for about 10 years. So, first off, we
are just delighted that it has come this far. I don't know that
we have specifically made a proposal to Congress, although we
have certainly written letters. Our Washington representative
has visited many offices. Our Washington representative also
worked with a working group last year, from Senator Mikulski's
office. She has worked with a number of people on the House
side as well. So, yes, to the degree that we could. I would
just say, most of the conversation today has been about the
mandatory coverage. The FEW has not taken a position on this,
because as Federal employees know, and as you are probably
aware, it is a mixed system under the new FERS system. New
employees are paying into Social Security and our remarks are
more focused on those older employees such as myself, who were
in the older civil service retirement system.
Ms. TUBBS JONES. I understood that and I was taking another
step. When you are at the end of the line, everybody asked the
question, so, you have to come with something else. Mr.
Chairman, thank you very much. Good to see you.
Chairman MCCRERY. Thank you, Ms. Tubbs Jones. I would like
to just ask a couple more questions, this time getting onto the
GPO and WEP issue. Do you disagree with me that if we were to
repeal the GPO we should also repeal the provisions for dual
entitlement for spouses, because surely you wouldn't treat two
people, one of whom did not ever contribute to Social Security,
better than you treat two people both of whom contribute to
Social Security, would you?
Ms. WOLFE. I will take a stab at that, in view of all the
silence. Patricia Wolfe, FEW. Certainly, our focus has been
entirely on the GPO and the WEP. We have not really addressed
as an organization the points that you have raised. I
certainly, in sitting here today and in learning more about
this, I see the difficulties that you are facing with all of
these choices. Now, again, our focus is on Federal employees
and that is where my expertise would lie. I don't feel really
qualified to speak to the other issues. If there are other
inequities, certainly your job is to be as equitable as
possible to everyone and I would urge you to address those as
you can.
Chairman MCCRERY. Anybody else.
Mr. IGLEHART. Representing educators in Texas, we are
concerned about the number of people who are retiring. We need
to replace them with qualified people that can educate our
students. We are looking at the GPO and WEP. If people are
aware, and many are not when they go into education, many are
not aware of these two provisions. If people are aware of these
provisions, they may well not come into education and we are
going to be desperately needing these people to educate our
students over the next decade, and that is pretty important in
Texas.
Chairman MCCRERY. I understand that, but I asked the
question. Surely you wouldn't want a couple, one of whom who
paid into Social Security and the other who didn't, to be
treated better under the law than a couple who both paid Social
Security taxes. Surely that is not a fair outcome, is it?
Mr. CANTERBURY. That was my point earlier. I think the
cases where the scenario would be exactly as you described
would be very, very small. We are talking about in a
profession, most of these professions, where we do pay, both
parties pay in, maybe not part of the substantial part of that
career field, but thank goodness through a lot of good quality
work by many of the groups sitting here we do go on to second
careers. I know a lot of police officers that go on to teach
school. I know don't see it too much the other way around, but
I do know a lot of public employees that work their 20 years
and then go into other career fields where they do pay into
Social Security for a substantial period of time. In the
scenario you described, I think that would--there is a fairness
issue that doesn't apply to what we are talking about. We are
talking about the majority of these people have paid it and it
is just more arbitrary and capricious the reduction, especially
with the GPO and the WEP where our members do pay and are
subjected to a different penalty.
Chairman MCCRERY. Here is the reason I asked the question,
because I want you to understand some of the things we are
faced with in grappling with Social Security. We already know
if we make no changes, about 2017, we start to have a cash flow
deficit, not enough coming in through the payroll tax to pay
benefits. Then 2042 or so, the trust fund balances are
extinguished. If we were to repeal GPO, WEP and the dual
entitlement provisions to try to treat everybody the same, next
year, we would have a cash flow deficit in Social Security and
the trust fund would be extinguished in 2025 rather than 2042.
That is the enormity of what you are suggesting if we take it
to its logical conclusion and treat everybody the same. I
wanted to give you some sense of what we are dealing with. I
appreciate very much your testimony today. You have made some
excellent points and brought us some good material. We would
ask if we still have some lingering questions, we would like to
present those to you in writing and we would appreciate a
written response. Thank you very much, and the hearing is
adjourned.
[Whereupon, at 3:21 p.m., the hearing was adjourned.]
[Submissions for the record follow:]
Statement of Catherine L. Ahearn, Massachusetts Teacher Association,
Peabody, Massachusetts
I am in favor of eliminating Government Pension Offset and Welfare
Elimination. As a young widow I have been hurt by this.
Statement of Margaret Aiken, Atlanta, Georgia
Just by chance I found out that my social security benefits have
been reduced by half because I work for a school system that does not
pay into social security. I just completed my seventh year as a
librarian in a DeKalb County high school and love my work with
students. Previously I worked eighteen years in the private sector. I
am counting on the money I contributed over those years to help me in
retirement. I will be forced both to change jobs and work long past my
66th birthday-normal retirement age. I implore you to repeal both the
GPO and WEP that so adversely penalize workers in my position.
Statement of Jeanne M. Alberti, Harvard, Massachusetts
I am writing to explain my concerns regarding the WEP and the GPO,
and to urge you both to pass H.R. 4391, the Public Servant Retirement
Protection Act, and to work toward repealing both the WEP and the GPO.
Both my husband and I worked for many years in the private sector,
each of us earning enough quarters to be eligible for Social Security
benefits upon retirement. When we started our family and bought a
house, I continued to work by writing the local newspaper, and selling
Avon products, which I could do from home while raising our children.
My husband continued his education, getting his doctorate, and went
into teaching at Northeastern, a private university.
In order to help out financially, I finished my degree, and taught
at a Catholic high school for two years before entering the public
education system. Eventually we both decided to spend the largest part
of our career years teaching in public education, myself at the high
school level, and my husband at the university level. My husband, now
deceased, had a gift for teaching and connecting with university-age
students. I myself have loved teaching, and though I retired this past
year, will miss it greatly.
Since my husband's death I have been receiving a small pension from
the Commonwealth of Massachusetts, as he died before retiring, just
after reaching his 50th birthday. His Social Security benefits, half of
which I am eligible for as his widow, are currently approximately $600
per month. However, I believe according to Social Security regulations,
they will reduce the benefit to me by an amount more than equal to what
I might be eligible for. Therefore, I will receive no widow benefits
from Social Security.
Having retired this year due to health concerns, and as I didn't
start public school teaching until the age of 40, I will am receiving a
pension of only 36% of my annual salary. At age 62, when I might be
able to begin collecting on my own Social Security benefits (which are
approximately $350 per month at the moment), my benefits will
ostensibly be cut in half due to the pension I am receiving from the
Commonwealth of Massachusetts.
Together, my husband's annuity and my pension total barely enough
to cover my present living expenses. I foresee future possible medical
expenses, and worry how I will cover them when the time comes. Although
retired, I will be looking for ways to find additional income in the
next few years, while I am still healthy and can do so. To have to pay
more into Social Security in the next few years will be a very unfair
situation considering my expectation of receiving little in return.
I fail to see how either my public school teaching pension or my
Social Security benefits could be construed as a ``windfall'' or
``double dipping.'' If I have worked at separate jobs, why am I
penalized, and not able to collect benefits from each job worked?
Teaching is hard work, and though my first inclination was that it
would give me time with my family, I came to love the opportunities I
was given through teaching to work with and be inspired by the
teenagers I taught. I find it incomprehensible that I am now struggling
to make ends meet because I changed careers from the private sector to
committing myself to the community and our nation through public
education.
I respectfully urge the committee to act quickly to move the Public
Servant Retirement Protection Act swiftly to final passage and
enactment. In addition, I ask you please to look for ways to repeal
completely both the WEP and the GPO as Congress continues to explore
these issues.
Cincinnati, Ohio 45239
September 13, 2005
House Ways and Means Committee
Social Security Hearing on Repeal of GPO/WEP
I am 68 years old and have been retired for four years. I have
worked full and part time for 42 years. Because I worked 14 years for
an Ohio Public School District, Social Security offsets my pension by
$300.00 a month. Social Security gives me credit for 20 ``substantial
earning years''. Both pensions net me less than $1,000.00 a month.
I am currently paying $280.00 a month for Medicare and a
supplemental medical coverage. This supplemental medical coverage has a
$750.00 annual deductible. Doing the math, you can see that I am ``out
of pocket'' almost $3,000.00 a year, before getting any medical
coverage. The medical premium will increase in 2006 to $367.00 per
month. I will no longer be able to afford coverage of my current
policy. Unfortunately I do not qualify under the ``low income''
guidelines.
I sincerely feel I have worked and paid into Social Security, along
with my employers, and should be receiving full benefits without an
offset.
I feel many people are receiving more Social Security benefits,
disability payments, child support payments, etc., that have not paid
into the system as many years as I.
This Offset/Windfall legislation has created hardships on many
individuals in retirement. This legislation has not ``shored-up''
Social Security as originally planned and should be repealed.
Thank you for your attention to this statement.
Sincerely,
Barbara Ambrosius
Statement of Debra Anderson, Ruston, Louisiana
I am writing to express my opinion that GPO is unfair. It mainly
affects women (widows). Those of us who work for the state of Louisiana
should not be panelized because we were married to people enrolled in
Social Security. Death benefits for those of us enrolled in teacher
retirement will be 1/3 of what other widows receive.
I have been married for over 25 years, but have only been teaching
for six years. My husband, age 62 is 13 years older than I am and odds
are I will be a widow at some point. Why should I not be able to
collect his full SS death benefit when that happens? When I am retired
from teaching school for 20 years my retirement will not be a whole
lot--.approx. $1,500 a month at best. I am going to need to be
supplemented by my widows benefits just like other widows in the other
36 states of the union.
I have spent much of my married life being a homemaker and a
mother. I feel that this enabled my husband to work all these years. We
are a team and my work at home was of value and now I find that because
I am enrolled in teacher retirement (as of 1999) I will not be able to
receive his full death benefits after my retirement. How can this be
and why is it not this way in all states if it is so prudent. Logic can
only tell a person that this makes no sense. I have never explained
this to anyone that was not appalled. I know several retired teachers
that are widows and had no idea their benefits would be cut back so
drastically. They were unaware of this unfair GPO and they are
suffering because of it. It needs to stop.
Please repeal this absurd rule. I also believe that I should be
able to receive SS from the other jobs I had before being enrolled in
our state teacher retirement plan. There are many teachers who work in
the private sector during summer months and contribute the full amount
to SS from their pay checks and when they retire they will never see
most of that. How is this fair?! Again, please repeal this GPO.
Rim of the World High School
Lake Arrowhead, California 92352
June 20, 2005
To Whom It May Concern:
When I was twenty-nine I was an engineer in the aerospace industry.
At that time, and it continues today, our society was crying out for
better math and science instruction. I decided to leave my engineering
career to answer the call for more qualified math and science teachers.
Some sixteen years later I still teach and love my job. There is no
other job where you have as much control over your success or failure,
happiness or despair, and creativity or lack there of. The intrinsic
rewards of teaching, and doing it well, surpass any other job to my
knowledge.
As anyone who reads the papers is aware, our educational system is
not perfect. Some contend that it is failing, but I'll not address that
issue in this letter. I will say that having well qualified individuals
teaching is an important part of improving the educational system.
Unfortunately, the intrinsic rewards of teaching are not compelling
enough to attract the qualified individuals we need. Our society needs
to encourage, as opposed to discourage, competent people to pursue this
profession.
In California, teachers are obligated to contribute to a state
retirement system instead of social security. I have no choice, but to
contribute to this system. I have also, during the course of my life,
made more than the necessary minimum contributions to social security.
However, as the current law is written, the money I would receive from
Social Security is reduced by whatever retirement benefits I receive
from the state of California. In my case, this means that I will
receive none of the social security benefits due me as a result of my
contributions over my lifetime.
I fail to see how such a policy rewards someone for selfless
dedication to serving America. Rather, it seems to be more of a
penalty. If your object is to encourage qualified individuals to become
teachers, I fail to see the logic behind the current law.
Sincerely,
John Arner
Physics Teacher
Education Astronaut Finalist
Statement of the Association of Americans Resident Overseas
Thank you, Mr. Chairman, for the opportunity to state the case for
Americans who have worked abroad and who are thus subject to the
Windfall Elimination Provision's offset (hereafter, the `WEP').
Although the Association of Americans Resident Overseas (AARO) has
submitted representations on the WEP in the past, this is the first
time we have been invited to address the issue by your Committee.
Regrettably we are unable to be physically present at this hearing as
we just recently left Washington after our Overseas Americans Week May
8-13 2005 in the capital a few weeks ago.
Since this issue is a complicated one and one that has foreign
aspects which may not be familiar to the Members of your Committee, let
us walk you through the steps of our position as carefully as we can.
1. Americans who go abroad to work are a disparate group. Some go
at the invitation of their companies. They rarely stay more than five
years and will not today encounter the WEP. Others go abroad on their
own initiative or stay beyond the five year period during which they
can remain on U.S. Social Security rolls. In this case, their employer
will be forced to enroll them in the host country's social security
program and they will accumulate points under that system toward a
foreign country's old-age retirement pension. Although only the rare
individual will know this, the points earned under the foreign system
brings them within the jeopardy of the WEP.
2. To put a human face on the WEP's impact, let me cite the case of
Barbara K. She worked in the USA before and in the early years of her
marriage to a journalist. He was posted abroad. She and the kids
followed him. They grew up and she started teaching at an
AmericanSchool in Europe. Divorce broke up her marriage but she
remained at her job. Her children married. One works in the USA; the
other in Europe.
Her employer, the AmericanSchool, contributed to her U.S. social
security until forced to enroll her in the host country's social
security pursuant to the terms of a Totalization Convention. She
acquired rights to a very modest pension from that system. In 1996
before retiring she received a notice from U.S. Social Security
advising that her U.S. pension would be $73O monthly. In fact, because
of her foreign pension, she was surprised to learn on retirement that
her U.S. pension would be substantially lower. Her contributions to
U.S. Social Security were interrupted in 1988 because of the
Totalization Convention, thus limiting her U.S. pension. And that
pension was further reduced by the WEP because of an insignificant
French pension.
3. The Windfall Elimination Provision was enacted in 1983 to
prevent U.S. government employees, who had contributed to and earned
generous local, state or federal pensions, from benefiting from the
`windfall effects' of U.S. social security computation when they
subsequently worked and contributed to a U.S. social security old-age
pension. These `double-dippers' would otherwise have enjoyed the
beneficial (more highly geared) U.S. social security pension
calculation intended to favor short-term contributors, while also
enjoying the benefits of a second, ``substantial'' non-U.S. social
security retirement pension.
While the 1983 Social Security Amendments producing the WEP labels
the nuisance it was seeking to correct as ``non-covered work'' i.e.
work not covered by U.S. Social Security, it does not include or refer
to work for a foreign employer as belonging to that category. Indeed
Congress has no power to establish social security policy for work in a
foreign country, even if performed by a U.S. citizen. Despite this, the
Social Security Administration (the ``Administration'') has applied the
logic of the WEP, and its offset, to U.S. citizen's U.S. old-age
pension, when they have also earned and benefited from a foreign old-
age pension. AARO has seen no reference in the legislative record
suggesting that the WEP was intended to apply when a U.S. citizen
enjoyed a foreign pension from work abroad. It believes that WEP has
been misapplied to a U.S. citizen's U.S. pension, when the
justification for doing so is the earning of a foreign old-age pension.
4. The Administration took an initiative to coordinate social
security regimes in the 1980s, when it began negotiating Totalization
Conventions with several countries with which there were exchanges of
workers. These Conventions (now twenty) provide for coordination of the
social security laws of the two High Contracting Parties by authorizing
workers from one country laboring in the other to remain on the social
security rolls of his country of nationality for five years, thus
exempting him from participating in his host country's system for that
period.
This effort of coordination and comity works to the mutual benefit
of employees of both countries.
A further `integration' of social security systems promoted by the
Conventions is the principle of ``totalization'', which envisages the
limited application of work credits earned in one participating country
toward requirements of the other country's old-age pension system. For
an American working abroad, this `recognition' of credits typically
involves using work-quarters performed in his host country (having a
Totalization Convention with the USA) to qualify for the vesting of a
pension under U.S. rules, which demand forty quarters of contribution
to the U.S. Social Security Fund. Although calculation of his pension
will recognize only those quarters earned in the USA, foreign quarters
may be taken into account to meet the requirement of vesting, thus
assuring that the worker earns a minimum U.S. pension instead of
forfeiting his work credits entirely.
This modest reciprocity might be considered an advance toward
limited `integration' of two countries' social security programs;
however, it rapidly ran into the countervailing negative impact of the
WEP.
The WEP, it will be recalled, applies whenever the U.S. worker
enjoys two old-age pensions, one American, the other foreign.
Accordingly, if the WEP were to apply without qualification, the
advantage accorded by Totalization Agreements would be neutralized by
the offset of the WEP, which substantially reduces the pension just
vested. The combination of effects of a Totalization Convention and the
WEP thus produces the unintended result of one hand taking away what
the other has just given. The natural antagonism between the virtuous
effect of Totalization Conventions and the WEP required a
reconciliation, and in 1993 Congress acted to provide the solution. It
decided that when a pension right has been obtained through application
of a Totalization Agreement, the WEP off-set would be set aside.
Let us stand back for a moment from the complicated and abstract
world of WEP and Totalization. What Congress decided in 1993 was that
when a U.S. worker could avail himself of the benefit of a Totalization
Convention under the national rules of one Signatory country or the
other, the policy of the WEP should not apply. Since Totalization
Conventions only affect U.S. workers who have worked in foreign fields,
does this not prove that whatever the intention of Congress in 1983
when the WEP was adopted, Congress clearly saw the conflict between the
two principles and decided that foreign work should not be the basis
for applying the WEP penalty? In a global world with fast integrating
economies, the mobility of labor is an asset for any country. We
believe that Congress recognized this in 1993 and sought to remove an
important disincentive to working abroad by severely limiting the
effect of the WEP.
Of course, not every country has a Totalization Convention with the
USA. Should U.S. exports of goods and services, requiring U.S.
personnel to work abroad, be based on the fortuitous existence of a
social security convention?
We believe that crucial incentives to foreign trade should not
depend on the rate and success of negotiation of Totalization
Conventions. Congress has already recognized the value of foreign work
for U.S. citizens in Convention countries and the inappropriate and
punitive effect of the WEP as applied to it. AARO strongly urges your
Committee to finish the work it initiated in 1993 when it protected
foreign work from the WEP in the context of Totalization. We
respectfully request your Committee to take the final step by repealing
the WEP or limiting its effect to +substantial ; combined pensions so
that U.S. workers can go abroad to work without the disincentive the
WEP imposes.
----------
AARO is a non-partisan, not-for-profit association serving the
interests of Americans living and working overseas.
Sun City, California 92586
June 11, 2005
Dear Committee Members,
I am writing to ask your support repeal the Government Pension
Offset (GPO) and the Windfall Elimination Provision (WEP).
I worked in the private sector for 13 years before taking a
position in the County Government. During those thirteen years, I paid
into the Social Security Fund. Once I started working for the County, I
paid into the County retirement fund.
At age 62 I began collecting a small Social Security benefit but my
check is reduced by a ``special formula'' because of my pension. In
addition, the Social Security office advised me that although I am
eligible for benefits under my husband's Social Security, they couldn't
pay me because two-third the amount of my government pension is equal
to or larger than the monthly Social Security benefit. Why am I denied
benefits that I accrued just because later in life I became a ``public
employee''?
My husband is now terminally ill and I soon face the situation of
not only losing him but his income. In this day of rising fuel, food
and medical costs, those of us on a fix income are hard pressed to
cover even our basic needs. As a single woman this becomes more
difficult. God help us if we need long term care.
Please give this your utmost consideration. We need to have our
voices heard.
Yours truly,
Kathleen A. Atwell
Statement of John Bartholomew, Lewisville, Texas
My wife and I were both teachers in the Texas Public School system.
The Offset/Windfall law is unfair. We are both penalized for being a
member of the Texas Teacher's Retirement System. I contributed to the
SS system for years when I was employed as a teacher in the NYState
system, and as an employee of a firm in Texas. I decided to return to
teaching in 1990, and was shocked to see I would be penalized for
returning. Why did the schools quit the system ``en mass'' in prior
years? Who was responsible for selling out the SS system to teachers?
My wife also taught in NYState and was eligible for SS benefits. Not
only was she a victim of the Offset/Windfall of her contributions, but
also her benefits based on my contributions were reduced based on my
Offset/Windfall amount. What an absolute disgrace. If my wife never
returned to teaching in Texas, she would have received a significant
higher amount of money based on her past employment, and mine. That is
a terrible injustice. Not only is this unfair, but if we had continued
teaching in NYState, or other states, we would have been entitled to
the full amount. Since the payment of SS is based on salary and
contributions to the system, then that is what I should be entitled to
. . . return of my, and my wife's investment, just as other's in our
society are entitled to. I urge you to consider repealing this
injustice to us. Thank you for your consideration.
Statement of Sheila Farren Billings, Salem, Massachusetts
The way that Social Security is currently set up is unfair to
public school teachers who have also worked for a significant time in
other professions which pay into Social Security. My husband worked for
sixteen years as a teacher in private schools, and contributed to
Social Security all that time. Later, as a public school teacher with
three growing children, he supplemented his low teacher's pay with
other part-time work which deducted payments for Social Security. This
extra work was a necessity; with just the teacher's pay, our children
would have been eligible for reduced lunch prices at school. Now, he is
a professor at a public college, and plans to continue to work there
until he retires. Because he worked sixteen years in private schools,
my husband will never be able to reach the maximum retirement benefits
for Massachusetts teachers by the time he is 65 or even 70. I believe
he should be able to supplement that lower public pension with the
Social Security he made contributions to for sixteen years.
Current Social Security laws penalize my husband and I for our
dedication to public education. Public schools are the bedrock of our
democracy, and both of us feel strongly that public school teachers
help insure a strong future for America. We have accepted that we shall
never become wealthy in this profession; but it is wrong that we should
be required to forfeit our Social Security contributions and the safety
net they would provide us in our old age.
Cincinnati, Ohio 45211
June 8, 2005
Representative Jim McCrery
Chairman,
Ways and Means Subcommittee on Social Secuirty
Dear Committee Members:
I am writing this letter to request that the committee allows the
release of Representative McKeon's repeal bill HR 147 and Senator
Feinstein's Companion Bill S.619 (the Offset/Windfall Elimination on
Social Security) to the House for a vote.
I am a divorced woman, 64 years of age. I worked, and contributed
to Social Security for 26 years and in l983 went to work for Hamilton
County. Only after I had been working for the County, did I read about
the reduction of social security benefits for individuals working for a
government office. My social security will be dramatically reduced. All
I am asking is that I, along with so many other individuals, be allowed
to collect the full amount we paid into social security so that we are
able to grow old without worrying about how to pay our medical bills,
gas and electric, etc.
I have read, with interest, President Bush's idea to sign a
totalization agreement with Mexico, allowing Mexican citizens, who work
in this county, be allowed to collect from our social security system,
even though they are not American citizens. How can our President and
others care more about non-citizens of this Country than true American
citizens?
I, as a voting/tax paying American citizen, am entitled to the full
amount deducted from my paychecks for Social Security just as I am
entitled to all the money I would deposit in a savings account in a
bank in this country.
Please, do the right thing for the people of this country.
Sincerely,
Janet A. Blank
Statement of Kathleen Bonn, Newbury Park, California
The Government Pension Offset and Windfall Elimination are two
badly conceived provisions that are unfair to teachers and others. They
discriminate against people who have legitimately earned social
security benefits, simply because they chose to become teachers. In
addition, they discourage those who might choose teaching as a second
career by not allowing them to collect the social security benefits
they've earned, in spite of the fact that their ability to earn an
adequate pension from teaching would be severely limited. We need to
work to keep the teachers we have and to encourage experienced people
to become teachers. These bad provisions interfere with these efforts.
Beyond that, they are patently unfair. Please act to repeal them now!
Arlington Heights, Illinois 60004
June 16, 2005
Dear Members of the House:
My work years are the following: 15 years in industry and 20 years
as a teacher.
I am now 66 years old and retired. Because I live in Illinois, I am
not entitled to my ``full social security benefit.'' As of this date, I
have earned a small pension from my school district as well as
$164.00(net) monthly from social security. With my husband's social
security and my pension, we are just able to make ends meet. According
to my social security office, I could be receiving approximately
$700.00 more each month. This money, which I had contributed for 15
years, would greatly relieve financial stresses. Furthermore, if my
husband were to pass away before me, I would not receive any of his
social security, putting me at the poverty level. I feel I am being
punished for choosing the ``higher'' calling of teaching. I believe the
GPO and WEP are biased against teachers who have previously worked in
private industry. Please repeal these grossly unfair laws. I know I
speak for so many educators who have contributed honestly to social
security. Repeal the GPO and WEP.
Sincerely,
Sharon M. Brand
Woody Creek, Colorado 81656
September 14, 2005
Ways and Means Committee
Dear Representatives,
My concern regarding the GPO and WEP legislation is the position it
puts someone like me into. I came to teaching at age 38 after raising
my family. I have worked since the age of sixteen, contributing to FICA
and paying income taxes. My husband and I have worked together for 32
years running a landscaping business. Now that I am a member of a
public employee pension fund I can no longer receive, or will be
greatly penalized, with regard to future social security benefits. Not
only will my personal benefits be effected by any survivor benefits
from my husband will also be severely effected. There is no way I can
accrue a lifetime of work benefit in Colorado's PERA since I started
teaching so late. This will severely effect my retirement income.
I am not a lazy person. I teach school full time and have second
job. I am pleading with you do away with these penalties and allow
working, contributing people the opportunity receive their earned
benefits through social security and public retirement funds.
Thank you.
Valerie Braun
Statement of Penny Brown, Cypress, California
I am a library Media Teacher at a PreK-12 school which is part of
the Los Angeles Unified School System. California has its own State
Teachers Retirement System in lieu of Social Security. But, I have not
always taught in California and I have paid into Social Security in
other states and through other positions. I think it is unfair that my
contributions will never be of benefit to me. Please vote to rectify
this unfair situation and allow teachers and others who are eligible
for both a teacher's pension and Social Security to receive both, in
fair proportion to the amount contributed. Thank you.
Pine Bluff Chemical Activity, Chemical Materials Agency, U.S. Army
Redfield, Arkansas 72132
June 9, 2005
I very much appreciate the opportunity to submit this written
testimony on the Government Pension Offset (GPO) and Windfall
Elimination Provision (WEP) Social Security provisions, and their
adverse and unfair impact on me--a federal retiree. Thank you Mr.
Chairman and the other legislators serving on this Subcommittee for
conducting this important hearing. As a retired federal worker being
adversely impacted by these provisions, I urge all Subcommittee
members, and lawmakers, to repeal them as soon as possible and allow me
to receive my full social security benefits.
I retired from the Federal Government in July 2004. In September
2004, my husband died after working in the banking business for over 30
years. He was 61 years old and did not get to collect his hard earned
Social Security.
As his widow, I was entitled to almost $1,200 per month of his
Social Security benefits. However, because I worked for almost 24 years
in the federal service in the Department of the Army as a Civilian
employee, I am only qualified to receive $466 per month of his Social
Security because of this unfair law. Not only did I lose his income,
but most of his Social Security.
I receive a government retirement annuity from OPM of $1,400 per
month which I earned as a civilian employee, and with the reduced
spousal Social Security benefit, I have to greatly lower my lifestyle.
The GPO causes me to lose $734 per month. This is the difference
between getting by and comfort in my retirement years. Why would the
government I gave so many years of my life to, take this away from me.
In addition to the penalty of not getting my deceased spouse's full
Social Security, I had to give up $277 per month of a Social Security
benefit of $519, which I earned before I entered the federal government
at age 45. That is a total of $1,011 that the government takes away
from me because of the WEP/GPO provisions.
I served my country with honor and dedication, only to be penalized
because of it. Please repeal these unfair GPO and WEP provisions that
affect the way Social Security is calculated, for me and for many other
women and men in my circumstance.
Sincerely,
Barbara Brubaker
Retired GS-7 Secretary/Steno
Statement of Gracie Buford, Nacogdoches, Texas
Support the Social Security Fairness Act
I want to ask for your help in repealing two unjust Social Security
provisions that hurt hundreds of thousands of teachers, school support
personnel, police officers, firefighters, and other public servants.
They reduce or eliminate Social Security benefits for retirees who
receive pensions for non-Social Security-covered employment. They apply
only to public pensions--recipients of private pensions are not subject
to such penalties.
While these Social Security benefit reductions may have been
intended to curtail payments of windfall benefits to highly paid
individuals, in practice they have had devastating consequences for
low--and middle-income public employees. These provisions are the
Government Pension Offset (GPO) and the Windfall Elimination Provision
(WEP). Each of these provisions can reduce monthly Social Security
benefits drastically.
The GPO reduces a Social Security survivor's benefit by two-thirds
of his or her public pension that is not covered by Social Security--
wiping out the survivor's benefit entirely for many workers. The WEP
currently can take away up to $306 a month of Social Security benefits
earned by a state or local public employee who has contributed to
Social Security for as many as 20 years, and the WEP does not phase out
completely until a worker has 30 years of covered Social Security
employment.
Besides being unfair to those who have paid into Social Security
but are being denied its full benefits, these provisions have perverse
effects. By targeting pensions of teachers and other school employees,
these Social Security benefit cuts discourage qualified individuals
from entering the classroom--at exactly the time when our nation faces
a severe shortage of such people.
Bipartisan legislation introduced in the 109th Congress would
repeal these two provisions. The House version of the bill, H.R. 147,
was introduced on January 4 by Rep. Howard McKeon, Republican of
California. The House bill already has 273 cosponsors. A Senate
companion version, S. 619, was filed March 14 by Sen. Dianne Feinstein,
Democrat of California, and Sen. Susan Collins, Republican of Maine. S.
619 already has 22 Senate cosponsors. I urge you not only to cosponsor
this vital legislation but also to help bring it to the floor for a
prompt vote.
Marysville, California 95901
June 23, 2005
The GPO/WEP adversely affects over one-third of America's
educators. Many have had more than one career--in some cases there have
been concerted efforts to encourage workers in other careers to join
the teaching force. First Lady Laura Bush promoted this as a sort of
``Peace Corps'' idea to attract new teachers. What was never stated was
the effect of the offsets in the non--Social Security states. At least
now the law requires notification of this to new hires who might be
affected.
Other teachers adversely affected are teachers who worked summer
jobs to support their families. In California many of our young male
teachers worked in agriculture. Little did they know the effect these
summer jobs would have when they retired from teaching.
As a high school student I worked at Woolworth's during the summer
to earn money for college. (I was going to become a teacher.) As a
musician I earned Social Security credits giving lessons and playing
professionally. 40 years ago most teachers worked more than one job to
make ends meet, especially those who were supporting families on a
single income.
For all of these reasons I urge repeal of the GPO/WEP.
Beverly Carlson
CTA/NEA-Retired
Statement of Ellen M. Carpenter, Hingham Public Schools--South
Elementary School, Hingham, Massachusetts
I am a 58 year-old fifth grade teacher in Hingham, MA with over 25
years teaching experience in Massachusetts public schools. I plan to
retire in approximately 5 years with a pension from the Massachusetts
Teachers Retirement Board (MTRB.) I also have 10 quarters credit under
the U.S. Social Security Administration (SSA), obtained early in my
career. I have made the easy financial decision to take my pension
under the MTRB retirement system.
My husband of some 34 years is 61 years old and has paid into the
SSA at the top rate for his entire business career. He is a 60%-
disabled Army veteran of the Vietnam Era. He and I have raised three
children who are now financially and emotionally on their own. He will
take his SSA retirement sometime in the near future.
Under the Government Pension Offset and Windfall Elimination
Provision (GPO/WEP), should my husband predecease me, I will be
ineligible to receive a widow's benefit. I am precluded from this
benefit, along with teachers from a handful of other states, because I
teach in Massachusetts and have not contributed to SSA during my
teaching career. It should be noted again that I have 10 quarters under
SSA.
Under my MTRB plan, should I predecease my husband, he will receive
a widower's benefit. I believe that most plans have such a benefit. In
this regard, I feel strongly that the GPO/WEP is highly inequitable and
that the Provision should be eliminated.
Montgomery, AL 36117
June 8, 2005
I very much appreciate the opportunity to submit this written
testimony on the Government Pension Offset (GPO) and Windfall
Elimination Provision (WEP) Social Security provisions, and their
adverse and unfair impact on me--a federal retiree. First I want to
thank Chairman Jim McCrery and the other legislators serving on this
Subcommittee for conducting this important hearing. As a federal worker
being adversely impacted by these provisions, I urge all Subcommittee
members, and lawmakers, to repeal them as soon as possible and allow me
to receive my full social security benefits.
My husband served 22\1/2\ years in the military. I chose to work
for the federal government, and served as a civilian employee at
Maxwell Air Force Base for 26 years. I had a break in service after
five\1/2\ years under CSRS, and therefore will retire as CSRS offset
retiree.
I am now a widow drawing my husband's Social Security--however only
as long as continue working. When I retire, my retirement will be
offset. It is scary to think about retiring and having to draw on my
savings constantly to supplement my retirement because the spousal
benefit to which I am entitled will be cut by two-thirds. I will be
drawing approximately $1,600 plus a third of the $1,331 social security
I currently draw. I have a house payment of $685 a month plus insurance
on vehicle and other normal expenses of owning a home. The house
payment is for a handicapped son who will never be able to qualify for
a loan to purchase a home.
Thank you for conducting debate on GPO and WEP, and please repeal
these unfair Social Security provisions that have a great adverse
impact on lower income women retirees and widows.
Sincerely,
Ida Clark
Statement of Judith M. Clark, Retired Employees Association of Orange
County, Huntington Beach, California
Chairman McCrery, Ranking Member Levin and Distinguished Members of the
Subcommittee:
Thank you for providing the opportunity to comment on specific
Social Security legislation--H.R. 146, ``The Social Security Fairness
Act of 2005,'' that should be evaluated as you consider other proposals
in a comprehensive plan of reforms that are meant to strengthen and
protect Social Security.
This legislation, which would repeal the Government Pension Offset
(GPO) and the Windfall Elimination Provision (WEP), would repair a
major inequity toward government retirees--federal, state, and local--
since these laws were enacted in 1983.
The following paragraphs explaining the GPO, WEP, and ``dual-
entitlement'' rule were provided in written testimony, to the Social
Security Sub-Committee on June 27, 2000 by Jane L. Ross, Deputy
Commissioner for Policy, Social Security Administration.
----------
Ms. Ross: ``The GPO, enacted by Congress in 1977 and amended in
1983, affects Social Security beneficiaries who receive pensions based
on work not covered under Social Security. The GPO reduces or
eliminates the Social Security benefit payable to a person as the
spouse or surviving spouse of a worker. For such a retiree, the GPO
requires that the Social Security spouse's benefit be reduced--or
``offset''--by two-thirds of the amount of the non-covered pension.''
Ms. Ross: ``The WEP was enacted in 1983 as part of major amendments
to shore up the financing of the Social Security program. It greatly
reduces the Social Security benefit of a retired or disabled worker,
who also receives a government annuity based on his/her own earnings.
The maximum Social Security benefit reduction cannot be more than one-
half the amount of a public retirement benefit. The maximum amount for
2005 is $313/mo. Simply stated, if a person's own Social Security is
reduced, it's WEP; if the benefit being reduced is based on a husband
or wife's Social Security benefit, it's GPO.''
The following statements by Ms. Ross will be rebutted/refuted by
me:
Ms. Ross: ``The GPO provision is designed to replicate the ``dual-
entitlement'' rule of the Social Security program for workers receiving
a pension from non-covered government employment. This provision,
applied since 1940, requires that Social Security benefits, payable to
a person as a spouse or surviving spouse, be reduced by the amount of
that person's own Social Security worker's benefit.''
Rebuttal: Social Security's ``dual-entitlement'' rule is unfairly
applied to non-covered government employee pensions. Historically, from
the 1940's to 1983, until Social Security was in financial straits and
more revenue was needed to secure the future for the next 75 years, it
had been perfectly acceptable to award Social Security benefits to non-
covered spouses and widows.
Ms. Ross: ``The dual-entitlement provision was intended to restrict
the payment of benefits to those family members who were actually
dependent on the worker. As a result, nearly 6 million (6.5 million
now) beneficiaries receive reduced benefits as spouses--they receive
the equivalent of the worker's benefit or the spouse's benefit,
whichever is higher.''
Rebuttal: Many government employees, especially women, who retired
from public service, have small pensions. They may or may not qualify
for minimum Social Security benefits on their own record. These women
are more dependent on receiving their spousal or widow's Social
Security benefits. As a non-covered government retiree, they lose not
only their deceased spouse's pension, either totally eliminated or
greatly cut back, but also the Social Security benefits he had received
while alive. Thus, they are reduced from living on three retirement
income sources to only one--theirs.
Ms. Ross: ``The GPO acts as a surrogate for the ``dual-
entitlement'' provision for workers receiving a government pension
based on work not covered under Social Security. Government pensions
are, to a large extent, a substitute for Social Security benefits.''
Rebuttal: Our government pensions are not the equivalent of a
private pension. Our government pensions are neither a surrogate nor a
substitute for Social Security. Social Security is a tax. Our pensions
are not taxes. Congress spends surplus Social Security funds. State and
local governments, by law, may not spend the pension funds of public
employee retirement systems.
Rebuttal: A government employee has an ownership right to their
pension contributions. They may receive 100% of their contribution if
they choose to leave government employment without taking/receiving a
pension. There are no ownership rights to Social Security taxes.
``Many people are unaware that the United States Supreme Court
ruled in Fleming vs. Nestor, (1960), that Social Security contributions
are clearly a tax and individuals have no right to any benefits.
Moreover, the Court affirmed that Social Security taxes are paid
directly into the United States Treasury and are not placed into
separate accounts. Congress can reduce Social Security benefits at any
time in the name of Social Security reform.'' (The Heritage Foundation,
``Executive Memorandum,'' June 10, 2000)
The interim report of the President's Commission to strengthen
Social Security, ``Social Security in Financial Trouble,'' was issued
July 19, 2001. ``The system is broken,'' wrote former Senator Daniel P.
Moynihan and Richard Parsons, co-chairs. The report said workers and
retirees do not own their benefits and have no legal claim to them.
``What they have is a political promise that can be changed at any
time, by any amount, for any reason.''
Ms. Ross: ``The GPO replicates the ``dual-entitlement'' rule by
assuming that two-thirds of a government pension is approximately
equivalent to a Social Security retirement benefit the worker would
receive if his-her job had been covered by Social Security. The other
third of the government pension is considered as the equivalent of a
private pension and is not used to offset Social Security benefits.''
Rebuttal: The GPO is based on a false premise--that two-thirds of a
government worker's pension is the equivalent of Social Security. How
is the pension of a Federal, State, or Local non-covered government
retiree different that the pension of a covered government retiree? A
pension is a pension is a pension, regardless if it comes from the
public or private sector.
Pension--A sum of money paid regularly as a retirement benefit or
by way of patronage.
Social Security--Measures by which the United States Government
provides economic assistance to persons faced with unemployment,
disability, or old age, financed by assessment of employers and
employees. (The American Heritage Dictionary of the English Language,
1970, Houghton Mifflin Co.)
As for the percentage, in 1977, the ``replication'' was 100%--a
dollar for dollar offset. In 1983, the Social Security ``replication''
was changed to two-thirds and one third was the equivalent of a private
pension. What will the ``replication'' be in 2005:
(a) 50% = Social Security; 50% = Private Pension?
(b) 25% = Social Security; 75% = Private Pension?
(c) 0% = Social Security; 100% = Private Pension?
Congress may choose any ``replication'' formula it wants, but all,
except c, are fallacious.
Ms. Ross: ``The GPO affects government workers in the way that
``dual-entitlement'' affects non-government workers: both groups of
workers can receive a private pension without having it ``offset''
against their Social Security spouse's benefit.''
Rebuttal: The statement is inaccurate, to say the least. The Social
Security Administration considers only one-third of a non-covered
government pension as ``private'' compared to non-government worker's
pensions that are 100% ``private.'' If her statement were true, then
all non-covered government pension retirees would not be affected by
the GPO and would be eligible to receive 50% of their spouse's Social
Security benefits and 100% if they were widows.
The Women's Institute for a Secure Retirement lists the ``Top 5
reasons why retirement is a challenge for women workers.''
Nearly three out of four working women earn less than
$30,000 per year.
Nearly nine out of ten working women earn less than
$45,000.
Half of all women work in traditionally female,
relatively low-paid jobs without pensions.
Women retirees receive only half the average pension
benefits that men receive.
Women's earnings average $0.72 for every $1 earned by
men--a lifetime loss of over $250,000.
Today's Social Security, although very important, is a
bad deal, especially for women.
The negative impacts of the ``dual-entitlement'' rule are
as follows:
``In most cases, women receive little benefit from their
husband's Social Security after his death.
Social Security pays survivors benefits only if his widow
receives lower benefits than her husband did.
If a wife receives either the same or larger monthly
Social Security retirement benefit as her husband, all she gets is a
$255 death benefit.A
A married woman, with a good job, whose husband dies
before his retirement could receive a paltry $255 death benefit from
Social Security and nothing more.
Today's Social Security is not fair to divorced women.
The Social Security Act requires that a marriage must last for at least
ten years before a divorced woman is eligible to share her former
husband's Social Security retirement benefits. The average marriage
today lasts 7 years.'' (Heritage Foundation)
Social Security, particularly the ``dual-entitlement'' rule, has a
disparate impact on women because they typically earn less, work fewer
years, and live longer than do men. The Social Security Administration
reports that 24% of married and widowed women have their benefits
slashed by the ``dual-entitlement'' rule. By 2040, it will be 39%. The
GPO only exacerbates this inequity!
Ms. Jo Anne B. Barnhart, Commissioner of Social Security, in
remarks made after her written testimony on the GPO/WEP before the
Senate Committee on Governmental Affairs, September 24, 2003, commented
that the ``dual-entitlement'' rule was also an ``equity issue.'' She
stated that the cost to repeal the GPO/WEP would be $61.9 billion over
10 years and $500 billion to repeal the ``dual-entitlement'' rule. She
also said that ``it may not be feasible this year (2003) or next to
repeal the GPO/WEP'' and suggested waiting as part of the Social
Security reform.
President George W. Bush, in his April 28, 2005 Press Conference on
energy and Social Security said the following: ``One other point on
Social Security that people have got to understand is that it's--the
system of today is not fair for a person whose spouse has died early.
In other words, if you're a two-working family like families are here
in America, and--two people working in your family, and the spouse dies
early--before 62, for example--all of the money that the spouse has put
into the system is held there, and then when the other spouse retires,
he or she gets to choose the benefits from his or her own work, or the
other spouse's benefits, which is ever higher but not both. See what
I'm saying? Somebody has worked all their life, the money they put into
the system just goes away. It seems unfair to me. I've talked to too
many people whose lives were turned upside down when the spouse died
early and all they got was a burial benefit.'' He was talking about the
``dual-entitlement'' rule.
Other comments on current or proposed laws for your consideration
regarding the GPO/WEP and the ``dual-entitlement'' rule are:
Private Retirement Accounts (PRA's)
Social Security taxes paid into the Social Security ``Trust'' Fund
are not legally ours and our families have no inheritance rights. The
6.2% proposal (H.R. 530) that will be divided between Social Security
and PRA's is the exact same tax, except for one major difference--one
we own (PRA's), and one we don't (Social Security) due to two different
laws. How logical is that?
Medicare and Social Security
I have never paid into Medicare while working, yet am eligible for
it on my spouse's record. I have never paid into Social Security while
working, yet am eligible on my spouse's record only if I didn't work.
What is the difference if I worked and never paid into Social Security
or never worked and never paid into Social Security? Why am I eligible
for Medicare benefits (based on my spouse) and not Social Security
benefits (also based on my spouse)? I didn't pay into either one. The
eligibility for either one is based solely on my spouse. How logical is
that?
``Dual-Entitlement'' Rule
This is an unjust and unfair law for 6.5 million people. Using
specious reasoning as the basis for justifying the GPO only compounded
an already poorly conceived law. How logical is that?
Widow's Plight
A widow may receive her own or deceased spouse's full Social
Security while still working in non-covered employment. When she
retires and needs her Social Security the most, her own Social Security
is reduced (WEP) and she completely loses her widow's Social Security
benefits (GPO). How logical is that?
Social Security Harassment
The Social Security Administration expects non-covered retirees to
report their annual COLA to Social Security. The Social Security
Administration will then reduce their already severely limited Social
Security benefits. Their COLA's are wiped out by their Social Security
decrease so they can never get ahead to pay for such things as
increased medical premiums or bills. How logical is that?
Chairman McCrery, the fairest, most honorable solution is to repeal
the GWO/WEP. The GPO/WEP issue is non-partisan. It goes beyond
politics. It affects voters of all parties. It is not a ``structural''
part of Social Security and, therefore, can be voted on separately. It
is a situation similar to H.R. 5, the ``Earnings Limitation Act,'' a
poorly written public policy and injurious law that was repealed on
April 7, 2000. It received complete and total support from Congress. If
poorly conceived laws, with negative unintended consequences, have been
repealed by Congress before, it can be done again. It's never too late
to make amends. I urge you and the entire Sub-Committee on Social
Security to support H.R. 147, ``The Social Security Fairness Act of
2005.'' I think the title says it all.
South Portland, Maine 04116
June 23,2005
Dear Committee Members,
I am writing to offer my concerns regarding my loss of social
security benefits as a result of taking a job in public education. I
believe may fall under the ``windfall provision''.
I am 42 years old and a special education teacher. I started paying
into social security as a teenager and have continued until five years
ago. Five years ago I took a job as a kindergarten special education
teacher in a public school. Prior to this I had worked in places such
as day treatment schools, residential treatment schools, and even the
preschool component of public school special education (Child
Development Services); all the time paying into social security.
After I took the position in the public school, I learned that I
would no longer be paying into social security, but would need to pay
into Maine State Teachers Retirement.
I was stunned to later learn that if I stayed to retire, I would be
losing a large portion of my twenty years of social security benefits.
Because I moved to a public school position at a later age, I am in
a bleak position for retirement. I love my job in the public school and
hope to stay, but I worry that if something is not done to restore my
social security benefits I may not be able to do that. I do have some
small retirement savings and I work hard to save every penny I can.
However, if my years of social security investments are taken from me,
I know that I will be in serious trouble for retirement. That really
scares me.
I just don't understand why I am being, what feels like,
``punished'' for moving to serve in a public school. I believe that I
would not have taken a public school teaching position had I known of
this punitive consequence. We need good people in public education. I
feel that this is a disincentive for good experienced people to move
into public school jobs.
There are several other teachers, here, that are in the same
position. We moved into public education later in our careers, and are
extremely concerned about our loss of social security. We love teaching
in the public school. We want to stay in public education. We need our
social security in order to live when we retire.
I don't think that this loss happens to people in similar positions
in all states, but it does happen here in Maine. That just does not
seem right.
I just keep hoping that people like you, who work hard to represent
us, will recognize the unfairness of this provision and the
consequences it presents for individuals like me and for public
education and will work to fix it.
Thank you for considering my letter and for your work on the
committee.
Lisa Crowley
Statement of Margaret Daniels, Hurst, Texas
I am a retired elementary school secretary for the Hurst-Euless-
Bedford School district in Bedford, Texas. I became a secretary for the
school district while my children were in secondary school to have my
working hours more in accord with theirs. I previously worked in banks
under Social Security. I began drawing my own Social Security when I
was 62 years old. I have been affected by the WEP offset for my own
pension. However, that does not affect me as much as the GOP offset
will should my husband pass away before I do. I would like to be able
to draw the portion of his Social Security benefits that I would even
if I had never worked during our marriage. I know this is a hard
decision for you to make at this time. I believe Texas is one of the
last sixteen states to not have repealed this. My daughter-in-law is a
teacher in Louisiana and I believe will also be affected. Your
consideration of this matter in your committee will be greatly
appreciated.
Statement of Jennifer Dannenberg, Skyline High School, Berkley,
California
I am a public school teacher at Skyline High School in Oakland. I
have taught for 10 years; before that, I worked in administrative jobs
with nonprofit organizations that helped families who have children
with disabilities.
Since I am already 55, I will not have a very large STRS benefit by
the time I retire in 8 years, and I will need my entire Social Security
benefit to live. It is unfair that teachers and other state employees
are not able to draw the full Social Security benefit. Why are we
penalized in this way? I qualify for a full benefit, and yet I cannot
collect it.
A teacher shortage currently exists in this state and threatens to
become more serious as new teachers enter the profession at a rate
slower than the retirement rate. We need to attract teachers who, like
me, are interested in changing careers mid-life. Continuing to disallow
the enjoyment of one's accrued Social Security benefit if one is also
collecting STRS will discourage qualified people from joining the ranks
of California public school teachers.
Statement of Robert Davis, Rockwall, Texas
I thank you for this opportunity and would like to commend you for
making the needed repairs to our Social Security system. My area of
concern is the WEP and GPO. I recognize the need for adequate funding,
but it was not the intent of adequate funding to punish the underpaid
government workers such as the teachers. Texas retired teachers have
not had an annuity raise since 2001 and the GPO and WEP prohibit raises
from Social Security. The second reason is that the payment of Social
Security with the penalty amounts to an extra Income Tax. This request
is in behalf of all the retired government workers that have paid the
required 40 quarters. I implore to follow your beliefs and continue
your excellent record of service by repealing the provisions.
Thanks
Skyline High School
Oakland, California 94618
June 17, 2005
To Whom It May Concern:
I teach in an inner city school and, living in the Bay Area as a
single person am unable to purchase property. I fear in the future an
extremely low standard of living despite the hard work I will have done
for this country.
Please consider that we who are in need of full compensation for
the security benefits we have earned are all diligent servants of the
people.
Sincerely,
Lynn Delaney
Teacher
Statement of Edward Derman, California State Teachers' Retirement
System, Sacramento, California
The California State Teachers' Retirement System (CalSTRS) provides
retirement benefits to more than 754,000 active and retired public
school teachers and their beneficiaries. California public school
teachers are the largest single group of State and local government
employees in the country who do not participate in the Social Security
system.
On behalf of the 1,200 local school districts of the California
public school system that educate California's children, CalSTRS wishes
to express its very grave concern over any proposal to impose on these
school district employers mandatory Social Security coverage with
respect to newly-hired teachers.
CalSTRS was established by State law in 1913 to provide a defined
benefit pension for the State's public school teachers. Thus, CalSTRS
was in operation some 22 years before Social Security even was created.
At the time Social Security was established, California's teachers and
all other State and local government workers were barred by Federal law
from participating. Accordingly, forced by the Federal Government to go
its own way, CalSTRS has successfully provided retirement benefits to
generations of retired teachers in California.
Through sound management over nine decades, CalSTRS has developed
into the third largest pension system in the United States, with
754,000 active and retired members and assets of more than $125
billion. CalSTRS currently pays out more than $5.6 billion a year in
retirement, disability and survivor benefits. Unlike the pay-as-you-go
Social Security system, the State of California has pre-funded its
future retirement liabilities.
We recently had our independent actuaries, Milliman, analyze the
impact of a mandatory coverage proposal on CalSTRS. (See Milliman
Letter dated March 30, 2005, attached). A proposal to mandate Social
Security coverage for all newly-hired State and local government
workers would impose a major new Social Security payroll tax burden of
12.4 percent of payroll on local school district employers and
employees in California. The 12.4 percent of payroll tax cost of
mandatory Social Security coverage would result in an average
additional cost of about $4,300 with respect to each new teacher, based
on an average starting salary of about $35,000. This new 12.4 percent
of payroll Social Security tax cost would be imposed on top of the
16.25 percent of payroll cost that is paid by employers and their
employees to fund the current CalSTRS retirement plan. California's
school districts simply could not shoulder such an enormous overall
retirement cost burden.
To accommodate this heavy new Social Security payroll tax burden,
employer contributions to the CalSTRS retirement plan would have to be
pared back significantly under a new plan coordinated with Social
Security. However, the school districts would be left with sharply
higher total costs to deliver a combined Social Security and CalSTRS
retirement benefit on a par with the current CalSTRS benefit. The
current CalSTRS plan produces a much greater retirement benefit than a
plan coordinated with Social Security for the same level of
contribution. This is because State and local government retirement
plans such as CalSTRS--whose assets are invested in the private capital
markets--produce a substantially higher investment return than is
credited under the Social Security system--even if a portion of the
Social Security payroll tax were to be invested in private accounts.
Thus, the cost of benefits provided under Social Security is
significantly greater than the cost of equivalent benefits provided
under the current CalSTRS plan. Accordingly, if Social Security
coverage were to be substituted for a significant portion of the
current State pension plan benefit, the employer's overall retirement
costs would have to increase sharply in order to fund the same level of
retirement benefits as currently provided to California's retired
teachers under the CalSTRS plan.
Milliman calculated that mandatory Social Security coverage for new
teachers would drive up total retirement costs for California school
districts by an additional 7.487 percent of payroll simply to fund the
same level of retirement benefits as currently provided to California's
teachers under the CalSTRS plan. The 1,200 local school districts in
California have a combined annual payroll for teachers of almost $24
billion annually. Therefore, a proposal to impose mandatory Social
Security coverage for new teachers will increase local school costs by
as much as $1.5 billion annually, cutting into the budgets they
establish to educate our children.
Simply cutting current retirement benefits for California's
teachers would not be a viable way to absorb the harsh new cost burden
of mandatory Social Security coverage. CalSTRS's independent actuaries
have calculated that the current CalSTRS
retirement benefit would have to be cut by about 75 percent in order to
keep the overall cost of a new CalSTRS plan coordinated with Social
Security on a par with the current cost of the CalSTRS plan.
State and local governments have only two responses available when
confronted by such a heavy cost burden imposed by the Federal
government: raising taxes or cutting spending on other essential
government services. School district administrators have indicated to
CalSTRS that a serious reduction in education services would be
necessary in order to address the increased costs of mandatory Social
Security coverage.
A case in point is the Hemet Unified School District, located in
Riverside County, California. Attached is a copy of an analysis that
the then-Hemet District's Superintendent prepared several years ago
regarding the cost impact of a mandatory Social Security proposal on
his district. (See statement on behalf of the Hemet School District by
its Superintendent, Stephen C. Teele, Ph.D., dated September 7, 2001).
His analysis of impact is equally applicable today. According to
Superintendent Teele, the Hemet School District serves 18,000 students
in 20 schools throughout rural and suburban communities within a 730
square mile area. Sixty-seven percent of the students reside in
families that qualify for the Free and Reduced Lunch program. Student
enrollment continues to grow at the rate of 2-5 percent annually.
Superintendent Teele's detailed budget breakdown underscores the
heavy cost burden that mandatory Social Security coverage would impose
on a local school district struggling on a budget already stretched
thin to meet the fiscal demands of educating California's children.
According to Superintendent Teele's analysis, after taking into account
current salary and facility costs, increased power costs, the cost of
operating a new school, the cost of recently-expanded special education
programs, and the cost of employing new teachers and staff to respond
to student body growth as well as class-size reduction and other State
educational reform initiatives, there would be no resources left to
absorb the harsh cost burden of mandatory Social Security, a cost
burden which will only grow over time as more new teachers are hired.
Accordingly, Superintendent Teele indicates, ``The proposal to
include new certificated personnel into the Social Security system will
have a significant negative impact on the District's ability to offer
quality educational programs and services at a time of increasing
demands from California's Education Reform and Accountability
Initiatives.'' (p. 2). Superintendent Teele concludes: ``[T]he Hemet
Unified School District is representative of school districts in
California that are maximizing all available resources to implement
successful programs and services in response to California's
Educational Reform and Accountability initiatives. This proposal not
only will have a detrimental impact on those efforts but also goes
contrary to President Bush's goal of improving public schools.'' (p.
3).
Conclusion
CalSTRS, its 754,000 members, and the 1,200 local school districts
in California strongly oppose any proposal to impose mandatory Social
Security coverage.
The members of CalSTRS--which predates Social Security--were barred
from participating in Social Security. CalSTRS was forced by the
Federal Government to go its own way and through sound management has
developed into a retirement plan that is capable of paying out over
$5.6 billion annually in benefits and shouldering all of its future
retirement liabilities on a fully funded basis.
Mandating Social Security on future California educators will have
a major impact on employees and school districts, limiting the ability
of districts to respond to efforts to improve the quality of public
education. Moreover, it likely bring about a significant reduction of
retirement benefits paid to future educators who perform a lifetime of
service to California schoolchildren, and undermine the financial
security of those educators in their retirement.
In essence, CalSTRS would be asked to cast aside decades of
successfully providing retirement benefits to generations of teachers,
in order to force new teachers into a retirement scheme coordinated
with Social Security that would provide reduced benefits at higher
cost. It is unfair at this late hour to destroy the CalSTRS retirement
plan--and indeed destroy the very success of private investment that
the Administration's personal accounts proposal evidently seeks to
emulate--by mandating participation to solve a longstanding solvency
problem in Social Security that the State and its school districts had
no hand in creating.
----------
Supplemental Sheet
California State Teachers' Retirement System contact:
Edward Derman
Deputy Chief Executive Officer
Plan Design and Communication
California State Teachers' Retirement System
Rockport, Massachusetts 01966
September 8, 2005
To whom it may concern:
My name is Therese K. Desmarais. I am the only child of first
generation Polish parents, the first girl in my extended families to go
to college. I paid my own way through a state college in order to earn
my Bachelor's Degree in Elementary Education, and then attend a private
university to complete my Master's Degree in Education. I was married
in 1965, and continued to teach full time, attend graduate school part
time and summers and raise two children.
When the children were born, I was not allowed to be in the public
schools beyond my seventh month of pregnancy. My husband was laid off
from a computer-based company and we moved to Massachusetts in 1970.
Since I was 100 miles away from both sets of grandparents and extended
family, I stayed at home to raise my two children until the youngest
was able to attend nursery school.
I returned to the public school on August 24, 1975 and worked for
two public school systems until my retirement at age 60, on August 24,
2002.
During that period of time, my parents began having age related
health problems. I cared for my mother until 1996 when I was forced to
turn to a nursing home to ensure her safety and medical attention. My
father began decline due to colon cancer. My husband, Richard, had a
serious heart attack in 1997, and I had to continue working because he
was self-employed and our medical insurance was available through my
employment.
In that same year, I was diagnosed with the same type of breast
cancer that my mother was recovering from in 1994. After two surgeries
and radiation, I could not longer continue to keep up with two round
trips from Sherborn, MA to Hartford, CT to care for my parents. I
managed my father's household affairs, bills and health related issues.
My father wished to remain in his home of fifty years, which he had
built. He wished to remain in his community, near his church and
familiar surroundings. I incurred many expenses caring for him, as he
had only his social security by which to pay many, many bills.
I incurred many bills while caring for them, as they were both
receiving Social Security. My mother's Social Security went toward
payment of the nursing home. My mother died in February of 2001. My
father died on Father's Day in June, 2001.
Both of our children attended college. Our daughter did a mid-
career change from finance to teaching, attending Harvard University,
Graduate School of Education in order to comply with certification in
Massachusetts for Math and Science teachers. She taught for two years,
and is presently on maternity leave with her second child.
My husband, Richard James Desmarais, died on February 12, 2004
after living in our retirement home for nine months. Our second
grandchild, Talia Therese was born on February 5, 2003. Those nine days
were filled with the most intense joy one could ever imagine.
Our son and his new wife were visiting us to meet the new baby when
Rich had his final heart attack here at home, and he died in my arms,
with my son and new daughter-in-law at my side. I can never forget the
sadness of the ensuing weeks and months. Richard's death caused his
ninety-one-year-old mother to be hospitalized with grief, in shock,
over the loss of her son.
I then began making all the arrangements for his funeral, tried to
sort out his company and our finances. It was at that time that I
realized that I was not eligible for his social security benefits as
his widow because I was receiving my teacher's pension from a private
retirement board.
Because of Rich's history of heart disease, (his father died of a
heart attack, his mother has had a triple by-pass, twice), he was only
able to get minimal life insurance. Since he was self-employed, he not
only paid his share of social security taxes, but twice that amount for
30 years.
Richard began working on tobacco in 1954 at the age of 14. He
worked very hard, providing all the necessities to both his children,
my parents, his mother who is still alive. He contributed to Social
Security for 50 years, expecting it would help us financially, along
with my retirement to allow us to live in our home, as independently as
our health would allow.
The Government Pension Offset (GPO) and Windfall Elimination (WEP)
are causing me the loose my home, my independence, my simple but
quality life style of caring for family and community members.
I have been receiving the social security benefit notices that
everyone else receives not knowing that I would loose them upon my
husband's death, when I needed it the most. I was not trying to cheat
or double dip, as the writers of the amended bill project. I needed it
to pay my mortgage, and now my rent, my taxes, my car insurance, my
food, clothing and fuel.
I urge you to consider the impact this is having on my family.
I urge you to consider my situation when you meet to discuss the
bill addressing the GPO and WEP. Richard paid into social security for
fifty years, so that he and his family would have financial security. I
do not have him to help me through this difficult time. Please consider
my situation, and know there may be many others who are depending on
your support of this action.
With sincere respect,
Therese K. Desmarais
Seward, Alaska 99664
June 8, 2005
Dear Committee Members:
Twenty three years ago I got a call from a professor at UAF who
said they wanted to interview me for a position there. My answer was,
``I have a job, I am a smokejumper.''
What she said next changed my life, ``Alaska is building the
greatest educational system in the world. With all your degrees/
endorsements and the languages you speak this would be perfect for
you.''
I am glad I took that challenge. Nonetheless, because I recently
terminated and then later retired I will have the super majority of my
SS garnished because I had the temerity to teach in Alaska. Alaska is
one of the few states where those of us who had a career teaching in a
public school are penalized by having the majority of our SS payments
denied.
As a USFS and BLM smokejumper I parachuted to fires across the
west. As an EMT I participated in numerous rescue jumps. On more than
one occasion I put my life on the line performing my duties as a
jumper. The Smithsonian just accepted a video/DVD I did titled,
``Twenty seconds over Birch Hill.'' It describes my freefall when both
my main and reserve chutes malfunctioned. I was fortunate to get an
opening 100 feet off the ground at almost 200 mph ie. one second from
impact. All of my jump buddies in the plane and on the ground thought I
had died. Better jumpers than I have died at Birch Hill when they had a
double malfunction and could not get either parachute to open.
For the U.S. government to tell me that I do not qualify for SS
because I was so unfortunate to retire in Alaska is like telling my
father, an 83 year old decorated WWII veteran, that he gets no benefits
because he retired in Utah.
During my career as an educator I have taught 22 different subjects
K through university. My students have gone on to careers in almost
every field imaginable. Yet I always was thrilled when one of them
became a teacher, and always encouraged them. How many of them know
that their SS will be denied if they teach in Alaska?
Sincerely,
Jerry S. Dixon
Biologist/Teacher of the Gifted
Statement of Carl L. Elam and Naomi J. Elam, Graham, Washington
The House Ways and Means Committee, Subcommittee on Social Security
Hearings on Protecting and Strengthening Social Security is of interest
to me because both my wife and I have had our Social Security benefits
reduced as a result of the Windfall Elimination Provision and my wife's
survivor benefits are essentially eliminated by the Government Pension
Offset.
Both of us were public school teachers and receive pensions from
those jobs that were not covered by Social Security. I also receive a
small pension from seasonal federal employment covered by CSRS and
FERS. My Social Security benefits were reduced by approximately fifty
percent by the WEP, and my wife's benefits were reduced even more.
My wife was not employed for over 15 years, caring for our
children, so her pension is small. Although she had several years of
significant earnings covered by Social Security, due to the WEP her
Social Security benefit amounts to only $2400 per year. To add insult
to injury, The Government Pension Offset essentially eliminates any
survivor benefits to which she might have otherwise been entitled from
my reduced Social Security.
The pensions received by retired state and local government
retirees are not noted for being lavish. To discriminate against
government workers and their survivors, who have participated to the
same extent as their counterparts in the private sector, by restricting
their Social Security benefits just because they are public employees
instead of private is unfair, and in fact, penalizes them for their
service. I urge the members of the Committee to do all within their
power to rectify this injustice.
Statement of Joyce R. Elia, Mission Viejo, California
As the Committee reviews the multitude of issues associated with
Social Security, I ask members to consider correcting a ``fix'' that
was initiated in 1983, and, to also not make similar mistakes this time
around (such as privatization which will line the pockets of Wall
Street and cost billions of dollars to implement). Congress has made
the same mistake as many corporations recently in the news--they have
``spent'' the hard-earned pension funds of workers during the stock
market's heyday and have now been ``caught short''. Workers in this
country have had enough of the corporate greed and fiscal
irresponsibility of government. We are tired of ``paying'' for
everyone's mistakes, while the corporate CEOs continue to live the
``good life'' with no understanding, and with a complete lack of
conscience, of how the ``real'' people in this country live.
The private sector continues to follow the government's lead in
cheating employees out of their retirement benefits (United Airlines,
possibly General Motors, to name a few), with the government's
blessing. At the same time, like Congress, the retirements for the
``chosen few'' are preserved. The hardworking, tax-paying individuals
of this country deserve better and we expect you to act responsibly.
President Bush espouses a Christian ethic. There is absolutely nothing
``Christian'' about defrauding American workers with high taxes and
erosion of their pensions.
As a current government (court) employee and former private sector
employee, I am seeking your support of HR 147, ``Social Security
Fairness Act,'' to eliminate the Government Pension Offset (GPO) and
Windfall Elimination Provision (WEP) to Social Security. This
legislation was enacted in 1983, during a period when Congress was
looking for ways to reduce the cost of Social Security. Their decision
to place that burden on the backs of government workers and teachers
has created a fraudulent and discriminatory solution which wrecks
financial havoc on the lives of affected individuals.
The GPO and WEP will greatly affect mine and millions of other
Americans' ability to collect the full Social Security benefits that
they have earned and to which they are entitled. This is a non-partisan
issue that transcends politics and affects voters of all parties.
Three years ago, a co-worker returned from her ``retirement
planning session'' crestfallen to learn that the small pension which
she had earned working for the Orange County Superior Court was going
to dramatically impact the receipt of her earned (as well as her
ability to collect her husband's earned) social security benefits. Her
situation will become worse, should her spouse predecease her. She will
not be eligible for any spousal benefits, which he worked a lifetime to
earn in his effort to provide for his wife. At the time, I was totally
unaware of these two laws and their impacts. I had worked in the
private sector for many years before ``retiring'' to raise a family.
When I returned to the workforce in 1994, to work as a Senior
Administrative Assistant to the CEO of the South Orange County
Municipal Court (unified to Superior Court in 1998), I was not informed
by the County/Court that paying into the County retirement system would
negatively impact my ability to collect mine and/or my husband's hard-
earned Social Security benefits. The County retirement plan is
predominantly self-funded by employees, with only a small portion of
the contribution coming from LOCAL (not Federal) taxes. I erroneously
assumed that any pension I earned would supplement my earned Social
Security benefits. These laws force me to either leave my job, friends
and an important part of my life prior to ten years of service
(vesting) or relinquish my own and my spousal rights to Social
Security. It punishes me for doing what the government told me to do--
plan for the future. (I would have been better off staying at home and
letting the government subsidize me.) The outcome is discriminatory and
dishonest, as well as disheartening, to a loyal hard-working employee.
The laws are arbitrary and selective--being particularly
discriminatory to women. Women receive only half the average pension
benefits received by men and these laws further reduce that small sum.
Please preserve teachers' and government workers' retirement
benefits that they have paid for and deserve by passing HR147, which
will repeal legislation which in actuality is ``legalized fraud,''
(i.e., the government has taken, or in many cases, continues to take
monies via social security taxation, which it has no intention of
returning by way of future benefits). Numerous teachers and public
workers (many of whom are single Moms), have part-time employment to
make ends meet. From those private-sector checks, social security is
being deducted . . . when under current laws, that money will never be
returned. If private companies acted in such a manner, they would be
charged with FRAUD.
I have included a briefing paper which expands on the legislation's
impacts.
I urge Congress' support and passage of this important legislation.
I also urge Congress to look into other areas for savings: reduction/
restructuring of Congressional retirement benefits; reduction in
foreign national benefits, fairer taxation, to name but a few.
I do not support private accounts OR melding government/teacher
pensions into Social Security. This practice would place yet another
undue burden on this class of individuals. Their pensions should be
treated in the same manner as private sector retirement plans--separate
and apart from Social Security.
Additionally, Congress makes it increasingly difficult for
individuals and families to save for their retirement, especially when
the interest on SAVINGS accounts are taxed.
Statement of Charles Fallis, National Association of Retired Federal
Employees, Alexandria, Virginia
Mr. Chairman and members of the Committee, I am Charles L. Fallis,
President of NARFE (the National Active and Retired Federal Employees
Association). I am submitting testimony today, for the record, on
behalf of the more than 4.6 million federal annuitants and workers.
The Government Pension Offset (GPO) and the Windfall Elimination
Provision (WEP) are two Social Security provisions that continuously
have an adverse affect on the quality of life of a significant number
of our members. We have been told, many times over the years, these
provisions should not be addressed until Congress considered ``the full
context of Social Security reform''. Finally, that day is here. We know
that you, Mr. Chairman, fully understand that we cannot afford to wait
any longer to address changes to these onerous offsets--changes which
have considerable support both here in the House and in the Senate for
repeal or reform. You and your colleagues in the state of Louisiana,
have a significant number of constituents that are among the most
adversely affected beneficiaries in the country by these offsets.
In 1935, when the Social Security Act was originally enacted, it
provided the same benefits to workers, with and without spouses, and
provided no survivors' benefits. The Social Security Act Amendments of
1939 added spousal and survivor benefits to provide extra protection to
workers with families. But in the past two decades, some spouses and
survivors have been shortchanged on this ``extra protection''.
The GPO Social Security Act amendment, originally enacted in 1977,
went into effect in 1983, and since then has affected over 350,000
federal, state, and local retirees. This figure grows by approximately
15,000 each year. The GPO reduces or eliminates the Social Security
spousal or survivor benefit to which an affected retiree may be
eligible. Two-thirds of the amount of the monthly government annuity
that a public servant has earned, is applied as an offset against
whatever Social Security spouse/survivor benefit might be payable. By
all accounts, the use of two-thirds of the public retirement income as
offset against the Social Security income is an arbitrary percentage.
As such, we believe it can and should be reexamined and changed.
Current WEP law greatly reduces the Social Security benefit of a
retired or disabled worker who also receives a government annuity based
on his/her own earnings. It applies to anyone who becomes 62 (or
disabled) after 1985 and becomes eligible for her/his government
annuity after 1985. The Social Security WEP has already affected over
695,000 retired federal, state and local government employees.
Thousands more will be affected in the future because that number grows
about 60,000 annually. This so-called windfall reduction can reduce the
worker's monthly earned Social Security benefit by as much as 60
percent or up to approximately $313.
NARFE has worked for over twenty-eight (28) years to repeal or
reform the GPO and approximately twenty-three (23) years to do the same
to the WEP. Both offsets have denied many of our older members,
particularly women, the economic dignity they had been led to expect in
retirement. Indeed, the elimination and reduction of these benefits
have forced thousands of elderly government retirees back into the
workforce--not by choice--but by economic necessity. I, therefore, urge
this Committee to include the repeal or reform of the GPO and the WEP
provisions as you develop your plan for Social Security Reform in this
109th Congress. This would restore earned benefits for women and other
retirees.
Mr. Chairman, and members of this committee, I previously testified
that the harshness of the GPO and WEP, as they exist today, cause both
fears and tears among thousands of older retirees. Fears for their
financial futures, and tears of frustration that Congress has not acted
sooner to reform this provision despite widespread support for doing
so. I hope the tears of frustration are about to be wiped away as you
include corrective measures within your plan for Social Security Reform
to repeal or reform the GPO and the WEP offsets.
There are several GPO and WEP bills pending before the Senate today
which would offer relief to the hundreds of thousands of current and
former teachers, school cafeteria workers, postal workers, VA nurses,
social security employees, and others who worked long and hard to help
support their families. In fact, many Representatives of this 109th
Congress, and several members of this committee, including you, Mr.
Chairman, have already acknowledged the need for changes in Social
Security to include some means of reforming the GPO and the WEP.
Chairman McCrery, during the past three decades members of Congress
have received many letters and phone calls from NARFE members who are
constituents, not just in Louisiana, but throughout the country. All
describe in detail the anguish and economic hardships they experience
every day because of the GPO and/or the WEP. I reiterate that for
hundreds of thousands of federal, state, and local government retirees,
the repeal of both of these offsets would diminish, and in some cases
eliminate, the devastating financial hardships they endure because of
the effects of these onerous laws.
The Social Security system has endured and will continue to endure
some serious challenges and concerns over the next century. None of us
can predict what this program or our economy will be like seventy-five
years from now, even though we try. And unfortunately, none of us here
today will be around to know. One thing is certain; reform is needed
and some form of change is inevitable.
Social Security Administration actuaries have determined that the
repeal of the GPO and the WEP would increase the size of the OASDI
actuarial deficit by an amount estimated at 0.11 percent of taxable
payroll. This amount is not negligible but when included in a total
Social Security reform package, it will help significantly to alleviate
the hardships that retired government employees have to endure with the
current GPO and WEP. The cost, I am sure, will be deemed negligible
when included in the overall cost to maintain the solvency of our
Social Security system over the next fifty years or more. Moreover,
repealing or reforming the GPO and WEP would have a substantially lower
affect on the system than Congress' decision to repeal the Social
Security earnings test in March 2000.
The President has stated in the past that, ``. . . America's
greatest economic strength is the pride, the skill, and the
productivity of American workers.'' Mr. Chairman and members of this
subcommittee, he is absolutely right. NARFE members, along with the
other federal, state, and local government employees and retirees in
this country are the proud, skilled, and productive American workers of
yesterday, today and tomorrow. They continue to support and strengthen
our nation's economy, and serve our country, to the best of their
ability, as they continue to work, even though these heinous offsets
debilitate their efforts to significantly contribute. Please allow them
to significantly increase their financial efforts in support of this
country's economy by returning to them that which they have earned. If
they are ever to feel vindicated, these punitive offsets must be
repealed or reformed now.
I commit to you today that, on behalf of NARFE's 400,000 members,
we stand ready to work with you and the members of the House Social
Security Subcommittee to expeditiously resolve these issues ``in the
context of full Social Security reform''.
Statement of Judith Flynn, Federally Employed Women, Corvallis, Oregon
I very much appreciate the opportunity to submit this written
testimony on the impact of the Government Pension Offset (GPO) and
Windfall Elimination Provision (WEP) Social Security provisions, and
their adverse and unfair impact on me--a federal retiree. First I want
to thank Chairman Jim McCrery and the other legislators serving on this
Subcommittee for conducting this important hearing. As a retiree being
adversely impacted by these provisions, I urge all Subcommittee
members, and lawmakers, to repeal them as soon as possible and allow me
to receive my full social security benefits.
I am a CSRS offset retiree because I temporarily left government
employment to finish my college education. At that time (working for
Oregon State University, Corvallis, OR) and previously (employed by
Harcourt, Brace publishers, New York, NY), I worked in the private
sector in excess of the required quarters to have earned the rights to
my Social Security payments. I also worked 24 years for the Federal
Government (USDA-Agricultural Research Service) in order to obtain my
entire earned annuity from the government.
I should not be penalized at all in my earned benefits simply
because I worked as a public servant. Yet am losing 12.5% of my Federal
Annuity each month due to these provisions.
GPO and WEP are truly unfair to federal workers, and need to be
repealed. Thank you for your help and consideration in fixing this
problem.
Brownsville, Texas 78521
September 12, 2005
Committee on Ways and Means
Social Security Issues
GPO and WEP
Dear Sir or Madam:
I would like to plead to you to eliminate the above provisions from
Social Security.
I am a retired teacher and my husband is a retired police officer.
I do not necessarily care if I receive a benefit, as I have not worked
the required 40 quarters under Social Security.
Nor do I care if I receive a spousal benefit.
However, my husband HAS. He took any number of off-duty jobs in an
effort to support his family at a time when pay for police officers was
very low. He is now retired with a total service connected disability,
which requires an inordinate amount of medication every month. If he
had his Social Security benefit, even though it is less than $400 per
month, it would go a long, long way toward alleviating his expenses.
But even if he did not need the money, the fact is that he EARNED that
benefit and the rules were changed toward the end of his career. This
does not seem quite fair to me.
Again, I am not particularly asking for repeal so that I can
collect a spousal benefit but because my husband EARNED his benefit and
is being denied that benefit.
Yours truly,
Cheryl Fowler
Statement of Marilyn Sprang Fransen, Rapid City, South Dakota
I was a music teacher in Colorado from 1963 to 1975. When I quit
teaching I went into business and took out in cash what had been put
into the retirement association. I was married with two children and
felt ``burned out'' by the demands of teaching.
In 1981 I returned to the school district but in the capacity of an
elementary office manager or secretary. I felt that my work was every
bit as important to the edu-
cation of the children of this school as my teaching had been, perhaps
more so, because I knew the demands upon teachers and I aided them in
every way I could. I also became nurse: surrogate Mommy; liaison
between teachers, administrators, parents, and other community; and
believed that I accomplished much toward making the school run smoothly
and efficiently. I stayed happily in that position for sixteen years
and bought back some of the teaching years' retirement benefits so that
I could retire in 1998.
Because I retired as a classified employee and not a certified
employee my retirement is only adequate and just above poverty level. I
was never informed about the GPO/WEP laws that came into effect in
1983. I had realized that no Social Security had been taken from my
salary those years but I also knew that as a married spouse and later
as a divorced spouse I would be eventually eligible for half of my ex-
husband's benefits as a supplement. I realize now that my divorce
lawyer was not aware of the laws either. Also, because of the animosity
of my ex-husband I was driven into bankruptcy, and I truthfully believe
my lawyer for that process was not aware, also, of the laws. I finally
learned about my predicament when I applied for my benefits after
turning 62 in July 2002!
It came as a complete shock. I contacted friends and co-workers in
the school district where I was employed and learned that they, also,
were in ignorance about the effects these laws would have on their
lives. They didn't and still don't believe me. The laws are so
complicated to understand. I've had three years to try to verbalize
what I believe has happened to me and it is still hard to make sense of
it. I am weary of this problem and worried about how I will be able to
live out my senior years on such a limited budget.
Because of the loss of much needed Social Security supplemental
benefits I am forced to work again despite health issues. I try to make
enough each year to put money into an IRA. How unfortunate for me that
I wasn't aware of this problem when I was working those years 1983
to1998 in the schools. I could have been investing money in other ways
then for this time in my life.
I have been actively trying to contact Senators, Congressmen, the
White House, AARP, NEA, and anyone who will listen to my plight and,
always it seems, it falls on deaf ears. I have given up hope that the
GPO will ever be repealed but, to me, the most unfair law is the WEP.
Now that I have been forced back to work I am contributing to Social
Security with the knowledge that I will never get back the benefits in
total that people in the other 35 states of the U.S. not affected by
WEP will get. My retirement from the school district which I served is
so little how could anyone believe it is ``a protection against double
dipping by highly paid State Employees'' to deny me my full benefit?
I am convinced that the WEP arm of the SS Pension Offset Law is
unconstitutional. I am abeing denied, after the fact, the right to
pursue happiness in being able to provide ably for myself in my
declining years!
It is too late for me to make up the loss of several hundreds of
dollars a month for the rest of my life. What difference should it make
upon my eligibility for complete benefits that I worked at very low pay
for 20+ years as a school secretary? It is absurd that this badly
written law should have not had a floor on it so that people in my
salary range wouldn't be victimized in this way. I am also convinced
that this law discriminates against women who are in lower wage slots
in the states that are affected. Most of my co-workers in classified
positions--cooks, kitchen managers, office clerks, bus drivers,
custodians, nurses, teacher instructional aides, and etc.--were women
by a large percentage as they are in most every school. We all know
very well that statistics bear out the fact that these women live
longer than their spouses and will suffer either widow-hood or divorce
in their later years when supplementary benefits will be critical to
them!
Classified personnel have no one to lobby for them, no national
associations that I have been able to find; and, frankly, do not
comprehend what is being done to them. As I stated before I am having
great difficulty convincing them that this law even exists. It is not
particularly humorous to me that one senator in one of the affected
states admitted to an acquaintance that he didn't even understand the
law when he signed for it's legislation in 1983!
I am praying that the wrong will be made right. I am praying that
my country's governmental representatives will see the injustice I am
seeing. And I am praying that when I reach my own 40 credits in a year
or so I will be able to receive my full benefits and not something
lowered by a complicated formula thought out erroneously in 1983!
Please consider my situation and do the right thing.
Statement of Janet Frost, San Francisco, California
Thank you for the opportunity to submit a statement. I am a
Licensed Clinical Social Worker in the State of California. I have
worked for the San Francisco Unified School District for the last 16
years, and became an employee about 5 years ago. Before that, I had 22
years of substantial earnings and paid social security during all those
year.
I came to work at a school district because I have a strong
commitment to the youth of our country. There is a tremendous need for
resources in our public schools, and I have done my best to leverage my
skills, knowledge and license to develop a program to assist school
sites in dealing with student mental health issues. I have developed an
internship program for our district which provides placements at school
sites for graduate students in clinical psychology, social work and
marriage and family counseling. These graduate students provide
individual and group counseling to our students and in return receive
clinical supervision towards their own licensure, or university credit.
It is a win-win situation, giving graduate students an opportunity to
practice their skills and providing the kind of attention and support
that many, many of our students desperately need.
I tell you this because it is clear to me that there are many
people in the private sector who would happily work for and make a
contribution to our school system, but do not want to risk losing the
retirement funds for which they have worked so hard. Our schools are
desperate to create new programs that will provide for our student's
needs. We need more help with math and science as well as mental
health. We are asking retired scientists and mathematicians to come to
our schools and teach. But, would you risk losing 50% to 60% of you
Social Security to do so?
Now that I am vested in CALSTRS I will only receive 50% of my
social security due to the windfall elimination provision. While this
may not be a great sum of money, I am appalled that I feel like I had
to chose between providing for the future of our society and providing
for my own later years.
Please do your best to understand this problem for those of us who
have had other careers before coming to work for our schools. We are no
longer a society where on career lasts a lifetime. We want the best and
the brightest to work with our children. Let's try not to punish those
who decide they want to offer something to our future, rather than just
earn a dollar for themselves.
Statement of Cecile M. Galvin, Orange County (CA) Employees
Association, Laguna Niguel, California
Thank you for giving me this opportunity to write to you.
When I married in 1957, as a wife of a brand new Ensign in the U.S.
Navy I did not work. Most wives did not work at that time because of
our life long commitment to our marriage and the anticipation of having
children. By 1965, we were the proud parents of six children. It took
every ounce of our income and loans to raise them and put them through
private schools and private universities and we would not have it
otherwise. Today, because of our ultimate sacrifice, we do not own a
home, we do not have any savings and we live from month to month. This
is our life and I will continue to work because my paycheck is not
enough to cover our expenses and we are both in our 70's. Since I am
still working, I am collecting S.S. and we need every bit of that along
with my paycheck to make ends meet.
I am writing you concerning the above penalizing social security
laws that were passed some years ago. I will be affected by these laws
twofold. First, I have been a judicial secretary in the court system
for over 21 years. Prior to these years, I worked as a secretary and
paid into social security and am eligible to receive social security
benefits. Had I known that I would lose two thirds of my SS when I
joined our court system, I would not have joined as this was never
communicated to us. I am now faced with a dismal future with regards to
my retirement since I will turn 72 on August 17, 2005.
I want to retire but I cannot afford to lose the SS checks I am
receiving now. I need them to live without begging otherwise I will
have to find another job. I don't look forward to that. With age comes
a time when you feel you aren't doing your job as well as you did in
earlier years. Maybe the decision will be made for me in the form of
letting me go. It's not comforting.
Secondly, when I retire, why should I lose my husband's portion of
SS if he qualified for it? Thirdly, if he should die before me, I would
get nothing. Is that fair? Would you leave your wife/husband in the
same predicament? How about your mother? Working wives should have the
same rights to a spouse's full benefits as non-working wives. That is
only fair.
This is not double dipping for us; it is double dipping for the
U.S. Government which puts us in the poverty arena and so I will have
to continue working until my demise or until I am unable. I would like
your views on this topic. Have they approached you regarding these
specific laws? This is a non-partisan issue and goes beyond politics
because everyone has a relative, relatives or friends that will retire
some day. What will you say to them when they find out that they are no
longer entitled to the benefits of the SS system that they paid into?
The cost of implementation should NOT be cited as a reason for not
acting, especially after reading this article in our local paper.
As one example of government waste but it sure points out the truth
about unnecessary and unbelievable overspending which we as taxpayers
are paying for. On June 9, 2004, this article appeared In the Orange
County Register.
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$100 million in plane tickets wasted
WASHINGTON The Defense Department spent an estimated $100 million
for airline tickets that were not used over a six-year period and
failed to seek refunds even though the tickets were reimbursable,
congressional investigators say.
The department compounded the problem by reimbursing employee
claims for tickets bought by the Pentagon, the investigators said.
To demonstrate how easy it was to have the Pentagon pay for airline
travel, the investigators posed as Defense employees, had the
department generate a ticket and showed up at the ticket counter to
pick up a boarding pass.
Congress' General Accounting Office issued the findings in two
reports on the Pentagon's lack of control over airline travel. A prior
report found that the Pentagon bought 68,000 first-class or business-
class airline seats for employees who should have flown coach.
Our government is currently spending billions of dollars on a war
in Iraq, rebuilding Afghanistan, returning to the Moon and Mars,
starting a temporary worker program for illegal immigrants, enhancing
Congress' pay annually, providing benefits to people who have NEVER
contributed to the system AND providing benefits to foreign born
nationals.
The government workers and teachers of this country who have
contributed to Social Security throughout their lives deserve better
treatment. We are watching our elected officials and our votes will
reflect the response we receive from Congress on this issue of grave
importance.
Hopefully, I will be guaranteed the retirement benefits paid for
and deserved. Please, please support the Social Security Fairness Act
HR 147. Thank you for your attention to this matter that so greatly
affects the quality of life for seniors in this country.
Longview, Texas 75605
June 11, 2005
I am a third grade teacher in Longview, TX. I have taught for 17
years because I believe that our children are important and deserve our
best efforts to provide a decent education.
When I began teaching, no one told me that I was giving away all
the money I had already paid into our social security system. I was 41
years old when I began to teach and had been working in the general
workforce since I was 15 years old. My husband was killed in an
accident at work before I began teaching and again no one told me that
I would be ineligible to draw widow's benefits. I have taught from a
wheelchair for 13 of my 17 years and recently discovered that I am not
eligible for SS disability if I can not continue due to my health. I
had polio when I was 3 and have always been a productive member of our
society even though I am handicapped. I have not asked to be allowed to
just lay down and let someone else pay my way.
Many of the teachers I work with have worked second jobs most of
their teaching careers. They have paid into social security (no
choice), but are not allowed the benefits of the general public (some
of which have never paid in to the system).
Widows that have never worked outside their homes are entitled to
their spouse's social security. Teachers, who are public servants, are
not allowed to draw from that same fund. I must admit to being confused
by the logic.
Texas teachers are not given the choice as to whether or not to pay
into social security system. Given a choice, I would have had a private
pension and social security--as is given to most employees. Many
government employees have extremely good retirement--don't they.
Teachers are not drawing huge retirements. After 20 years, I will
draw about $1300. a month. Out of this, I must cover health insurance
and prescriptions, maintain a home, car, and food. Not exactly the lap
of luxury. If I could draw my own social security or widow's benefits
from my husband's social security, I could possibly have a fairly
decent lifestyle after giving so much to our society. $2,000 a month
only translates to $24,000 a year. Could you maintain your lifestyle on
this amount?
We need and are entitled to the social security benefits that we
paid in good faith.
Thank you,
Helen Sue Gillispie
Framingham, Massachusetts 01701
June 20, 2005
To whom it may concern:
Two years ago after just a one-week battle, my husband Thomas H.
Goodwin died of leukemia. He was only fifty years old. We have two
children who at the time were fourteen and sixteen years old and I was
employed as a fifth grade teacher in Framingham, Massachusetts.
When our first child was born I stopped working to stay home and
care for her and I did not return to work until my younger son was in
first grade. At that time I returned to work as an aide in his
elementary school. Later I returned to school to obtain a teaching
certificate and master's degree in education and six years ago I began
to teach fifth grade in Framingham.
Being out of the workforce for eight years, I of course did not pay
into social security and my income before was insignificant in today's
economy . . . In addition, my husband earned more than six times my
salary when I went back to work and always earned much more than I did
before our children were born paying into social security every year.
When suddenly my husband died without warning our income dropped
incredibly and it was then that I learned upon retirement I would not
be able to access all of his social security and if that wasn't enough
I could not collect my social security either because I had not paid in
enough in consecutive years and I was an employee of the state of
Massachusetts, paying into a separate retirement account.
Being 52 now and thinking towards my own retirement it is
incomprehensible to me that I will not be able to access benefits my
husband worked so hard to earn while he was alive. This bill is a turn
off to people who may be thinking of changing professions later in life
and entering teaching as I did because they are penalized
significantly. We will not have enough working years to pay into our
state retirement plans to support ourselves and then we cannot access
our social security earned from previous employment or social security
benefits earned by our spouses hard work if we are widows like I am.
I am sure this was not what was intended when this law was passed
but it is the reality. If I knew this was true I may never have gone
into teaching (a field that I love) since I would be better able to
provide for myself.
Please think about young widows like myself when you vote to repeal
this law. It is just not fair. I am not asking for anything I did not
earn, I am just asking to receive what is fair and what my husband
would have received had he been alive. Do not make his death felt even
worse for my family and me.
Jae Karen Goodwin
Statement of Robert Gray, Colorado Public Employees' Retirement
Association, Denver, Colorado
I would like to thank you for having the hearing on June 9 which
examined Social Security provisions affecting public employees.
The Colorado Public Employees' Retirement Association (PERA) covers
180,000 active state, school, local government, and judicial employees
in Colorado. PERA also pays monthly lifetime benefits to 68,000 retired
public employees and survivor beneficiaries. Except for a few of the
local government members, PERA members are not covered by Social
Security from their public employment with a PERA employer.
Colorado PERA opposes any effort to mandate Social Security
coverage for state and local workers, even on a ``new hire'' basis.
Mandatory coverage under Social Security is not needed for the
employees, and has not been requested by the employees themselves. In
addition, forcing new employees hired after a certain date to be
covered under Social Security would cause great problems for employers
and employees in Colorado, as well as their retirement system.
PERA members have a strong defined benefit plan that provides
comprehensive benefits in lieu of Social Security coverage. Benefits
included in the PERA plan are:
Lifetime retirement benefits with an annual increase
after retirement
Disability benefits payable in case of disability after 5
years of service
Survivor benefits payable in case of death after 1 year
of service
Strong portability features that provide for vesting
after 5 years of service, the ability to purchase service credit for
prior employment outside PERA, and the ability upon terminating
employment to refund or rollover all employee contributions with
interest, plus a 50 percent matching amount
A retiree health care program, and An optional 401(k)
plan.
Even as applied only to new hires, the cost of mandating Social
Security coverage would come at a time when Colorado state government
faces serious budget restrictions. Contributions would have to be
increased by about 5 percent of pay in order to provide benefits from a
Social Security and supplemental retirement package that would equal
the benefits that PERA currently provides for state, school, and local
government workers.
For new hires, the benefit from PERA that would supplement Social
Security would be much smaller than the current PERA benefit program.
For current employees, the current benefit structure would have to be
preserved and continued throughout their future service and retirement
years, out of fairness to these 180,000 employees and because of the
contractual nature of their benefits. The cost to the State of Colorado
and other PERA governmental employers would have to increase to
continue this system, because new hires would have separate plan
benefits, and contributions by new hires and employers could not be
used to help fund the ``closed'' system. PERA's actuary has determined
that the employer contribution rate, which is currently scheduled to be
13.15 percent of salary by 2012, would have to reach 20 percent of
salary if all pension liabilities for the ``closed'' (pre-mandatory
Social Security) group of employees and retirees were to be fully
funded over the next 40 years.
Requiring state and local workers to join Social Security against
their wishes would not help provide a permanent solution to Social
Security's financial problems. It would provide a short-term infusion
of funds, but the Social Security benefits earned by public employees
would put an additional burden on the OASDI funds when they retired.
The absence of mandatory coverage has not caused Social Security's
financial problems. Federal employees hired after 1983 were required to
be covered by Social Security, but that has not solved the long-term
problem.
Colorado PERA also believes that a mandate from the federal
government that state and school districts cover their workers under
Social Security probably would violate the Tenth Amendment to the U.S.
Constitution.
Regarding the WEP and GPO provisions of Social Security, PERA
recognizes that complete repeal of these provisions would have a
significant cost impact on Social Security and would not promote equity
between private sector and public sector workers. However, both the WEP
and GPO use fairly arbitrary formulae for reducing Social Security
benefits, and PERA urges Congress to pass reasonable legislation to
improve the equity of the reduction.
In particular, PERA supports H.R. 1714, the proposed Public Servant
Retirement Protection Act (PSRPA). PSRPA would affect thousands of
state, school, and local workers who will receive or who already are
receiving benefits from public employee retirement systems from their
employment not covered by Social Security.
The original purpose of the WEP is to ensure that public employees
who work a part of their career in Social Security-covered employment
and the other part of their career in public employment outside Social
Security, do not receive an unfair advantage from the weighting in
Social Security's regular benefit formula. Social Security is a social
insurance program in which benefits paid to low-income workers replace
a higher percentage of pre-retirement earnings than for higher-income
workers. For example, in 2005 Social Security replaces 90 percent of
the first $627 of a worker's AIME (Average Indexed Monthly Earnings),
and replaces 32 percent of the next $3,152 of AIME.
Because weighting occurs in all Social Security benefit
calculations, it makes sense that public employees who have pensions
from employment not covered by Social Security should be treated for
Social Security benefits in some manner that takes into account their
entire career earnings. Public employees who also have other employment
in their careers that was covered by Social Security should not be
accorded the advantage normally given only to low-income career workers
in the calculation of their Social Security benefits.
PSRPA would accomplish this goal better than WEP. PSRPA would use a
sounder concept for calculating the Social Security benefit. It
compares the average indexed earnings covered by Social Security to the
average indexed earnings during the worker's entire career, and bases
the Social Security benefit on this ratio.
PSRPA would apply to public employees' Social Security benefits the
same earnings-based weighting that is currently used in Social Security
benefit calculations. According to examples prepared by the
Subcommittee, the Social Security benefit under PSRPA to a low-wage
career earner would replace a higher percentage of his average SS-
covered indexed monthly wages than would be replaced for a medium-wage
earner or a high-wage earner.
The WEP calculation, on the other hand, uses fairly arbitrary
percentages in order to calculate the ``windfall'' reduction. Employees
who meet other fairly arbitrary thresholds of income earned and years
worked are exempt from WEP.
The cost to the Social Security trust funds is far less for H.R.
1714 (PSRPA), at $7 billion over the next 10 years, than the cost of
full repeal.
Thank you for the opportunity to submit this statement. I would be
glad to provide further information or answer any questions the
Subcommittee may have.
INFORMATION ON WITNESS SUBMITTING THIS STATEMENT
This statement is submitted by Rob Gray, Director, Government
Relations, Colorado Public Employees' Retirement Association (PERA), on
behalf of PERA and for no other client or party.
Merced, California 95340
June 9, 2005
House Sub Committee on Social Security
I am a 61 year old retired California Highway Patrol Sergeant. I
have devoted my entire life to public service beginning with service in
the U.S. Air Force during the Vietnam War, then 28 years with the CHP,
then 8 years as a congressional staff person and now I work part-time
as a Disaster Assistance Employee for FEMA.
My service to the CHP did not pay into Social Security and I now
receive a pension from the State of California. I have also worked and
paid into Social Security for about 18 years so far. My SS statements
show that I would be entitled to a small Social Security pension based
on my earnings for those 18 years. My understanding is that the small
amount that I earned will be cut up to 60% because I also earned a CHP
pension. I don't want or deserve the same pension that someone earned
by working in the SS system for 40 years but I do deserve what I earned
for the years worked.
I think it is terrible that the people who are penalized are the
teachers, police and other public servants like retired military. At
the same time there are so many people that don't even depend on SS
because they had such lucrative jobs and they don't have to worry about
getting their SS offset. Then there are the millions who make over $90K
a year and don't pay SS on the amounts over that. It is wrong that the
wealthy keep getting richer and the public servants have to scrape and
fight for every benefit they earn. If you want to make SS healthy, make
it so people pay SS on all that they make, not just the first $90K.
Each time a bill to repeal the WEP/GOP is introduced it gets
tremendous bi-partisan support because the members know it is the right
thing to do but it never gets to the floor for a vote. We expect you to
strengthen SS but not on the backs of teachers, policeman and other
public servants. We served the people now give us what we earned.
Please repeal the WEP/GPO.
Brian Griffin
San Luis Coastal Unified School District
Pismo Beach, California 93449
June 22, 2005
I, Donna Hoaster Guild, have worked in education for 32 years. I
began teaching elementary school in 1966 in Virginia, and spent several
years teaching there and in New Jersey, where I accompanied my husband
on his U.S. Navy assignments. We then spent four years in Japan, after
which we returned to California, where my husband completed his Naval
obligation. When our sons reached school age, and after completing the
studies necessary to obtain a California Teaching Credential, I
returned to teaching. I had no idea that my Social Security earnings
from my previous years of teaching on the east coast, as well as from
my earnings from numerous summer jobs, were in jeopardy. It never
occurred to me that when I retired I would not receive a full
distribution from Social Security based upon the monies I had already
paid into the system. It wasn't until last year, when I spoke with a
local retirement counselor, that I was told about the Windfall
Elimination Provision.
While I understand why I will not receive Social Security benefits
from my last 25 years of California employment, during which time I
have contributed to our California State Retirement System instead of
Social Security, I do not understand why the distribution based on my
previous Social Security earnings should be reduced. How is this
justified? Why should someone who has worked faithfully and diligently
through all these years be penalized in such a way?
The Windfall Elimination Provision is terribly unfair, and punishes
many of us who have contributed so much, to so many of our children.
Please repeal the Windfall Elimination Provision.
Thank you for taking the time to consider my comments.
Sincerely,
Donna Hoaster Guild
Pismo Beach, California 93449
June 22, 2005
To the Ways and Means Committee, in the matter of
The Social Security Windfall Elimination Provision (WEP)
From the middle of 1965 to the middle of 1975 I was on active
military duty with the United States Navy, serving afloat on the east
coast of the United States, at sea in southern European waters, and for
four years in the far east. During these years my military pay was
``garnished'' in anticipation of entitlement to future social security
benefits.
From 1975 to 1985 I was employed by private industry and
contributed fully to Social Security in anticipation of an entitlement
to full benefits upon my retirement or disability.
From 1985 to the present (and into the future) I have been employed
as a high school mathematics teacher in both the San Francisco Bay Area
and in the Central Coast of California. Contributions from my pay,
earned 10 to 20 years earlier are being mitigated, reducing my full
entitlement to benefits that I have already earned through Social
Security.
Because I am a teacher and have already contributed thousands into
the California State Teachers Retirement System (STRS) (as well as
thousands into Social Security) in anticipation of retirement, I find
that now I am being penalized for being forced to contribute into both
systems over the years. My Social Security benefits will be reduced
because I am a ``public employee.''
This reduction of earned benefits is ludicrously unfair. I am about
to be punished during my retirement for contributing a majority of my
adult life to the service of my country.
PLEASE REPEAL THE WINDFALL ELIMINATION PROVISION.
Thomas A. Guild
Statement of Mary Harlan, Staunton, Virginia
My situation is a classic example of the negative result of the
GPO/WEP laws on the retired population.
I am a member of the population which changed direction at mid-
life. When I began teaching at age 35 in 1965, I had already spent 15
years working under Social Security. The year I began teaching, the
community in which I lived, Caribou, Maine, was desperate for teachers.
Twenty teaching positions were still vacant a week before school
opened. I continued to teach for 19 years and when I left teaching, I
again worked under Social Security for another 13 years. I was given no
information about the passage of the GPO/WEP laws and their affect on
my retirement income.
Nineteen years of teaching did not provide a sizable pension;
therefore I counted on the addition of Social Security to give me a
comfortable retirement income. Since the GPO/WEP laws did not go into
effect until January 1, 1986, I had no idea when I began teaching that
upon retirement the pension due me from Social Security would be more
than cut in half.
To make matters worse, if my husband pre-deceases me, my spousal
benefits which he earned will be reduced by my GPO formula. In other
words, this law is Grandfathering back to benefits earned as early as
1942, when my husband began working for the U.S. Government, and will
reduce them according to a law which took effect in 1986 and which
never applied to him and his earnings.
I estimate that at a minimum, I have lost $14,000 to the WEP, an
amount that is increasing every month I receive Social Security. It is
totally unfair, that we who have worked under Social Security are
penalized for spending part of our employment career at public service
occupations.
I urge the passage of H.R. 147 which will repeal these unfair laws.
Sugar Land, Texas 77478
June 16, 2005
Dear Honorable Members of Congress:
Thank you for the opportunity to submit my comments for
consideration during your discussion of House Bill 147.
I am a 46 year old wife and mother living outside of Houston, TX. A
number of years ago, I decided to put my career in high-tech on hold
while I stayed home with my children, who are now ages 13 and 9. At the
time, I intended to resume my career after my children were a bit
older. As is often said, ``A funny thing happened on the way . . .''
After my first child entered school, I began volunteering at his
school. In doing so, I came to understand the world of children's
education in a way that I had not before--the good and the bad. The
early years of children's schooling sets the tone and pace for the rest
of their education. It is when a child often decides whether school is
for them or not, when a child's success or failure in learning to read
begins to color all of their school work. Eventually I made up my mind
that I had something positive to contribute to this world, and that my
second career would be as a teacher. I have spent the last two years
earning my teaching certificate. During my time as a student teacher, I
found that my instinct to teach was right, and that I loved being with
the children, and they in turn were extremely eager to succeed under my
tutelage. I could not be more excited about this second career.
Unfortunately, I discovered that if in fact I accept a teaching job
in the public school district here, I will have to give up my
previously earned Social Security. Since I have contributed for more
than twenty years, and since my husband has paid the maximum Social
Security for years and years, this seems hugely unfair. I am willing to
accept a much lower salary as a teacher than I could earn by returning
to high tech, because I want to do work that I love and value. But it
is too much to ask me to also give up my Social Security pension.
I've been to a town hall meeting here in Sugar Land, TX hosted by
Congressman DeLay, who insists that I will recoup in my teacher's
pension all that is offset in my Social Security benefits. But he is
wrong--he misses the point that everything I recoup from a teacher's
pension is money I will have contributed myself--it's not a gift from
the government in lieu of Social Security! And it still misses the
point of why I should give up all my previous Social Security
contributions, as well as those of my husband, as his spouse. If I had
been a teacher all along and had never paid into Social Security, I
wouldn't expect to receive Social Security retirement benefits, but
this is clearly not the case.
If I remain at home, or take any other private sector job, I don't
jeopardize my Social Security, but if I teach in the public school
sector, I do--it is that simple. For now, I have decided to do
substitute teaching, so that I can at least be in the classroom doing
the work I love, on a part-time basis, without jeopardizing my Social
Security. But I would LOVE to be a full-time teacher in one of my local
public schools. I would LOVE to make a real difference in the education
of the children in this city. What I want to do is to make children
crave books because they crave adventure, to teach them math games that
they beg to play, to convince them that they are a huge, important part
of America's future and we need their contributions. I can do that in
the classroom. And I don't mind making a financial sacrifice in my
weekly paycheck to do this. But it is too much to also ask me to give
up the Social Security retirement benefits that my husband and I have
earned.
Thank you again for the opportunity to submit my comments for your
consideration.
Best regards,
Lynn Harpham
Palm Springs, California 92264
September 14, 2005
House Ways and Means Committee
Dear Sirs,
I am writing to request that my thoughts on this subject be
included in the record of the meeting held on June 9, 2005.
As one of the huge number of U.S. citizens/former public service
employees that are subject to the WEP provision of Social Security law,
it seems to me that we are the forgotten people. This law has been in
effect since 1983 and there has been no real effort by Congress in the
meantime to address the basic discriminatory nature of this law, either
by amendment or repeal. I sincerely hope that fact will be remedied by
the current Congress given that it seems that you now have the green
light to examine all portions of current Social Security law.
The intent of this law was, according to some, to prevent so-called
``double-dipping'', a ludricrous idea when people's earned public
pension and social security benefits are very low to start with. If the
Congress feels that the WEP law is crucial to maintaining SS solvency
(it isn't because there are also many other logical solutions for that
issue) but let's say that you do feel that it is necessary, then why do
you not exempt those with low public pensions from being subject to the
WEP??? Rep. Barney Frank of MA has sponsored bills (with many co-
sponsors) for several years that are designed to do just that but so
far they have never come to the floor for a vote.
This is the approach that I would advocate rather than full repeal
because it is a fair compromise and it makes practical sense.
This is an issue of fairness. When I took a teaching job in MA in
1967, I never dreamed that I would ultimately be penalized on my SS
benefits when it came time to receive them. My earned benefits have
been cut by one half for the simple fact that I chose to teach in MA.
There are eight or nine other states where teachers and other public
employees are similarly punished by the Federal Government for having
worked in the ``wrong'' states--Texas and Illinois, to name two. I
taught for 24 yrs then I worked in other professions. I contributed to
SS for a total of 30 yrs, some years smaller, some years greater
amounts. Imagine my surprise when I found out that my earned benefit
was to be cut by 50% because I had taught in MA public schools where SS
is not deducted from paychecks.
At the very least, SS needs to inform people of the existence of
the WEP/GPO laws which they do not now do rather than say, ``oh by the
way, you will now be penalized'' when you go in to meet with SS Reps''.
When I had my appointment with a SS Rep to start the process of
receiving SS benefits, she attempted to make light of the fact that I
was going to be penalized, saying ``oh, that's not so bad'' when she
did the calculations in her computer.
If the public really knew about this law, they could make better
decisions earlier on about which states to teach in and which to avoid.
An unintended consequence of this law, however, is that certain states
may have a harder time attracting public employees because of the
negative effect on their earned SS benefits.
My earned SS benefits were low to start with. A fifty percent
reduction was horrible news!
SS needs to put a disclaimer on their yearly account statements to
citizens--ie: ``your SS benefits will be subject to the WEP/GPO laws if
you were a public employee in the following states and SS was not
withheld from your paychecks''
Please, SS Subcommittee Members, it is time to remedy this unfair
law! At the very least, please exempt public pension recipients whose
pensions are under $20K a year, like myself, from being subject the the
WEP! Help keep us out of poverty!
Thank you in advance for your careful consideration of my comments.
Yours Truly,
Wayne V. Hatford
Sacramento, California 95816
June 15, 2005
Dear House of Representatives Subcommittee on Social Security;
Summary of Statement
1. I am a public school teacher who was a stay-at-home mother
while my four children were of pre-school age.
2. Severe medical problems on the part of my children required
that I stay at home full time to prepare special diets due to extensive
food allergies.
3. Prolonged stress, exhausting work and poverty over a number of
years caused my own immune system to break down so that I became
disabled with multiple chemical sensitivities, and allergies to
inhalants and foods.
4. After about ten years of being completely disabled, and with
the help of a world-class clinical ecologists, I was able to return to
work full-time, although still having a disability that limited the
type of jobs I could hold.
5. Vocational Rehabilitation in Wyoming helped me to retrain so
that I could work in an environment free from perfume and other petro-
chemicals.
6. I experienced quite a bit of discrimination from different
school districts when they found out that I had a disability that was
not simple to deal with.
7. Due to circumstances beyond my control, I was not able to hold
a job for more than one or two years. I could not prove discrimination
because schools can let teachers go for no reason until they are
tenured.
8. Because of my spotty employment record, I was not ever to
become vested into a retirement system with any one state.
9. I was able to work fairly well in the clean air in Montana,
but due to very low pay I could not make a living and moved to
California to find work.
10. Because of the ``Windfall Elimination Act'' I lost the vast
majority of my social security representing my twelve years of teaching
experience from 1962 through 1996. I did not have 40 quarters. I was a
full-time Mother for a number of years.
11. Child support obligations and low-paying jobs prevented me
from purchasing a home.
12. I am facing retirement without a home paid off to cushion
inflation. I need all my social security; I don't have any windfall.
The Windfall Elimination Act Discriminates Against Women
Women interrupt their careers to have children.
Women make less money those men although they work longer
hours.
In cases of divorce, the women's income is severely
reduced while their expenses increase due to child care which can take
50% of some women's paycheck.
Women don't make enough to save extra money for
retirement.
Women follow their husbands around the country and
therefore have to put their own careers and financial best interests on
hold.
Women are not in a position to choose careers that result
in a comfortable retirement because they are dependent on their
husbands.
Women whose husbands abandon them are often forced late
in life to scramble for retirement.
The Windfall Elimination Act Violates People's Civil Rights
People need the right to move around the country to find
work; this act would eliminate several states from the places people
could find work.
It was considered unconstitutional to prohibit welfare
people from moving to states that paid higher welfare benefits; workers
should not be penalized for moving to a non-social security state.
I earned my social security; the government made a social
contract; I was counting on that money so that I could provide for
myself in my old age.
This act robs the poor who often are not politically
powerful enough to fight back.
Please see that justice is done.
The Windfall Elimination Act Discriminates Against Poor People
The Act does not exempt from reduction a decent amount of
retirement money that the people have earned.
Poor people are more mobile due the need to find jobs and
are more likely to have to cross boarders into one of the states that
does not collect social security.
Most of the nation's poor and women and children.
The Windfall Elimination Act Robs Me of What is Rightfully Mine
I started teaching in 1962 and contributed to social
security for two decades before the act was passed.
The U.S. Government made a contract with its citizens,
and well into my career it broke that contract.
The Windfall Elimination Act limits workers' freedom to
move among the various states of the U.S.
I taught in the public schools in NJ and NY, 4 years, before I
began a family. Severe allergies on the part of two of my four children
necessitated that I stay at home as a full-time mom to prepare from
scratch the special rotational diets required to stop uncontrollable
diarrhea and allow the children to begin growing again in height and
teething normally. The stress of all the work, up to a 16 hour day in
many cases, the poverty, the medical expenses, caused my own health to
collapse within a few years. I became disabled for a number of years
due to multiple chemical sensitivities caused by extreme prolonged
stress and chemical exposures. We found a very talented clinical
ecologists who got me well enough to go back to work after I had been
disabled for about 10 years. However, during those years of complete
disability when I could not hold a job, I did not contribute to Social
Security and there are therefore gaps in my work record that were
beyond my control.
The stress of the medical problems led to a divorce, and I raised 4
kids alone. As a single parent stay-at-home Mom, I am proud of the fact
that all my children were highly regarded by their teachers and have
become good highly intelligent productive citizens. My efforts
medically kept my two younger children off social security disability.
With the help of Vocational Rehabilitation in Wyoming, I retrained for
a job where I would not encounter perfumes, after shaves, and petro-
chemicals--a school librarian. I have been continuously employed since
1986.
My work history is full of interruptions as I ran into
discrimination by schools when they found out they would have to
accommodate my allergies to tobacco, petro-chemicals, and perfumes.
They would not let me get tenure. I could not hide my disability.
However, I have taught over 12 years in states where I contributed to
Social Security. I found a clean place to live and work in Montana, but
could not make a living there because of low pay. I moved to California
in 1997 and got a job paying about 50% more that I had been making. I
did not know about the ``Windfall Elimination Act.''
The Windfall Elimination Act reduces my social security from over
$950./month to approximately $240.00, I believe. Since I was married
for 15 years and have never remarried, I'm told I can get social
security based on my ex-husband's contributions. However, I'm told that
this source of social security is also subject to the windfall
elimination act also.
So I am 65 years of age, as of this month. I cannot afford to
retire on the income I would receive from just teaching in California
since 1997. I am borrowing money to buy back service credit from my
teaching experience in other states. This costs me over $2,500. Per
month. I cannot afford to rent an apartment so I rent a room and keep
my stuff in storage. I have no washing machine, hardly any furniture,
do not eat out, or spend much money except on my special diet, medical
expenses (very high), and contributions to my retirement.
I expect in my case that my medical expenses above and beyond
insurance will amount to several hundred a month. I do not drink. I
have never smoked nor done drugs. I exercise and keep my weight down. I
am all I have and I do not want to lose control over my life. It is all
I can do to get medical help for myself because my medical costs are
preventative health care. I use homeopathy, acupuncture, Chinese herbal
medicine, organic food, good diet with lots of vegetables, exercise,
weight-lifting to prevent bone loss, etc.
I have done well to get back to work after 10 years of being
totally disabled. I know many people in my situation who are on social
security disability, but I had the help of a world-class clinical
ecologists who treated me with non-standard treatment that worked, and
who put my medical bill ``on the back burner'' until I could pay.
This so-called ``Windfall Elimination Act is unfair to women
because they make less than men and have interrupted careers to raise a
family.
This so-called ``Windfall Elimination Act'' is unfair to mothers
who stay home with their kids when they are preschoolers.
It is unfair to people who don't make much money, because it takes
away what little we get.
It's unfair to teachers, who don't make that much anyway.
Right now I can't afford to retire in the foreseeable future.
If this act were repealed, I could retire when I'm 70, and with my
precarious health, and multiple chemical sensitivities, I could leave
the state and find a cheaper place to live.
Patricia Hedstrom
Santa Ana, California 92705
June 13, 2005
Gentlemen:
My husband passed away last month. He was a WW II veteran having
served in the Navy from 1941-1945. He served his country and, as his
surviving spouse, I am penalized.
I desperately need my Spouse Portion of his Social Security. GPO
takes away $965 (spouse's Social Security) of my monthly income. This
is one half of my monthly income.
He paid into Social Security since it began.
PLEASE, PLEASE HELP ME. Do whatever you can. Do not discriminate
against me because I worked for a governmental office. I retired from
the County of Orange, Santa Ana, California. Do not penalize me because
I am a woman; a woman in desperate need of my SPOUSE PORTION of my
deceased husband's Social Security.
GOVERNMENT PENSION OFFSET must be repealed. NOW.
Sincerely,
Joan B. Johnson
Statement of James H. Keegan, Jr., Belmont, Massachusetts
I am a retired Massachusetts public employee who also worked in the
private sector. For over 43 years (both full-time and part-time) I paid
into the Social Security System. However, my benefit has been reduced
by nearly one-half. I had counted on this money as part of my total
retirement plan.
I respectively request that the Committee revisit the ``Windfall
Elimination Provision'' and examine its fairness.
Thank you.
Statement of Colleen M. Kelley, National Treasury Employees Union
Chairman McCrery, Members of the Subcommittee:
I am Colleen M. Kelley, the National President of the National
Treasury Employees Union (NTEU). NTEU represents more than 150,000
federal employees across 30 agencies and departments of the federal
government. Thank you very much for holding this important hearing
today on the Government Pension Offset (GPO) and Windfall Elimination
Provisions (WEP).
As you may know, NTEU has presented testimony before this and other
Committees of Congress on numerous occasions in support of legislation
to either repeal or reform the Government Pension Offset and Windfall
Elimination Provisions. These two Social Security provisions negatively
impact thousands of federal employees and retirees and NTEU has sought
Congressional assistance on these issues for many years. Action to
address these offsets is long overdue.
The Government Pension Offset unfairly penalizes recipients of
government pensions who are also eligible for Social Security based on
a spouse's work record. The GPO reduces the spousal Social Security
benefit by two-thirds of the amount of the government pension, in many
cases entirely eliminating the Social Security benefit that a federal
retiree is otherwise eligible for.
The Government Pension Offset has a particularly devastating effect
on female federal retirees who frequently are eligible for smaller
federal pensions than their male counterparts. This stems from a number
of reasons, including interruptions they may have had in their careers
while raising their families or working at lower paid positions for the
bulk of their federal careers.
A good example of the effects of the Government Pension Offset is
the elderly widow who is eligible for a monthly pension of $600 based
on her federal government service. Two-thirds of her pension, or $400
must be used to offset any Social Security spouse's or widow's benefit
for which she is also eligible. Assuming she is eligible for a monthly
spousal Social Security benefit of $500, the application of the
Government Pension Offset results in her receiving only $100 in Social
Security each month. The Government Pension Offset has effectively
slashed this individual's retirement income from $1100 monthly to only
$700 each month.
More often that not, the Government Pension Offset
disproportionately affects those who can least afford to forgo this
retirement income. Had individuals such as the widow in the above
example not dedicated their careers to public service, they would
remain fully eligible to collect their spousal Social Security
benefits. As you know, Mr. Chairman, the Government Pension Offset does
not apply to individuals who collect private pension benefits and are
also eligible for Social Security.
As of December, 1999, according to the Social Security
Administration, more than 300,000 former federal employees had their
Social Security benefits reduced as a result of the Government Pension
Offset. It is estimated that the number of affected individuals grows
by about 15,000 each year. Moreover, it is particularly troubling that
69% of these individuals are women and the average offset applied to
their Social Security benefits is $391 each month. These numbers do not
even account for those federal retirees who are eligible for Social
Security but do not bother to apply because of the GPO.
The Windfall Elimination Provision (WEP) also unfairly reduces the
retirement income of many federal retirees by reducing their own,
earned Social Security benefit by as much as 50%. Under current law, an
employee eligible for both Social Security and a pension from work not
covered by Social Security (such as under the Civil Service Retirement
System) finds that a lower benefit formula is applied when calculating
the Social Security benefit to which he or she should be entitled.
It is my understanding that more than 600,000 individuals currently
have their Social Security benefits reduced as a result of the WEP.
And, the number of individuals subject to this offset is estimated to
increase by 60,000 each year.
Here is an example of how the Windfall Elimination Provision works.
A private sector worker with average monthly earnings of $500 would be
eligible for a Social Security benefit of $450 each month (90% of $500)
at age 65. Using the same earnings as the private sector worker, at age
65, a former federal employee affected by the WEP would be eligible to
receive only $200 in monthly Social Security benefits (40% of $500).
The WEP requires that instead of using the 90% formula, workers with
non-Social Security covered employment have a 40% formula applied
instead.
The use of this lower formula--simply because the individual chose
to spend his or her career in public service--has a devastating and
unfair effect on the retirement plans of many federal employees.
Federal employees who have 30 or more years of substantial Social
Security covered employment are exempt from the WEP, however, it is a
rare federal employee that can complete a public service career and
also have 30 years of Social Security covered employment.
In recognition of the financially devastating effects both the
Government Pension Offset and Windfall Elimination Provision have on
federal employees and retirees, bipartisan legislation has been
introduced in the House and Senate again in the 109th Congress.
Congressman McKeon (R-CA) has introduced H.R.147, which would repeal
both the Government Pension Offset and the Windfall Elimination
Provision. This bipartisan bill already has gathered 260 cosponsors. In
addition, Senator Feinstein (D-CA) has introduced S.619, legislation
that would also repeal both the Government Pension Offset and the
Windfall Elimination Provision. Her bill, which has also received
strong bipartisan support, currently has 18 cosponsors. NTEU also
supports H.R.1690, legislation introduced by Congressman Frank (D-MA)
that would restrict the application of the Windfall Elimination
Provision to individuals whose combined monthly pension income exceeds
$2500 each month. This bill currently has 18 cosponsors.
Thank you again Chairman McCrery for scheduling this important
hearing today. NTEU strongly supports legislation either reforming or
repealing the Government Pension Offset and the Windfall Elimination
Provision. On behalf of all of our members, I hope that you will act on
the bills referred to your Committee without delay.
Statement of Deborah Kifer, Rowlett, Texas
I am a Texas teacher with 20 years experience and have never had an
option of contributing to Social Security through my school district.
However, I have worked in other jobs and contributed to Social Security
on my own behalf. After my husband died last fall, I discovered that I
was entitled to a $255 ``lump sum benefit'' under Social Security and
nothing more--ever! It seems that because I will retire under the
Teacher Retirement System I cannot claim any surviving spouse benefits
from my husband of 32 years. His last Social Security statement
estimates that taxes he paid amounted to $87,000 throughout his life,
and yet I nor anyone in our family is able to claim any of that. Please
change the law to be more equitable. If I had never worked, I would be
able to claim part of his benefits as a surviving spouse. However,
because I have dedicated my life to education, I am being penalized.
Saint Louis, Missouri 63130
September 8, 2005
For Members of Congress:
I am a single woman. I don't have any duplicate anything to collect
upon someone's death. I only have the benefits from what I earned and
what I contributed to plans.
The problem that I see is that if social security didn't want to
include me in the benefits, then they shouldn't be taking my
contributions.
And in the government pension offset, no one seems to have taken
into account that partial retirements are not the same as full
retirements. Someone who has worked as a teacher for part of her career
gets a reduced teacher retirement. That reduced retirement is treated
no differently than a full retirement in the offset plan. Also, people
could put thousands of dollars into social security, either before or
after their teaching, and they are penalized greatly with no regard for
their contributions.
Also, it's interesting to see who has been penalized and who
hasn't. I believe that people in the army and in the government can get
their pension plans (not social security & for which they made no
contributions) and still get teacher retirement if they go into
teaching.
It seems very simple to me: If you put the money into social
security, then you should get the same benefits as anyone else who put
in the same amount of money. I find it difficult to see that I am
somehow claiming a benefit I didn't earn. I'm only asking social
security to give me what I earned because of my contributions to social
security.
I appreciate your time and effort to think about your position and
the harm it might be doing to people like me . . . single wage-earners
who have worked as teachers and have worked outside the teaching
profession. And who are very concerned about their retirement needs and
how they are going to be met.
Respectfully,
Cecilia Lacks
Versailles, Kentucky 40383
September 8, 2005
Ways and Means Committee
United States Senate
Washington, DC
Dear Senators:
I am a victim of both the Government Pension Offset, and the
Windfall Elimination Provision of the Social Security Act. When my wife
died, I was unable to draw on her Social Security because of my pension
from the United States Postal Service. Now that I am eligible for
Social Security on my own record, I am penalized (taxed) approximately
50% of the amount for which I am eligible for the same reason.
During the years when I was earning credits toward Social Security,
I was working 2 jobs. After working 8 hours at the U. S Postal Service,
I worked many 8-hour
shifts at another job, and, I worked many 7-day weeks, also. I also
paid the requisite contribution into the Civil Service Retirement
System for my 4 years of active duty military time, so that my Postal
Service Pension would not be reduced when I started receiving my Social
Security checks. When I started receiving Social Security, my benefit
was reduced by 50% because of the WEP. In two years I will be eligible
for Medicare, and my health insurance plan will require me to enroll in
Medicare Part B. At current levels, the Part B Medicare premium will
take more than half my Social Security check. It remains to be seen if
I will be required to enroll in the Part D Medicare Drug Benefit. If
so, my Social Security check will be reduced to virtually nothing.
The GPO and WEP are an unfair burden on Postal and Civil Service
retirees and should be eliminated completely. The means of fixing
Social Security does not lie in privatization. Allowing workers to put
a portion of their FICA tax into private investment accounts will only
enrich the Wall Street moneychangers. Given the state of the stock
market the last 5 years, the returns upon which privatization is
predicated will not be there. I know several Postal or Federal workers
and retirees who have lost money in their Thrift Savings Plans. And I
know a number of retirees in the private sector whose 401-Ks have left
them with meager income and who have had to go back to work. Social
Security should be fixed by raising the cap on income subject to the
FICA tax. And Social Security would be in far better shape if more
workers were paid a living wage on which to pay the FICA tax. Far too
many executives have managed corporations badly, or driven them into
bankruptcy, and then walked away with an obscene retirement package.
In all fairness, please support repeal of the GPO and WEP and fix
Social Security by raising the cap on wages subject to the FICA tax.
Privatization of Social Security is a bad idea that must be scrapped.
Sincerely,
William K LaFrana
Statement of Ara Lawrence, Brandenberg, Kentucky
As a retiree of a public school district in Ohio and eligible to
receive widow's benefits, I am adversely affected by the Social
Security Offset.
My late husband worked his entire life from the age of 15 paying
into social security. During the last 25 years of his life he was a
self-employed real estate broker, paying both employer and employee
shares into the Social Security System. He retired in December of 1995
and died in January of 1996, after having received only one Social
Security check.
When I retired in 1999, I was only eligible to receive a small
portion of the widow's benefit because I worked and paid into a state
retirement fund (the School Employees Retirement Fund of Ohio). If I
were totally dependent upon that pension and the small amount of social
security I receive, I would be below the poverty level and unable to
take care of myself.
I feel that I am entitled to the full amount of widow's benefit
from Social Security whether I receive a pension or not. The monies
paid into the fund by my late husband were his funds and should not go
to those who have never paid into the system.
I am being penalized for working and helping to support our family,
which included raising and educating twin sons on a modest salary.
Littleton Educators Association
Littleton, Massachusetts 01460
June 22, 2005
I began my professional life as a waiter and a cook way back in
1981. I was content working as a chef until I found that I was going to
be a father. I that point, I felt that I needed to do more for society
than just feeding people. I struck a deal with the owner of the
restaurant at which I was chef and went without a raise so that I could
change my hours and go back to school to earn my degree in English and
Secondary Ed. I worked very hard, working 60 hours per week in the
restaurant while going to school full time and graduating Magna cum
Laude from the University of Massachusetts, Boston.
In time I found a school looking for a half time Culinary Arts
teacher and a half time English teacher, kismet. I worked there for two
years, driving 124 miles per day round trip. I had to work on campus
one night per week and one weekend per month. My salary was about half
of what is was when I left cooking and all of my pay went to cover our
childcare expenses after the birth of my son in 1996. I loved it and
never complained because it was a joy working there. I moved to the
Leominster Public Schools in 1997 and taught there for four years until
returning to my home town, Littleton, to teach eighth grade English in
the building in which I attended High School.
After teaching for 10 years, my salary is about what it would have
been six years ago, had I continued to work as a chef. I can't complain
about the money. I get to have an enormous impact on the lives of my
own children, as I teach where we live and my daughter this past year
was in my building, Littleton Middle School. I also get to influence a
generation of their peers and my neighbors. As the President of the
Littleton Educators Association, elected in my first year in Littleton,
I get to participate in the discussions about education in my town, not
just in my grade of in my class. Now, I get to do more than feed
people; I get to teach Shakespeare and poetry to kids and thankfully,
the kids like my class.
So it was quite a shock to learn that while I have done everything
right, under the Government Pension Offset and Windfall Elimination
Provision, I don't get any benefit from my actions. I worked hard as a
chef and as a waiter. I paid into the Social Security system and
expected that would get something, not a lot but something, back. It
turns out that if I had chosen to stay cooking, I would get the
benefits to which I am entitled but since I decided to change careers,
I'll get nothing. In order to earn a good pension, I'll need to teach
well into my late 60s. (I don't envision a time when I'll stop working,
so the time isn't the issue. I'm concerned about my ability to reach
kids when I'm that old.) And the bottom line for me, personally, is
that I've paid into the fund. I've done what I was supposed to do. So
why am I getting penalized for choosing to teach?
Professionally, not personally, what are we telling all of the
career changers like me? They can choose to take a pay cut, enter a
profession that is consistently disrespected, be overworked as funding
for education is cut and give up a substantial portion of their
retirement benefits. Why would they make that choice? We need to
support teachers, help them do the good work that we do. This provision
just doesn't make any sense. Please change the Government Pension
Offset and Windfall Elimination Provision.
Mark J Levine
President
Statement of Valerie Lichtman, San Bernardino, California
I am responding to the Social Security Offset and Windfall
provisions in the Social Security Act. My husband paid into social
security for over 50 years. He retired when he was 71 and collected
social security for one year. He died at age 72. I am still working but
have reached the age that allows me to collect his benefit. However,
since I am a teacher in California, I will not be able to continue to
collect my full benefit as his widow once I begin collecting my own
state teacher's retirement pension. I, too, paid into social security
when I taught in the state of Washington and prior to that when I held
various other jobs. It is extremely unfair that I am being denied full
benefits because I moved to California and worked as a teacher here. I
could not continue paying into social security as a teacher in
California. If social security is just a welfare system, and not a
pension system, then every worker in this country should pay into it.
Otherwise, the offset and windfall should be eliminated.
Escondido, California 92029
June 7, 2005
Gentlemen:
Please consider allotting me my full social security benefits. I
worked over 30 years until the age of 50 as a single mom and paid
social security. Now I receive $330.00 because I also worked for the
City of Vista and receive a pension.
I was a single mom and felt social security and my pension upon
retiring would be enough to live on. It would have totaled
approximately $2000.00 per month. Then upon retiring I find that my
social security is cut and the amount I receive for both is not a
living income, approximately $1300.00. I would have been happy to pay
social security while working for the City for 13 years but none was
taken out. If I didn't go to work, went on welfare, my social security
would be almost as much as I receive now.
Please reconsider changing this law so that the many dedicated
employees can receive their retirement and the social security they
expected to get. Nothing was ever said that we could not work for
cities and have our Social Security cut.
Thank you
Ruth Lovison Smith
Holland, Massachusetts 01521
June 23, 2005
Dear Sir or Madame,
I would like to provide a submission for the record for the
Committee on Ways and Means Fourth in a Series of Subcommittee Hearings
on Protecting and Strengthening Social Security.
My name is Richard A. Lucier and I live in Holland, Massachusetts.
I have been a vocational instructor at Baybath Vocational Technical
High School in Charlton, MA for the past 21 years. Before becoming a
teacher I had worked for 10 years in the private sector as a licensed
electrician for various electrical contracting companies. After
attaining my Master electricians license I planned on running my own
electrical contracting business. I was asked to try substitute teaching
at Baypath and found I enjoyed teaching and I enjoyed the students. The
following year I became a full time teacher and I have never regretted
my decision.
I continue to do small contracting jobs after school and on
Saturdays as well as school vacation time. As you know, teachers do not
make incredibly high salaries, yet I have managed to build my own home
and raise three children. One has graduated from college, one is still
attending and the third will graduate from High School next year. I
have worked extremely hard my whole life and my wife and I hope to
someday have a secure and happy retirement.
I feel it is extremely unfair that I have continued to contribute
to the social security system yet I am unable to draw from it when I
retire. This has not been a minimal contribution and I continue to
contribute, on a full time basis, all summer and every school vacation
for 21 years. If I cannot draw from social security, why must I
contribute to the system? Please don't let those of us who have chosen
to work hard, and supplement our teacher's salaries with second jobs,
be penalized for our strong work ethic.
I am very proud to be a teacher and to be helping kids learn a
good, honest trade. I only hope that when I retire, there will be new
young people stepping up to the plate, who will have the same level of
pride in what they do as I have. They will most likely need a second
job as well, and if they continue to contribute to social security I
hope you will reward them and give them what they deserve. If not, the
state of Massachusetts is going to have a very difficult time finding
dedicated professionals who can afford to make the same kind of
sacrifice.
Your time and consideration given to this matter is greatly
appreciated.
Respectfully yours,
Richard A. Lucier
Statement of Carole Marks, Marietta, Georgia
I very much appreciate the opportunity to submit this written
testimony on the Government Pension Offset (GPO) and Windfall
Elimination Provision (WEP) Social Security provisions, and their
adverse and unfair impact on me--a federal retiree. First I want to
thank Chairman Jim McCrery and the other legislators serving on this
Subcommittee for conducting this important hearing. As a federal worker
being adversely impacted by these provisions, I urge all Subcommittee
members, and lawmakers, to repeal them as soon as possible and allow me
to receive my full social security benefits.
In 1964, while not yet a high school graduate, I took a civil
service exam, scored high and patiently waited for my 18th birthday so
that I could begin a career with the federal government. With the
exception of five years when my children were young, I continue to
enjoy a proud and dedicated career in civil service. I recently
celebrated by 35th Anniversary with the Federal government.
Unfortunately I was divorced in 1980 during a five year lapse of
service, and I had to return to work to support my two young daughters.
We received no child support from their father who basically abandoned
us. At the time of our divorce, we had been legally married 13 years,
and I have never remarried.
Being a single mom with no child support, I was forced to often
work two (and at a time three) jobs. Considering that he never helped
financially while I was raising my children, there was not a lot of
money left over for me to adequately invest and save for my own
retirement. Because I never remarried, I should be entitled to receive
a partial benefit from my ex-husband's wages. These spousal benefits,
however, are cut by two-thirds simply because I spent my career working
for the federal government. Further, the benefits to which I am
entitled from my contributions to Social Security when I had to work
two and three jobs are cut by 60%.
It is very disheartening to know that I spent my whole life working
as a dedicated employee of the federal government, raised two children
on my own while working, and I still cannot receive adequate spousal
benefits or my own earned Social Security benefit to be able to retire
and enjoy these years.
Although my health is failing, I simply cannot afford to retire
because of the GPO and WEP Social Security provisions. Had I chosen a
career outside of the government, I would be receiving my full
benefits. This is not fair. My thanks to all of you who recognize this
travesty.
Punta Gorda, Florida 33950
June 9, 2005
I very much appreciate the opportunity to submit this written
testimony on the Government Pension Offset (GPO) and Windfall
Elimination Provision (WEP) Social Security provisions, and their
adverse and unfair impact on me--a federal retiree. First I want to
thank Chairman Jim McCrery and the other legislators serving on this
Subcommittee for conducting this important hearing. As a federal worker
being adversely impacted by these provisions, I urge all Subcommittee
members, and lawmakers, to repeal them as soon as possible and allow me
to receive my full social security benefits.
I took an early Civil Service Retirement in 1989, and then worked
for private employers from 1991 to 2004. My Social Security earnings
statement led me to believe that I would get about $400 per month in
Social Security benefits.
However, when I actually retired in 2004, I only received $171 per
month of my earned Social Security benefits because I was also covered
under the CSRS retirement system. If I had worked in the private sector
for my whole career, then I would be receiving all my earned Social
Security benefits with no penalties.
I had purchased a retirement home with the assumption that I would
have $400 each month from Social Security. Now that I am receiving only
$175 per month (with the 2005 COLA increase), I am having trouble
making ends meet and am considering selling my retirement home.
Receiving that extra few hundred dollars each month would enable me to
keep my home.
Please fix this inequitable problem. Don't punish Americans for
working for the federal government.
Sincerely,
Mary Ellen Marvin
Statement of Patricia Mason, Syracuse St, Colorado
My name is Patricia Mason. I am writing to give you information on
the misinterpretation of the Government Offset Pension and Windfall
Elimination Provision. I started paying into Social Security in 1959. I
stopped paying in 1962 when I married, had 3 children and did not work-
outside my home. My husband paid social security for both of us-or so
he thought. I worked occasionally over the next 20 years. In 1988 I
began to work full time again and paid into Social Security til 1994
when I moved from Florida to Colorado. At that time I began paying into
the State system. I am retiring from high school counseling in this
year-2005. I was never informed that the Social Security monies I and
my husband had paid into the system would not be paid to me at the time
of my retirement, or reaching age 65 and 5 months. I am now 67 years
old. My story is similar to many older women who had children and never
had the opportunity to work as long as their male counterparts. This
law is unfair to women and all people who paid into social security and
were never told of the penalty for moving to a non-SS state for
educators, policemen, firemen,etc. I understand that there is a lot of
discussion about changing social security in its entirety. Judging by
the length of time it has taken to get the House Ways and Means
Committee to hold hearings so people like me can tell their stories I
don't think the big picture will change any time soon. I represent
women in all the 14 states who made a decision to move from a state
where social security was withdrawn from their paychecks, as well as
pension monies. I did not know I would lose most of that social
security benefit because of that move. When I try and explain why I
won't have the pension in retirement I had planned because my
government is reducing my social security my family and friends don't
believe it! Please support the members of Congress who do think this
law is unfair-and repeal it! Those of us who worked as educators never
thought we would be penalized for moving. We all know something needs
to be changed in the overall plan of SS. However if we need to be paid
less shouldn't it go across the board, according to what you put in?
Many retired people receive private pensions while receiving their full
social Security benefits. We are just asking to be treated fairly in
the eyes of the Congress and our fellow citizens.
Statement of Sally Masters, East Hampton, Massachusetts
To Whom It May Concern:
As a guidance counselor in the Massachusetts schools, I am writing
to ask that you repeal the Government Pension Offset and Windfall
Elimination Provision. I understand that a hearing will be held on this
topic today.
I worked in other occupations outside of Massachusetts since 1975
and moved to Massachusetts in 1999 to change careers. I was unaware of
the Government Pension Offset and Windfall Elimination Provision before
moving here and am quite concerned about losing all of the money that I
have put into Social Security for more than 24 years! In addition, I am
single and do not have someone else in my life on whom I might depend
for retirement. This is a travesty! Please repeal these laws. Thank
you.
Statement of George and Jean Millen, Warrensburg, Missouri
In 1972, my wife Jean Millen, who holds a Masters Degree in Library
Science, took the only library job open to her at the time. Thus after
spending six years as an academic librarian, she became a school
librarian for the next 27 years, 20 of which were full time. When she
took this school library position, she did not realize that Missouri
was one of those states in which school districts were not required to
contribute to Social Security.
At this juncture, the Government Offset Provision was passed in
1977 and in 1983 the Windfall Elimination Provision was added. Jean and
I did not realize at the time that these modifications to the social
security law would Jean's benefits later. Indeed, we did not know
anything about these provisions until the mid 1990's when I attended a
pre--retirement seminar.
Of course, Jean and I are not happy. Jean's social security
statement dated April 2004 projected her monthly benefit at $779 a
month when she turns 65 plus 6 months. A year later when she signed up
Medicare, we discovered that her monthly benefit is being projected at
$476.80 a month due to the Windfall Elimination Provision. While one
might think her teacher's pension is substantial, it is not. Jean only
grosses about $1,250 a month for her 20 years at full time.
If Jean had never worked outside the home a day in her life, she
would have received half of mine which would be about $800 a month.
However because of the Government Offset Provision, she would get
nothing if she attempted to draw benefits under my name rather than
hers.
But permit me to return the problem caused by the Windfall
Elimination Provision. Even those folks in education who have 40
quarters of substantial earnings are still affected by the W.E.P. While
my wife has 49 quarters that qualify if figured correctly and is
projected to have as many 65 quarters by the time she retires, she is
still going to receive only a little more than $477 a month unless the
Windfall Elimination Provision is modified or repealed.
Jean and I urge the House Ways and Means Committee to include WEP
and GOP repeal provisions in the Social Security legislation now being
considered and thanks for listening.
Broomfield, Colorado 80020
June 8, 2005
Dear Representative:
I would like to urge congress to act on the repeal of the
Government Pension Offset (GPO) and the Windfall Elimination Provision
(WEP).
The GPO and WEP unfairly cut the retirement benefits of public
employees. Many of the individuals who are or will be impacted by these
two programs have never even heard of the issue until they find that
they are receiving much less of a benefit than they expected. It forces
some people into poverty or some other form of government assistance.
I for one worked for many years in the private sector, paying
social security on a much lower salary due to the number of years ago
that this work took place. I did however contribute enough to qualify
for a small benefit.
I changed careers 15 years ago and went into teaching. I learn that
this change will cause me to lose about 2/3's of my $700.00+ benefit. I
wonder why we penalize those who have such impact in the well being of
our children.
I realize this is not a great deal but it would make a difference
to me and my wife.
The GPO and WEP further impact our nation at a time when there is a
growing teacher shortage. They tend to discourage people from entering
the profession when we need more dedicated people to teach our future
resources, our children. The offsets also impact police, firefighters
and other public service professions.
Congress should take immediate action to address this unfair
situation. I appreciate your support on legislation that would
recognize the sacrifices made by public employees by repealing these
discriminatory offsets.
Thank you for your consideration of my views on this important
issue.
Sincerely,
Merle Miller
Naples, Florida 34119
June 9, 2005
To the Committee on Ways and Means:
I am a 70 year old retiree from Massachusetts. I worked 10 years
under Social Security and then worked 15 years under the Commonwealth
of Massachusetts Retirement System. During that time, the Commonwealth
of Massachusetts did not deduct Social Security from my pay. There was
no way that I could pay into Social Security on my own. Because of
this, I am being penalized approximately $500.00 per month from
benefits to which I should be entitled. I receive a Social Security
check of $124.00 per month. If I had never worked anywhere, I would be
entitled to $615.00 per month from my spousal benefits from my husband.
I think it is very unjust that I am being denied benefits from my
husband's Social Security pension. In my retirement years, since I have
turned 65, I have been denied approximately $25,000.00 in benefits.
Please overturn this very unjust law.
Thank you for your consideration.
Natalie Morrissey
Joint Statement of National Conference of State Legislatures
Retirement legislation soon to come before the House Committee on
Ways and Means may encompass expansive reforms to Social Security and
the federal tax treatment of retirement and savings vehicles. As you
consider changes to national retirement and savings policies, the
diverse group of signatories on this testimony--including national
organizations representing state and local governments, public employee
unions, public retirement systems, and nearly 20 million public
employees, retirees, and beneficiaries--urge your strong opposition to
proposals that would undermine the financing of public sector benefits,
impose unfunded mandates on state and local governments and their
taxpayers, and/or impose a tax increase on the savings of first
responders, teachers and other public employees throughout the country.
State and local government retirement systems comprise a
substantial segment of national pension assets and membership. More
than 14 million workers--ten percent of the national workforce--and six
million retirees, disabilitants and their beneficiaries are covered by
these programs. The over $2 trillion in assets held in trust are an
important source of liquidity and stability for our financial markets.
Further, state and local retirement systems currently distribute over
$120 billion annually in pension and other benefits, a volume that
exceeds the entire economic output of 22 States and the District of
Columbia and is vitally important to the future growth of our economy.
Thus, efforts to strengthen our national retirement savings policies
should ensure these valuable programs are not disrupted. We, therefore,
strongly urge your assistance with the following:
Do not destabilize State and local government finances or the
retirement security of public workers by mandating coverage on those
who designed and funded their retirement programs outside of Social
Security.
The sharp payroll cost inherent in mandating Social
Security coverage will have a devastating fiscal impact on State and
local governments that do not participate in Social Security. This
impact will be felt in virtually every state. An updated preliminary
analysis done by the Segal Company shows the cost to be $44 billion in
the first five years alone, simply for newly-hired employees.
Conversely, the significant turmoil on those State and
local governments and workers currently outside the system would have
very little impact on the solvency of Social Security. Mandatory
coverage raises modest revenue in the short-term, but ultimately only
increases Social Security's future liabilities.
It is important to remember that at the time Social
Security was established, State and local governments and their workers
were not permitted to participate in the program. These governments
designed their own retirement plans in reliance on that exclusion. In
the 1950's, when Congress allowed State and local governments to
voluntarily affiliate with the Social Security System, some chose to do
so while others continued to structure and fund benefits outside of the
system. It is unjustified to now change the rules--imposing significant
costs on these State and local governments and undermining the
retirement security of their employees--for such a negligible change to
Social Security's long-term solvency.
Maintain Congress' long-standing policy of supporting employer-
sponsored retirement plans, including those provided by State and local
governments.
Proposals to completely restructure all or part of the
federal tax system should retain incentives for retirement savings,
including pension systems sponsored by state and local governments.
Such incentives are not only important to assist individuals attain a
secure retirement, but are vital to our nation's future economic well-
being.
Similarly, any modifications to tax laws should
strengthen, not weaken, retirement savings in state and local
government retirement programs. Provisions that would have a
significant negative impact on such savings were recently outlined in a
staff report of the Joint Committee on Taxation to ``further
consistency in the tax system.'' For example, options in the report
affecting state and local government employee benefits programs (see
attached) include the proposed repeal of pick-up arrangements under
Code Section 414(h)(2), imposing an immediate tax increase on first
responders, teachers and other public employees around the country.
While tax simplification can produce great benefits, a one size fits
all approach may not address the needs of the public sector's diverse
workforce and legal framework, or have any positive effects on
retirement savings.
Congress has worked over the years to make refinements to
the Code to address the unique policy issues affecting public plans. It
would be counterproductive to abandon longstanding and effective
provisions, impose immense burdens on state and local workers and their
employers, and undercut successful State and local retirement policies
in attempts to ``simplify'' the federal tax code. We strongly urge your
opposition to any tax proposals that are detrimental to public sector
retirement savings.
Our organizations support efforts to strengthen the solvency of the
Social Security system and retirement savings. We believe this is best
accomplished by protecting the retirement security of millions of
workers and retirees in state and local government retirement systems.
We look forward to working with you and your staff as legislation is
considered.
If you have any questions or need additional information, please
feel free to contact our legislative representatives:Options Outlined
in JCT Staff Report Affecting State and Local Government Employee
Retirement Plans
Options Outlined in JCT Staff Report Affecting State and Local
Government Employee Retirement Plans
While tax simplification can produce great benefits, a one size
fits all approach may not address the needs of the public sector's
diverse workforce and legal framework, or have a positive effect on
national retirement savings. A Joint Committee on Taxation (JCT) staff
report, Options to Improve Tax Compliance and Reform Tax Expenditure s
(JCS-02-05 (2005)), is largely aimed at individuals, corporations, and
tax-exempt organizations. Nevertheless, a handful of the options
outlined within the report would impose extreme disruptions and costs
on state and local government retirement plans, subject public employee
retirement savings to immediate taxation, and/or undermine state and
local government retirement policies:
Impose Immediate Taxation of Contributions to State and
Local Retirement Plans by Repealing ``Pick-Up'' Rules (pp. 140-144).
This proposal would repeal the current ``pick-up'' rules contained in
IRC section 414(h)(2), thereby prohibiting employee contributions to
State or local government retirement plans to be made on a tax-deferred
basis. Currently, such contributions are not tax-exempt, but instead
are taxed when taken as retirement income--analogous to the tax
treatment of employee contributions under 401(k)-type vehicles. If
enacted, this JCT proposal would require federal taxes to be paid today
on income that will not be received until retirement, imposing an
immediate tax increase on first responders, teachers and other public
employees throughout the country, overturning a policy established by
Congress to equalize the tax treatment of public plan contributions,
and imposing substantial costs on States and localities to restructure
benefits and/or compensation.
Subject Grandfathered State and Local Government
Employees to Medicare Payroll Tax (pp. 80-82). This proposal would
overturn a long-standing agreement to transition all state and local
government employees into the Medicare system, whereby only employees
hired after March 31, 1986 were mandated into Medicare. Those State and
local government employees hired on or before March 31, 1986, who were
not already covered by Medicare, were grandfathered from mandatory
participation. This proposal would now force these employees, most
nearing the end of their career, as well as their employers, to pay the
Medicare payroll tax.
Apply 10% Early Withdrawal Penalty Tax to State and Local
Government 457 Plans (pp. 130-132). At present, the 10% early
withdrawal penalty tax is not applicable to participants in section 457
governmental deferred compensation plans. This proposal would now
impose this penalty on the 457 plans of state and local government
employees, rendering distributions made before age 59\1/2\, as well as
for death or disability, generally subject to both income tax and an
additional 10% penalty tax. This provision will fall particularly hard
on police, firefighters and other public employees with mandatory
retirement ages or early retirement incentives who had planned on
relying on their 457 savings for a larger portion of their early
retirement income.
Impose FICA Taxes on all Salary Reduction Amounts (pp.
71-73). At present, contributions to cafeteria plans in both the public
and private sectors are excluded from wages for FICA purposes. This
proposal would require all employees and their employers to now pay
FICA on these amounts, imposing more costs on an already strained
benefits system and eliminating a significant incentive for
participating in and maintaining these plans.
Eliminate 403(b) Catch-up Contribution Rules (pp. 122-
129). This proposal would eliminate rules permitting 403(b)
participants to make contributions for up to five years after
termination of employment and permitting employees who have completed
15 years of service with certain employers to make additional elective
deferrals. Employees of educational institutions have historically
relied on these special rules to make up contributions they may have
missed early in their career.
----------
National Conference of State Legislatures
National Association of State Auditors Comptrollers and Treasurers
National Association of Counties
United States Conference of Mayors
National League of Cities
International Association of Fire Fighters
Fraternal Order of Police
National Association of Police Organizations
International Union of Police Associations, AFL-CIO
International Brotherhood of Police Officers
International Brotherhood of Correctional Officers
International Association of EMTs and Paramedics
American Federation of Teachers
National Education Association
American Federation of StateCounty and Municipal Employees
Communications Workers of America
Service Employees International Union
National Association of Government Employees
National Association of Nurses
National Association of State Retirement Administrators
National Conference on Public Employee Retirement Systems
National Council on Teacher Retirement
National Association of Government Defined Contribution Administrators
Government Finance Officers Association
International Public Management Association for Human Resources
National Public Employer Labor Relations Association
Statement of the National Education Association
Mr. Chairman and Members of the Subcommittee:
On behalf of the National Education Association's (NEA) 2.7 million
members, we would like to thank you for the opportunity to submit
comments ontheGovernment Pension Offset (GPO) and Windfall Elimination
Provision (WEP), and on the issue of mandatory Social Security
coverage. We commend the Subcommittee for holding this important
hearing on a matter of great concern to educators and other public
employees.
NEA strongly supports complete repeal of the Government Pension
Offset and the Windfall Elimination Provision, which unfairly reduce
the Social Security and Social Security survivor benefits certain
public employees may receive. We oppose requiring public employees to
participate in Social Security. Our testimony will cover both of these
issues.
The Government Pension Offset: A Devastating Loss of Benefits for
Widows and Widowers
The Government Pension Offset reduces Social Security spousal or
survivor benefits by two-thirds of the individual's public pension.
Thus, a teacher who receives a public pension for a job not covered by
Social Security will lose much or all of any spousal survivor benefits
she would expect to collect based on her husband's private sector
earnings.
Congress and the President agreed in 1983 to reduce the spousal
benefits reduction from a dollar-for-dollar reduction to a reduction
based on two-thirds of a public employee's retirement system benefits.
This remedial step, however, falls well short of addressing the
continuing devastating impact of the GPO.
The GPO penalizes individuals who have dedicated their lives to
public service. Nationwide, more than one-third of teachers and
education employees, and more than one-fifth of other public employees,
are not covered by Social Security, and are, therefore, subject to the
Government Pension Offset.
Estimates indicate that 9 out of 10 public employees affected by
the GPO lose their entire spousal benefit, even though their deceased
spouse paid Social Security taxes for many years. Moreover, these
estimates do not include those public employees or retirees who never
applied for spousal benefits because they were informed they were
ineligible. The offset has the harshest impact on those who can least
afford the loss: lower-income women. Ironically, those impacted have
less money to spend in their local economy, and sometimes have to turn
to expensive government programs like food stamps to make ends meet.
NEA receives hundreds of phone calls and letters each month from
educators impacted by the GPO. Many are struggling to survive on
incomes close to poverty, fearing they will be unable to cover their
housing, medical, and food expenses on their meager incomes. For
example, consider the following stories:
From NEA member Frances in Louisiana:
``My husband, a Baptist minister, passed away [in 2001] after
paying Social Security for 42 years. At times we had to take a second
loan on our home to pay the Social Security. Now, I had to pay back the
loan, but discovered that I will not get benefits because I receive a
small teacher retirement''
From NEA member Stella in Colorado:
``I am a 72-year old widow . . . I was happily married to the same
man for 39 1/2 years. My husband was a World War II disabled veteran
who worked and paid into Social Security for 50 years--He passed away
11 years ago thinking I would be able to receive his Social Security
and Veterans Widow pension . . . But now I'm living in poverty.''
The Windfall Elimination Provision: A Shocking Loss of Earned Benefits
The Windfall Elimination Provision reduces the earned Social
Security benefits of an individual who also receives a public pension
from a job not covered by Social Security. Congress enacted the WEP
ostensibly to remove an advantage for short-term, higher-paid workers
under the original Social Security formula. Yet, instead of protecting
low-earning retirees, the WEP has unfairly impacted lower-paid retirees
such as educators.
The WEP penalizes individuals who move into teaching from private
sector employment, or who seek to supplement their often insufficient
public wages by working part-time or in the summer months in jobs
covered by Social Security. Educators enter the profession often at
considerable financial sacrifice because of their commitment to our
nation's children and their belief in the importance of ensuring every
child the opportunity to excel. Yet, many of these dedicated
individuals are unaware that their choice to educate America's children
comes at a price--the loss of benefits they earned in other jobs.
While the amount of reduction depends on when the person retires
and how many years of earnings he or she has accumulated, many public
employees can lose a significant portion of the Social Security
benefits they earned in other jobs. Like the GPO, the WEP can have a
devastating impact on educators' retirement security. For example:
From NEA member Carolyn in Kentucky:
``I started direct sales business from my home at nights and
weekends to supplement my teacher retirement. I earned my necessary
quarters, reached my 62nd birthday, and then learned of the Windfall
Elimination Provision. I was told that I was eligible to receive
approximately $158 monthly; however, because of the WEP, this reduce be
reduced to $78 a month. By the age of 65, my payments had risen to $84,
but after paying $66.00 for Part B of Medicare, I now have $18 to
deposit. I have been forced because of the economics of the day to
return to the classroom to substitute teach for a paltry sum of $61 a
day . . . This is certainly not the American dream I had in 1956 to
become a teacher!''
The ``Double Whammy'': Educators Impacted by Both the GPO and WEP
Many NEA members report that they are subject to double penalties--
losing both their own benefits and spousal benefits due to the combined
impact of the GPO and WEP. For example NEA member Martha from Texas
reports:
``By 1978, when I started my teaching career, I had already earned
my forty quarters of Social Security and over the years depended on
these benefits as part of my retirement. I should be entitled to $415 a
month at the age of 62. However, because of the Windfall Elimination
Provision, I will now be entitled to $206 a month, and this reduction
in my earned retirement is a big loss. [In addition,], according to the
Social Security Administration, I should be entitled to approximately
$970 a month for widow's benefits. However, because of the Government
Pension Offset, I can only receive $21 a month. Both the Government
Pension Offset and Windfall Elimination Provision are devastating to
teacher retirees and me.''
The National Impact of the GPO and WEP: Undermining Teacher Recruitment
Efforts
The GPO and WEP have an impact far beyond those states in which
public employees like educators are not covered by Social Security.
Because people move from state to state, there are affected individuals
everywhere. The number of people impacted across the country is growing
every day as more and more people reach retirement age.
Perhaps most alarming, the GPO and WEP are impacting the
recruitment of quality teachers to meet urgent national shortages.
Record enrollments in public schools and the projected retirements of
thousands of veteran teachers are driving an urgent need for teacher
recruitment. Estimates for the number of new teachers needed range from
2.2 to 2.7 million by 2009.
At the same time that policymakers are encouraging experienced
people to change careers and enter the teaching profession, individuals
who have worked in other careers are less likely to want to become
teachers if doing so will mean a loss of Social Security benefits they
have earned. Some states seeking to entice retired teachers to return
to the classroom have found them reluctant to return to teaching
because of the impact of the GPO and WEP. In addition, currentteachers
are increasingly likely to leave the profession to reduce the penalty
they will incur upon retirement, and students are likely to choose
other course of study and avoid the teaching profession.
The GPO and WEP also impact other critical public services fields,
including police and firefighters. Our nation can ill-afford to allow
the very real fear of poverty in retirement to force talented,
dedicated individuals out of these professions.
The GPO/WEP Solution: Total Repeal
Representatives McKeon (R-CA) and Berman (D-CA) have introduced the
Social Security Fairness Act of 2005 (H.R.147). This bipartisan
legislation, which already has over 260 cosponsors, would eliminate the
GPO and WEP, thereby allowing public employees, like all other
employees, to collect the benefits they earned and need. NEA urges the
Subcommittee, and the entire House of Representatives, to take
immediate steps toward passage of the McKeon-Berman bill.
Mandatory Coverage: An Unwise and Unnecessary Approach
NEA's position on repeal of the Government Pension Offset and
Windfall Elimination Provision should not in any way be interpreted as
support for requiring public employees to participate in Social
Security. NEA strongly opposes mandatory coverage. Instead, NEA simply
believes that educators should be able to receive the benefits they or
their spouse earned by working in covered employment, without
jeopardizing their public pension.
Many existing public employee programs are tailored to meet the
needs of specific employee groups. Forcing educators into Social
Security would jeopardize these state and local plans. In addition,
Social Security trust funds can be invested only in U.S. Treasury
bonds. State and local governments permit a greater diversity of
investment options, thereby potentially achieving a greater rate of
return.
Mandatory coverage of educators would also increase the tax burden
on public-sector employers. Ultimately, these increased tax obligations
would lead to difficult choices, including reducing the number of new
hires, limiting employee wage increases, reducing cost-of-living
increases for retirees, and reducing other benefits such as health
care.
Finally, mandating coverage of educators will not solve the Social
Security system's financial difficulties. The amount of money gained by
mandating coverage would be relatively small and would not solve the
long-term Social Security crisis. Requiring new state and local
employees to pay into Social Security would enable the federal
government to continue borrowing money from Social Security trust
funds, and, therefore, could exacerbate financing problems.
We thank you for your consideration of these comments.
Cleveland, Texas 77327
June 23, 2005
Thank you for the opportunity to write to you. I am a retired Texas
public school teacher asking you to eliminate the Government Pension
Offset and Windfall Elimination Provision (GPO/WEP).
In planning my retirement I followed Social Security suggested
formula or pension, savings and social security. Imagine my surprise
when at age 65 I discovered that because of my chosen profession I
would be heavily penalized by having my spousal/widows benefits
reduced. I can receive a reduced pension and allocate a portion of my
pension be paid to my husband upon my death. He can receive both my
pension and his Social Security with no penalty or reduction in
benefits. I am penalized and he is not. This is not equitable.
We are impacted twice because he is included in the ``Notch'' group
and initially had his Social Security benefits cut by Congressional
action. ``Notch'' causes his Social Security to be lowered and my
spousal/widow benefits are reduced. During my working years I have paid
into Social Security through second jobs. My husband has paid into the
system from 1940-2001 except for 3\1/2\ years he served in World War
II.
Our income is impacted by governmental action that can be remedied
by your committee. Your committee recommendation to the House to
eliminate GPO/WEP will positively affect thousands of households hurt
by this unfair legislation.
Please consider the welfare of voting American citizens penalized
by the GPO/WEP legislation whose only ``crime'' was being a public
employee where one or both paid Social Security during their working
years.
Thank you for considering my request.
Patricia Jane Nelson
Statement of Frederick Nesbitt, National Conference on Public Employee
Retirement Systems
The National Conference on Public Employee Retirement Systems
(NCPERS) represents over 500 public sector pension funds that cover
firefighters, police officers, teachers, and state and local government
employees. NCPERS is the largest national, nonprofit public pension
advocate. Since 1941, we have protected the pensions of public
employees.
We appreciate the opportunity to share our views with the
Subcommittee on Social Security on the issue of mandatory Social
Security coverage of non-covered state and local government employees.
NCPERS was founded 64 years ago to stop the federal government from
disrupting and dismantling public sector pension funds by requiring
them to be part of Social Security. That remains one of our primary
goals today.
The Social Security system provides coverage for virtually all
segments of American society including most, but not all, state and
local government employees. When the system was established in 1935,
state and local government employees were initially excluded. Some of
these employees subsequently made a decision not to be included,
instead developing their own retirement and benefit programs tailored
to their occupational needs. In many instances, these retirement
programs predate the Social Security system. These state and local
government retirement systems are solvent and require a contribution by
both the employer and employee, in most cases.
In the 1950s, state and local governments were given the voluntary
option of joining Social Security. In 1950, 1954, and 1956, legislation
was adopted to allow states to enter into voluntary agreements with
Social Security to elect to cover their employees. States were also
given the option to withdraw from Social Security coverage. In 1983,
the option for states within Social Security to withdraw was repealed.
In 1990, Congress mandated Social Security coverage for all state and
local government employees not covered by a qualified public pension
plan or have benefits comparable to the retirement, disability, and
survivors' benefits provided by Social Security. Approximately 70
percent of state and local government employees are covered by Social
Security; those not covered are primarily public safety officers and
teachers. The states with the most non-covered employees are: Alaska,
California, Colorado, Illinois, Louisiana, Maine, Massachusetts,
Nevada, Ohio, and Texas. Those state and local governments not
participating in Social Security rely on their own retirement and
benefit programs tailored to their occupational needs of their
employees and retirees. These state and local government retirement
systems are solvent and require a contribution by both the employer and
employee, in most cases, with nearly 75 percent of the pension benefit
payouts coming from the plan's investment returns.
NCPERS opposes expanding Social Security coverage to non-covered
state and local government employees. Requiring Social Security
coverage would undermine these plans and place unnecessary financial
burdens on state and local government employers and employees. These
public sector funds designed their retirement benefits to meet the
needs of their employees, including such unique characteristics as
retirement ages, disability benefits, survivor benefits and death
benefits. Because of the unique makeup of the public sector workforce,
many employees, such as public safety officers, have earlier retirement
ages or mandatory retirement, higher disability rates, earlier deaths
and earlier disability retirements. All these factors are accounted for
and provided by the public sector plans.
In most cases, Social Security would not provide these employees
with coverage because of the age at which these employment events
occur. Public safety officers, for example, do not work until age 65
(or 67 when the age is finally raised), but retire at an earlier age
because of the stress and hazards associated with the job. Likewise,
the public sector plans have been designed to recognize the fact that
the employer must be prepared to provide disability retirements,
sometimes at an early age before an individual would qualify for Social
Security benefits.
Making Social Security mandatory would have little impact on the
projected funding shortfalls of Social Security system. However, such a
move would greatly affect public employees. Public employees not
covered would be required to pay an additional 6.2% in payroll taxes in
addition to what they are now required to contribute to their public
pension plan. Unlike most private sector employees who do not
contribute to their employer-sponsored pension plan, public employees,
for the most part, make an employee contribution which is combined with
the employer contribution. These contributions are then invested in
securities, with the investment returns paying a large portion of the
pension obligations during the lifetime of the employees and survivors.
Mandatory coverage would be costly to states and localities. As
employers, states and localities would also be required to pay an
additional 6.2% in payroll taxes on top of what they already contribute
to the pension fund. These employers are currently facing severe budget
shortfalls. These governments must balance their budgets, therefore,
adding such a financial burden would require them to either increase
taxes or reduce government services. For example, this would cost
California over $2.3 billion in additional expenditures annually, Ohio
$1 billion annually, and hundreds of millions to Texas, Illinois,
Colorado, Massachusetts and Louisiana.
Mandatory coverage would be disruptive to existing retirement
programs. Many public employers would be unable to absorb the higher
costs. Either they would be required to continue funding their
respective retirement plans, in addition to the Social Security tax, or
severely reduce or eliminate current retirement benefits. The loss of
the investment returns on these pension funds, which averages over 8
percent per year, would add an additional burden to the employers. A
situation would be created whereby no new funds would be going into the
pension assets, but retiree benefits would continue to be paid.
Eventually, the funds would run out of money, thus placing the
retirement benefits of millions of employees in jeopardy. Many of these
plans are established constitutionally and to make such a change would
require legislative action and/or constitutional amendments.
It is a given that mandating coverage of non-covered state and
local government employees does not improve the financial stability of
the Social Security system. It some short-term benefits, but adds to
the long-term benefits payments, thus placing greater financial demand
on the system. NCPERS believes that the Congress should solve the long-
term financial needs of the system and ensure that Social Security is
funded to guarantee and protect the benefits of all those who are
covered.
Mandating Social Security coverage of non-covered state and local
government employees is not the way to ensure Social Security's future
and it will destroy existing public sector plans that are well funded
and provide secure retirement benefits to millions of state and local
government employees.
We thank you for the opportunity to express our position on
mandatory Social Security coverage to the Subcommittee.
Statement of Anne Ratto, Corralitos, California
I am submitting this testimony to as a private citizen who is
urging you to repeal the Social Security Offset Law. I have worked in
education for the majority of my 20 year career. From 1986-1999 I
worked in Alternative Education with high school students who were at
risk of dropping out, ending up in the prison system or homeless. My
faculty position as Vocational Education Coordinator was to provide
jobs and job training for students so they could become self-sufficient
adults. I was a member of STRS in this position and did not pay into
Social Security. Since 1999, I have been an administrator at a local
community college, where I manage a program for low-income adults so
that they have the support services necessary to succeed in college. In
this position, I am a member of PERS and pay into Social Security. I
plan to retire in this position in the next decade.
As I plan for my retirement, I am deeply disturbed that part of the
retirement that I earned will be reduced due to an antiquated and
unfair law. I deserve to receive all the benefits that I have paid
into. In addition, as we see the baby boomers retire, people in the
private sector who may want to transition into an education position
are deterred as they will have their Social Security reduced.
I urge you to do what is fair and repeal the Social Security offset
law. Many deserving educators who have devoted their lives to serving
young people deserve to be treated with respect and dignity in their
retirement years.
Statement of John Reddington, Bright, Indiana
I worked for and retired from the City of Cincinnati. I also worked
under Social Security and was eligible to receive about $600. per
month, but thanks to the GPO/WEP provision, I am PENALIZED and receive
only \1/3\--about $200. per month. Reduced by 60%. I followed the
RULES, but then you CHANGED THEM. Please REPEAL the GPO/WEP. Thank you.
Statement of Amy L. Reed, Newbury Park High School, Newbury Park,
California
The Government Pension Offset and Windfall Elimination are two
badly conceived provisions that are unfair to teachers and others. They
discriminate against people who have legitimately earned social
security benefits, simply because they chose to become teachers. In
addition, they discourage those who might choose teaching as a second
career by not allowing them to collect the social security benefits
they've earned, in spite of the fact that their ability to earn an
adequate pension from teaching would be severely limited. We need to
work to keep the teachers we have and to encourage experienced people
to become teachers. These bad provisions interfere with these efforts.
Beyond that, they are patently unfair. Please act to repeal them now!
Statement of Sharon Richard, Sour Lake, Texas
Thank you for giving me this opportunity to submit this statement.
I recently completed my seventh year as a Texas schoolteacher. I
teach American history, including the American Revolution, the
Constitution, and the Bill of Rights, to eighth grade students at
Henderson Middle School in Hardin-Jefferson Independent School
District. I absolutely love what I teach. As I strive to share with my
students the ideas of the Founders and Framers and the many reasons why
they fought, deliberated, perspired, and worked on the noble experiment
known fondly as the United States of America, I constantly urge my
students to undertake a life-long participation in their government. I
do my best to instill the belief that the founders' idea of popular
sovereignty is still true in this democratic republic, and they must
always think of themselves as part of ``We the People.''
Before my teaching career began, however, for over twenty-five
years my husband and I owned and operated a small independent community
pharmacy. Both my husband and I have paid significantly into social
security over the course of our lifetimes. He began paying into social
security at the age of sixteen. I first paid into social security at
the age of twenty-one. Also, since we owned our business, we MATCHED
the social security paid in by our employees and ourselves. Therefore,
we consider that for more than twenty-five years, we paid DOUBLE
amounts into social security.
Three years into my teaching career, I found out about the
Government Pension Offset and the Windfall Elimination Provision. Of
course, at first I could not believe that my government would really
take away EARNED social security at retirement. But in the course of
the last few years, I have learned that, indeed, my government really
will do that.
Yes, my government, the government ``of the people, by the people,
and for the people,'' really will literally deny our hard earned and
previously paid benefits because of two obscure and misunderstood laws
called the Government Pension Offset and Windfall Elimination
Provision.
I have learned that if I retire through the Texas Teacher
Retirement System, and draw a pension, I may lose my spousal benefits
because of the Government Pension Offset. My husband simply cannot
comprehend that he has spent more than thirty years as a conscientious
community pharmacist, often serving the public around the clock, and
that his wife of over thirty years will be denied benefits based on the
social security he has paid in!
Further, because of the Windfall Elimination Provision, I will also
be denied much of my OWN paid-in social security, because I have only
twenty-six ``substantial'' years of social security. I will not receive
the amount of money per month that is quoted on my quarterly social
security earnings statement. Meanwhile, of course, I have no choice but
to pay into the TRS. I will lose hundreds of dollars each month when I
retire, dollars that will make a significant difference in our
retirement years. These are my earned benefits that I will be denied!
And I also paid matching amounts through my business! Unconscionable.
Unjust. Unfair. Unbelievable. Incomprehensible.
My salary is slightly more than $30,000 per year. I am in my mid-
fifties, and plan to teach only a few more years. With a meager salary
like this, my pension will hardly be a ``windfall.'' And although many
people consider pharmacy to be lucrative, on the contrary, small-town
independent pharmacies have taken severe financial hits with the advent
of insurance-driven HMO's, PPO's, drug formularies, and the like.
Accordingly, our business retirement plan was minimal. Because of these
factors, we have since sold our little independent pharmacy. Therefore,
we had certainly counted on our fully earned social security benefits,
along with my small teacher pension, to help with our retirement.
As badly as the WEP and GPO are affecting public servants at
present, the future of education is also being severely undermined by
these laws. We need quality individuals to enter education, and we need
them now more than ever. As a measure to recruit these quality
individuals, plans such as Troops to Teachers and Careers to Classroom
have tried to lure past military and professionals into the classrooms
of America. However, as prospective teachers are made aware of these
unjust social security laws, many are giving up the idea of going into
the classrooms of Texas and the other 14 impacted states, and rightly
so. How wrong it is, for example, to recruit retired military, praise
them for excellence in the classroom, and then deny them the social
security benefits they earned while serving their country! These laws
are such an injustice to hard-working public servants. And to be told
that we are ``double dipping'' is unjustified and quite untrue.
We know the reasons these laws were implemented, to prevent the
``double dipping.'' But the effect is negligible on those who get large
pensions. Those who are hurt are the lowest paid public servants in
America. To allow the Government Pension Offset and Windfall
Elimination Provision to continue to force custodians and cafeteria
workers, bus drivers and school nurses into virtual and unexpected
poverty is simply immoral. It is beyond unjust to allow these dedicated
and conscientious, but lowest paid personnel on Texas campuses to be
treated in such a manner by their government. To let these laws stand,
to postpone the elimination of these unfair laws through yet another
Congress, is a travesty. Two decades of this injustice is long enough.
There is much talk of mandatory Social Security among those who do
not currently pay into the system. That would be fine, but school
districts in Texas, for example, can barely make ends meet now, with
escalating expectations from both the state and federal governments.
How can they suddenly fund matching Social Security for all employees?
The funds simply are not there.
``America's heroes,'' the firemen and policemen, along with the
millions of others who are affected by these unbelievably unjust laws
are also having a hard time understanding why this issue appears to be
so partisan. This is not a Republican vs. Democrat issue; this is a
simple issue of fairness to multitudes of public servants in this great
country.
As one of those public servants, I respectfully request immediate
elimination of the Government Pension Offset and Windfall Elimination
Provision.
On May 19, 2005, when Congress began the effort to address the
long-term solvency of Social Security, the Honorable Hal Daub, Chairman
of the Social Security Advisory Board and former Member of Congress,
testified before Ways and Means:
While restoring the solvency of Social Security is a pressing need
that presents significant challenges, it also give us the opportunity
to examine whether some aspects of the program could be better targeted
to the 21st century population it now serves. The basic construct of
the program is sound, with a benefit formula that recognizes the need
to replace a greater portion of the pre-retirement earnings at the
lower end of the scale in order to maintain an adequate standard of
living. Over the last third of a century, largely because of Social
Security, the poverty rate among the aged has been cut from nearly 25
percent to a little over 10 percent. That is a remarkable achievement,
but in changing the program we should look for the opportunity to do
even better, and we need to look for aspects of the program that have
not done so well. For example, older women, particularly those who are
widowed, divorced, or single still have poverty rates approaching or
exceeding 20 percent.
Mr. Daub is quite correct when he says that aspects of the program
have not done so well. It is truly hard to maintain an adequate
standard of living, especially for older women who are generally living
alone in their later years. The GPO and WEP absolutely do contribute to
the poverty level in which many public servants find themselves. The
Honorable Mrs. Nancy Johnson, R-Connecticut of Ways and Means, also
asserted at the May 19th hearing that these laws unjustly affect her
constituents and need review and change.
Yes, some changes must be made to Social Security (simply removing
the cap would be a fine start), but as you determine the future of the
system, I urge you to take into consideration the words you have read
and heard from the real working men and women of the United States who
are being hurt by the GPO or WEP. Many pertinent statements were
delivered also to the May 1, 2003 Subcommittee hearing of the 108th
Congress. These men and women continue to count on their Congressional
representatives to make a difference in their lives. Now is the time
for Congress ``to do even better'' by ``the population it now serves.''
The GAO has not taken into consideration that the cost of repeal of
these laws must be measured by more than dollars, cents, and the effect
on the long-range deficit. Indeed, the cost of repeal of the GPO and
WEP is negligible compared with the overwhelming cost of implementing
personal retirement accounts. Unquestionably, the cost must also be
measured by the life of each American public servant and the respect
each deserves for a lifetime of commitment.
Again, I respectfully request immediate elimination of the
Government Pension Offset and Windfall Elimination Provision.
Statement of Andrew Sallee III, Lexington, Kentucky
I am a former USPS employee and retired with 36.5 years of
service. I worked previously at a number of jobs prior to 1959 when I
joined the Government and also during my employment with the USPS.
I looked forward to the time when I would enjoy both my retirement
through the Government and also with an additional paycheck from the
Social Security. Then came the passing of the double dipping bill which
stripped me of 60% of my already small Social Security check.
I CAN recognize if I had earned both of these retirements using the
same employment that I would be penalized, this makes sense!! But to
just LUMP everyone into the same bill without any thought as to where
they were employed is senseless and shows how much it LOOKS like our
representatives don t really know on what they are voting.
It is unfair to penalize civil servants for extra work outside of
their regular workplace and anyone to whom I relate this experience
cannot believe me unless they too have become a victim of this terrible
bill.
I urge you to repeal the original bill with all due haste!!! I know
we have the backers for WINDFALL REPEAL, Congressmen Bunning, McConnell
and Chandler all back the repeal, please help to get it out of
committee!!!
Statement of Marilyn Sapienza, Cheshire, Connecticut
I worked for 12 years for a publishing company. During that time, I
contributed to Social Security. Then, I became a public school teacher.
For 22 years, I taught in Connecticut public schools. I taught
Grades K, 1, 2, 3, 5, and 6. I taught reading intervention and remedial
reading to elementary children. During these 22 years, I contributed to
Teacher's Retirement.
Now, with my retirement within sight, I learn that I am not
eligible for my full Social Security benefits. And why? Simply because
I have been a teacher in the public schools. This knowledge deeply
saddens me. I feel as if I am being punished for having become a public
servant. I feel as if I am being discriminated against just for having
instructed a generation of school children.
My 12 years of Social Security benefits exist only because I have
worked for them. Getting Social Security benefits at the time of my
retirement is not a gift. Rather, it is, in my opinion, a right, a
right earned from hard work. Had I worked for 12 years in industry
only, I would have been eligible for my Social Security benefits in
full. So why should I be penalized just because I continued to work as
a public servant?
I ask that you support paying full Social Security benefits to
teachers who have earned them. To do otherwise is to penalize teachers
and act prejudicially toward them. I appeal to your sense of justice
for people like me who have had two careers--one in industry and one as
a devoted, public servant educating our young citizens.
South Hamilton, Massachusetts 01982
June 9, 2005
To Whom It May Concern:
The GOP/WEP is not a fair system and penalizes one for working hard
and trying to provide for retirement. As a widow, and a school teacher
with limited years of teaching (stayed home to take of children, one
being a Spina Bifida), I was looking forward to my late husband's
social security. He worked hard for his money and never had the
opportunity to collect it since he died of cancer at a young age. It is
not fair for the government to keep my social security and reduce his
by 2/3 of my teacher pension. Without his social security, I will never
be able to fully retire. Please repeal the GOP/WEP so individuals can
have a better life. Thank you.
Linda A. Saunders
Culver City, California 90230
June 23, 2005
To Whom It May Concern:
My name is Rosalie Saxman. I started working when I was 16 years
old, holding various jobs from childcare to being a waitress at a
family resort and then at a restaurant as I put myself through college.
After graduation, I became a teacher of the deaf. I taught in a public
school for two years, and then moved to a private school, where they
had us pay into social security, for the next ten years.
While teaching I decided to become an Audiologist and worked at
Childrens Hospital for three years. I then decided to start a family
and so I began working in a public school as an educational
audiologist. I have now held this position for the past 21 years.
Having worked for a total of 33 years in an educational setting, I
think it is in very poor taste for my social security to be deducted
from my teacher's pension, when I have been working in the same field
of education but under the two systems. Because I came in from a
private school I never received credit for my years experience when
joining the public schools. This means I will have to keep working
until I am 63 years old just to have 25 years experience. This already
eliminates me from any longevity increment that my retirement might
give me. Then to have money taken away, because I worked at a school
that did not contribute to the state pension plan is penalizing me for
working in the education field for more than 35 years.
I would strongly urge this committee to look at what this ruling
does to people who have paid in to both systems. It is an unfair
treatment.
Thank you for your time.
Rosalie Saxman
Statement of Barbara Shaughnessy-Harding, Rimforest, California
I know the majority of you have been supportive in the past, please
be proactive now regarding the Government Pension Offset and the
Windfall Elimination Provision.
My husband and I would be affected by both of these unfair offsets.
He has worked, on his feet as a barber, for over 35 years and social
security is his pension plan. I have also worked all of my adult life,
primarily with companies that were part of the social security system
and consequently, both my employers and I have paid enough into the
system that I have the quarters required to qualify for the same
pension as others.
Twelve years ago I started working for a school district and began
paying into the state teachers' retirement system. Imagine my surprise
when I realized about a year ago that both my husband and I would now
be discriminated against for trying to take care of ourselves in our
old age. Apparently I would have been better off if I had stayed at
home and not worked at all. It's just not fair.
Please do what you can do to help us.
Statement of Suzanne Shaw, Penobscot, Maine
Thank you for giving me this opportunity to write to you.
My name is Sue Shaw and I am writing to you today as a retired
teacher.
Privatization and a reduced Social Security benefit are NOT
acceptable. I should know--my SS benefit has already been reduced by
60% due to the Windfall Elimination Provision.
I taught for 37 years--both under Social Security and non-Social
Security retirement systems. Because of this straddling of retirement
systems, when I reached the age to receive the Social Security (SS)
benefit that the government collected the taxes for and promised to me,
I saw that benefit either severely reduced (WEP) or totally eliminated
(GPO). Because I have not only worked under SS for the required 40
quarters but also have a spouse who contributed to SS for almost 50
years, I will be subject to both the Government Pension Offset (GPO)
and the Windfall Elimination Provision (WEP). I fully realize that
everyone is limited to one SS benefit. However, since I chose to be a
teacher for 28 years in Maine, I will not receive a complete benefit
under either situation--personal or spousal. I will be eligible to
receive not a penny of my husband's earned benefit (GPO) and only 40%
of my own (WEP).
One of the arguments I hear is that SS is slanted toward the low
wage earners. As I say in the following paragraphs, that is what I
thought I was! That is why I was working two jobs and during vacations
from school! When you are young and poor, that is what you do--you work
extra jobs! When you are old and the benefits that you supposedly
earned when you were doing that extra work are denied to you--what do
you do then?
Just like Everyone Else . . .
I am so tired of people acting as though we who are fighting the
Social Security Offset of The Windfall Elimination Provision are trying
to steal something. I am tired of hearing people tell me that Social
Security (SS) needs to be preserved for current recipients and for
those who will be retiring in the future, as though we are some type of
an unfunded liability. As though we are asking for something that has
not been paid for.
I am tired of people who do not understand anything except that
they are afraid someone is trying to steal SS retirement money. I am
tired of being told that the government cannot afford to pay us 100% of
our earned SS benefits. And hundreds of thousands of workers are tired
of being forced to pay into a system from which they will not be able
to realize fair benefits.
People who are penalized by the Windfall Elimination Provision
(WEP) have paid into the SS system exactly the same as everyone else.
Exactly the same formula was used for withholding SS tax from our
private sector work. For every penny we earned, we paid a portion of
that penny into SS, just like everyone else.
Social Security says that in order for an individual to receive a
benefit, they must first earn ``40 quarters'' which means a minimum of
10 years working time. Just like everyone else, those of us who are
trapped by the WEP have earned those forty quarters--and in many cases
well over that number. We are NOT asking for benefits for non-covered
work--we simply want the same SS benefits for the same quarters and
contributions as everyone else!
The government tells us that SS is meant to be a safety net for
those at the low end of the income scale. Those of us who worked full
time at one job and evenings and weekends at another thought we fit
that description!
We were low paid--so we worked an extra job. We climbed the ladder
of advancement and crossed private/public sector lines. We relocated to
follow family or opportunity. We opened a small business on the side.
We worked--and now we will have to continue to work, because the
retirement benefits we were promised for the payments we made will not
be forthcoming due to the WEP.
Just like everyone else, we paid 100% of the required tax into SS.
But--UNLIKE everyone else, we will NOT receive a 100% benefit! Because
we receive a ``public pension'' for part of our work history, our
benefit for work under SS is offset. UNLIKE everyone else, our earned
SS benefit could be well less than half of what was promised by the
government.
Unlike those with a 401K, our public pension will cause our SS
benefit to be slashed.
Unlike a private sector pension from an employer, our public
pension will cause our SS benefit to be reduced by thousands of
dollars.
Public pensions and SS are different systems--different forms of
government (state/federal) oversee them, different taxes and
contributions support them, and they have different vesting and
benefits schedules. To receive both SS and a public pension is NOT
double dipping--it is receiving different benefits for different paid
taxes for different work under different employers. It is paying in
twice--and working twice. Benefits should be paid twice--once from each
employer--both at the 100% level!
All we are asking for is the SS benefit we earned. The SS benefit
promised when we paid SS taxes on every penny earned for year after
year after year . . . just like everyone else.
The Widows of America . . .
Imagine this--you are recently retired. While your children were
young, you worked part time occasionally, but spent a lot of time at
home, raising your family. When they were through with school, you took
your turn at college, and at mid-life began the career you had always
dreamed of--teaching school. You worked for 20 more years, and now, you
and your spouse are looking toward a well-deserved retirement. A
relatively common, uncomplicated scenario.
But then, as happens all too often, tragedy strikes and your
beloved spouse unexpectedly dies. Your world collapses, and things turn
upside down as you bury your life-partner. As time passes, there is
business that needs to be seen to, and you begin to deal with the paper
work that death creates. You go down to the Social Security offices,
and a bleak picture becomes even more so, and the future becomes not
only lonely, but also frightening, because you find that there will not
be enough money to live on. Social Security says you can not have any
of your deceased spouse's benefit. You will be living on only your
public pension from your relatively short career.
Every day, all across the country, widows (and, of course,
widowers) find that, when they go to SS after the death of their
spouses, there will be either severely reduced survivor benefits, or
none at all. These surviving spouses find that they are denied the
benefits earned for them by the work record of the deceased simply
because they (the survivors) have a public pension.
This law that devastates the income of so many of America's elderly
widows is the Government Pension Offset (GPO). Passed in the early
80's, it was designed to keep those with high incomes from doing what
was perceived as ``double dipping'' or getting two top-level government
retirement benefits. As conceived, the law had good points. In
practice, however, it is extremely flawed. What the GPO does is give a
secure retirement the kiss of death for low and middle income public
employees who, along with their spouses, have worked, paid their bills,
and paid their taxes for many long years. What the GPO does, in fact,
is put the income of many of these retirees at the poverty level upon
the death of a spouse. What the GPO does is see to it that all too
often, when the spouse dies, the benefit dies also.
These retired public employees--postal workers, clerical staff in
the state offices, police, firefighters, Department of Transportation
workers, secretaries, teachers, guidance counselors, bus drivers, game
wardens, public utility workers, federal employees, custodians, state
health workers, prison employees, air traffic controllers, and many
more, have retirement income stolen by the GPO. The loss of this
income, which had been earned for them by their spouses, makes many of
these dedicated individuals eligible for public assistance programs.
They become eligible for heating assistance, housing assistance, food
stamps, and health care. Programs that, in fact, end up costing the
government more money than it would to simply give the workers their
earned benefits in the first place.
These people do not WANT assistance--they want the money from the
benefits that SS promised when SS taxes were taken from paychecks. As
one worker put it--''It's all tax money--.it's just how you get it! It
would be cheaper for the government to keep me off of the `dole' if it
can!'' These widows can find themselves living on less than $25 a day--
many times much less, simply because they had the misfortune to chose
to work in the public sector. As Marti Flint said in the January 8th
2003 CBS Evening News ``Eye on America'' segment on SS--``the only
thing I did wrong was to go to work in a school!''
The encouraging of workers to embrace ``2nd careers'' . . .
President Bush encourages the military to turn to a 2nd career in
the classroom in his ``Troops to Teachers'' program. One has to wonder
if the military personnel who walk into classrooms after 20 years in
uniform realize that they could possibly, with the opening of that
classroom door be closing another! They could easily be closing a door
on a large portion of their SS benefits. Military pensions and SS paid
while in the military are exempt from the Windfall Elimination
Provision (WEP). But the WEP says a public pension from non-SS-covered
work cancels out that exemption when a state pension from non-covered
work is thrown into the formula!
People from the private sector are urged to step to the front of
the classroom and ``make a difference'' as a public servant. Public
workers begin small businesses on the side, or in the case of teachers
or other school personnel, work summers and vacations to help make ends
meet. Whatever the scenario, when an individual's work history
straddles the public sector/private sector line, it is like having one
foot on the boat and one foot on the dock. If their public sector work
is in non-SS-covered employment, these individuals are going to take a
soaking!
Unlike the person with one foot on the dock and one on the boat,
however, the vast majority of those affected by the WEP do not even
suspect that disaster is imminent! They think they have planned ahead!
They had paid in good faith into one system for retirement, and then
into another! They had paid the taxes and expected the benefits. They
expected promises made by the government to be kept! What a nasty shock
to discover, often not until the very edge of retirement, that 100% of
that promised benefit will not be forthcoming.
It has been said that elimination of the Offsets would cost too
much and would cause depletion of the SS account that much sooner.
Whose money is being held so tightly in the governmental fist? Don't
forget--we paid in for years and years! If a state worker knows that
they are only going to receive 40% of their SS from other jobs, will
the government let them only pay in 40% of the tax rate? Definitely
not.
So--here is the public worker, retired and needing more income
because the WEP has significantly reduced planned on retirement
benefits. Being a cheerful, energetic soul, a post-retirement job is
decided on as being the answer, and off to Wal-Mart our retiree goes.
Unfortunately, that happy little retiree is now paying even more money
into the Social Security system. Money that is, of course, at some
point in the future going to be denied as a benefit. Our retiree is
caught between a rock and a hard place by the WEP.
Most retirement plans tout the Social Security Administration's
``three-legged stool of retirement''--pension, SS and savings. The
public workers affected by the Offsets had earned their SS
``quarters'', had a public pension, and had saved. They had, in fact,
planned for their future. Unfortunately for them, however, the WEP cut
off one of the legs and the stool fell over!
Heroes need a hand . . .
These laws, The Government Pension Offset and the Windfall
Elimination Provision, are undermining the financial quality of life
for America's Heroes. The very people who dedicate their lives to
serving the public from one side of the country to the other, the
firefighters, the police, the teachers and the other public workers are
finding that their reward for that life of service is a slap in the
face from the federal government. Over 75% of the nation's emergency
responders will be affected by these laws, almost half of the teachers,
and one third of the public employees, for a total of approximately 4%
of the workforce.
They are finding that they cannot collect benefits earned for them
on a spousal work record under SS (the GPO), and they are finding that
benefits from work that they did with their own hands is denied them
also (WEP).
These laws, the GPO and the WEP, have been like dirty little
secrets that no one talked about in polite company. No one discovered
them until the day they went down to SS to begin collecting a benefit .
. . and what could be done then? No one explained to people changing
careers that if they crossed the line between covered and non-covered
SS work that they were putting their retirement income at risk. No one
pointed out the fine print on the SS form that gives approximated
retirement income, which warns . . . ``income from non-covered work may
affect benefits''. No one today is telling the young people who are
becoming the teachers of tomorrow that they need to consider these laws
when deciding where to teach. The GPO and the WEP were virtually
unknown just a few short years ago. But as with any secret, tell a few
people, and soon everyone knows! We have been saying in loud voices all
across the country . . . ``HEY_LISTEN UP_THESE LAWS APPLY TO YOU!''
What a ``Thank You''. . .
When America is in crisis, we turn our eyes and hopes to our heroes
. . . to the armed services and the emergency responders who dedicate
their lives to serving the public. In our memories live times of Iraq,
Desert Storm, Vietnam, Korea, WWII and of course the devastation of 9-
11.
We revere these men and women. We build memorials, dedicate parks,
and hold parades in their honor. And then--when they decide to move on
and re-dedicate their lives to the people of America by becoming
workers in the public sector in certain geographical areas, the federal
government pays them back by stealing the Social Security (SS) benefits
that they bought and paid for in their military or ER careers!
If these brave men and women who have put their lives on the line
as policemen, firemen and soldiers decide in their 2nd public service
career to settle in certain areas, they will find that they will lose
over \1/2\ of the SS they already earned. The Windfall Elimination
Provision (WEP), a federal law enacted in the late 70's, causes anyone
who accepts a pension from ``non-covered'' work (work that does not pay
into SS) to lose a substantial portion of their earned SS. Those who
have already dedicated their lives once to the public should not be
cheated out of their SS benefits just because they chose to live in
certain geographical areas as they re-dedicate their lives to public
service. These thousands of American heroes are going to lose SS that
they earned in time dedicated to the safety of America.
The WEP changes the formula that is used to figure SS benefits for
those who also earn a pension from non-covered work. This changed
formula costs those with a SS pension up to $6,000 an amount equal to
60% of their benefit. For those with larger SS pensions, the price tops
out at $3,600 a year.
For anyone to lose a retirement benefit that has been earned and
paid for, to lose a benefit that is expected, is devastating. For the
government to break the promise that was made when the taxes were paid
is unfair. To steal SS benefits in a manner that is completely
unfounded is criminal.
But . . . to cut the benefits of those who have dedicated and re-
dedicated their lives to the service of the American public is even
worse than devastating, unfair and criminal . . . it is an unpatriotic
practice of the lowest order!
What a governmental payback for America's heroes!
A new twist . . .
There is an argument in favor of elimination of these laws from the
state budget point of view. State budgets are in big trouble. There is
not enough money coming in, to simplify the matter. But--there is a
simple solution that would increase the cash flow into some of these
economically strapped states, and that would, as President Bush says,
``stimulate the economy''. This stimulation would, in turn, help the
state budgets because people would be spending this money and then
paying sales tax on what they buy. More business would mean a need for
more employees, which means more jobs.
If a one-time tax break payment of several hundred dollars is
supposed to help the economy, how much more help could be given by
allowing these earned benefits to be paid month after month? If
``stimulation of the economy'' is the desired result, how much better
it would be to eliminate the Social Security Offset laws than to simply
give a one time tax reduction of a few hundred dollars!
I am a retired Physical Education teacher, and over the 37 years
that I taught, one of the things that was crystal clear was ``you do
NOT change the rules in the middle of the game''. Back in the early
`80s, a well-meaning Congress changed the rules in the middle of our
game. As a result, we are in a 7th inning slump. But we have high hopes
for a comeback.
There is no `right way to do the wrong thing' . . .
Now, with hope in our hearts, we ask that Congress realize the
unfairness of these laws and the necessity of voting to eliminate them
by passing HR147 and S619. We ask that Congress not settle for less
than ``the Social Security Fairness Act of 2005''. We ask that Congress
do this because it is simply the right thing to do. And, as the title
itself says, ``the fair thing to do ''. Because . . . there is no right
way to do the wrong thing, and the Social Security Offsets are wrong.
Next, I would like to address totalization and the future of Social
Security.
I just received a packet of information from Congressman Mike
Michaud's office. It consists of a report from the Government
Accounting Office on totalization with Mexico, a Congressional Research
Service report on totalization with Mexico, and a few background sheets
concerning totalization laws from the ``Congressional Quarterly'' of
1977. I read it with mounting horror at the thought of what such an
agreement could do to the future of SSA! While I realize that
totalization is a good thing for some people (both U.S. citizens and
others) whose work records straddle international boundary lines, such
an agreement with Mexico would be a disaster!
Those who compare such an agreement with the one now in place with
Canada do not have a realistic grasp of the differences between the
borders, the relationships at those borders, the ethnic groups
involved, the numbers involved, and the unreliability of the necessary
records and spastics involved. To compare the two is to compare an
apple and--not even a slightly similar orange--but an apple and a
watermelon!
As a citizen of this country, I had to work at least 10 years or 40
quarters to receive a SSA benefit. Now that I am over 62 and receiving
of that benefit, I am told that because of a law called the ``Windfall
Elimination Provision'', I cannot have 100% of that benefit. My husband
has worked under SS for 45 years. Should he die, I will get not one
cent from his SS survivor benefit due to a law called the Government
Pension Offset''.
Yet--totalization with Mexico would allow SS benefits to be paid to
ILLEGAL ALIENS AND THEIR DEPENDENTS AND SURVIVORS. To make matters
worse, these illegal workers could qualify on a work record that could
be as small as 6 quarters or 1\1/2\ years! I do realize that these
benefits would be reduced. That fact does NOT make me feel better!
People in favor of totalization point to agreements with other
countries and say that the illegal alien issue is not a problem. Those
other countries do not mirror the situations at the USA/Mexico border.
Those countries, unlike Mexico, do not have vast numbers of illegal
workers in the United States. The projected payments as a result of a
totalization agreement with Mexico would be $78 million a year and
would grow to $650 million a year by 2050. But--the GOA fears that the
$78 million figure is horrifically low due to unrealistic projected
numbers of recipients and dependents/survivors! Under current
agreements with other countries, $15 million is paid each month to
about 94,000 recipients. Even if the projected $78 million is correct,
it would represent an amount equal to two-fifths--well over one-third--
of the amount currently being paid to ALL countries per year!
An extremely important point is that, through all of the pro/con
arguments it must be kept in mind that record-keeping dealing with
illegal aliens and their dependents and survivors must, by the very
insertion of the word illegal, be extremely suspect! It would be
criminal for totalization with Mexico to be allowed, only to have it be
the straw on the camel of SSA's back. It would be criminal to allow
benefits that are prefaced with the word illegal to drain the SSA trust
fund so that benefits of U.S. citizens would be placed in jeopardy.
It would be criminal to allow illegal, undocumented workers and
their dependents and survivors to have SSA benefits while the Social
Security Offset Laws of the Government Pension Offset and the Windfall
Elimination Provision still prevent public servant citizens of the
United States from receiving their own earned SS benefits.
I strongly urge you, at every opportunity, to speak out against
totalization with Mexico, and to vote against such an agreement when
the time comes! I offer as an example of the insanity of this
agreement, the following news story:
Government to pay for illegal alien's care
WASHINGTON: Health care providers can charge the government for
emergency care provided to illegal aliens beginning on Tuesday (5-10-
05).
The Centers for Medicare and Medicaid Services issued final
guidance Monday that sets up a system for reimbursement. Lawmakers set
aside $1 billion over four years for the program, created by Medicare
legislation passed in 2003.
Two-thirds of the money will be distributed to health care
providers based on a state's percentage of undocumented aliens. The
remaining third will go to providers with the largest number of arrests
of undocumented aliens.
The states receiving the highest amounts are CA = $70.8M, TX =
$46M, AZ = $45M, and NY = $12.25M.
----------
I have to wonder about a government that does something like that!
To create a system that relies on a percentage of something that is
undocumented makes even someone who is mathematically challenged raise
an eyebrow . . . and then to give the rest of the $ to the places with
the largest number of arrests . . . whew!
I have to repeat . . . what isn't understood about illegal? I
wonder how much of the ``emergency care'' is made up of illegal aliens
getting to the hospital just in time to have their child delivered . .
. which, to my understanding, makes it a citizen of the U.S.? And then,
of course, eligible for all sorts of aid, including Social Security . .
Totalization with Mexico would rely too often on things that are
``undocumented'', creating havoc with the system, and placing an unfair
drain on its resources.
I implore you--keep the Security in the Social Security system--using
methods that are just and fair . . . not simply politically
expedient.
Statement of Marna Shultz, Pembroke High School, Pembroke,
Massachusetts
Many teachers work during the summer and hold part-time positions.
If we pay into the social security system, it seems only fair that we
should be able to collect the benefits.
Today most people are not able to retire but continue working in
positions that will require them to pay into a benefit system they will
never be able to benefit from!!
I have a friend that retired from teaching and became a lawyer. He
is now a lawyer paying a tremendous amount of social security for which
he will never reap any benefit. At least give the person a choice
whether or not to pay the social security tax!
It seems to be an unfair and senseless punishment for a profession
that has already been hit with extra regulations. (The teachers in my
system received a 1% raise this year. Will that kind of raise allow for
much saving to be done?)
Please help. Just be fair. Thank you.
Mentor, Ohio 44060
June 16, 2005
I am writing to you regarding the Government Pension Offset (GPO),
the Windfall Elimination Provision (WEP), S-349 and the issue of the
Social Security Fairness Act of 2003.
I have worked in private industry for 17 years and then elected to
be a stay at home Mom when my two children were born. In 1991 I started
my employment with Mentor Public Schools as a secretary and have worked
here for 12 years. I am 59 years old and, of course, am starting to
think about my retirement in the future. Six years ago, my husband
passed away unexpectedly. I was left with two children in college and
that has been tough on my salary.
I am not a teacher--I am a classified employee. It has come to my
attention that since I worked in private industry and have paid into
the PERS that my social security benefits and that of my deceased
husband's will be sorely reduced once I elect to retire. I certainly
find this unfair. I have worked, and continue to work, to take care of
me and my children. Why is it that because I have chosen to work, that
I am punished with a drastic reduction in benefits when I retire?
I need your help--please help me.
Thank you.
Paulette Spehek
Statement of Dan Stefancik, Mogadore, Ohio
Please consider the following thoughts regarding Social Security
and Public System pensions:
Trying to be both fair and honest, I can see how a person who
made a ``good living'' as a public employee after private employment
may not warrant a full Social Security pension too. However, as in most
economic cases, a one-size-fits-all approach is not practical, or
reasonable, in determining how a retiring wage earner spends his or her
``golden years'' of independent living.
Many Baby Boomers, like myself, worked for years at relatively low
paying jobs covered by Social Security before we moved to jobs covered
by one of the public employee pension systems.
Many of us never became the teachers, police officers, or
bureaucrats that many people symbolize as the ``public employees''.
Thousands of us are service workers, custodians, clericals, and school
bus drivers who never made it out of the lower paying jobs in the
public service areas. Sure, there are `civil service fat cats' who make
a six-figure salary, but there are a lot more of us who don't!
Most of us in the Ohio School Employees Retirement System
(OSERS) are service workers who did not ever make $30K in our highest
earning years. That means the MAXIMUM PENSION for working 30 years
AFTER we left SS covered jobs would be about $1,650 per month BEFORE
any deductions or contributions for health care (now $125-$500 per
month).
Most of us will face the following, or at least a similar financial
situation in retirement:
A conservative estimate of TYPICAL FIXED MONTHLY EXPENSES
will often include:
$150 property taxes for a small residence in an older
neighborhood
$ 50 for minimal homeowner property insurance.
$125 for electric service if not using electric heat.
$125 for natural gas service if using it to heat a
small home.
$25 for basic wired telephone service.
$25 for basic television service.
$50 for trash collection, water, and sewer service in
an urban area.
$100 for basic full coverage auto insurance.
Totaling at least $650 per month for the most basic fixed expenses.
That would leave less than $33 per day for food,
medicines, clothing, housing costs, transportation costs, routine
repairs, personal hygiene, cleaning products; and ``luxuries'' such as
newspapers, magazines, postage stamps, pet care, and an occasional trip
to the movies.
In much of our country, the above pension and expense amounts do
not even meet the minimum levels of the cost of living for middle-class
Americans trying to make ends meet each month.
The above figures are lower than average estimates meant to show
you that THOUSANDS OF WORKING CLASS ``PUBLIC EMPLOYEES'' DID NOT MAKE
ENOUGH DURING THEIR NON-SOCIAL SECURITY-CONTRIBUTING CAREERS TO WARRANT
A REDUCTION OF SOCIAL SECURITY PENSION BENEFITS THEY WOULD RECEIVE FOR
THEIR YEARS WORKED WHILE CONTRIBUTING TO SOCIAL SECURITY.
A logical solution could be a sliding scale in the offset rule that
would limit Social Security pensions for higher earning public
employees without penalizing lower paid workers.
Thank you for considering the above thoughts during your
deliberations.
--Delivery Worker under OSERS and eligible for a small S.S. pension
too.
Statement of Connie Stenlund, Vancouver, Washington
I appreciate the opportunity to submit this written testimony on
the Government Pension Offset (GPO) and Windfall Elimination Provision
(WEP) Social Security provisions, and their adverse and unfair impact
on me--a federal government retiree. First I want to thank Chairman Jim
McCrery and the other legislators serving on this Subcommittee for
having this important hearing. As a retiree that will be adversely
impacted by these provisions, I urge all Subcommittee members, and
lawmakers, to repeal them as soon as possible and allow me to receive
my full social security benefits.
I worked for the federal government with the U.S. Coast Guard,
Department of Transportation, for 25 years and retired from the Civil
Service Retirement System. However, because I am a single Mom and
employed in a lower grade, I also had to work a part-time job to make
ends meet. I paid into Social Security for about 28 years, long enough
to receive benefits. I also worked long enough for the Federal
Government to earn a government retirement.
When I become eligible for my full benefits at 65 and 10 months, I
will lose about $300 per month in my earned Social Security benefits.
However, my earned government pension is not enough to continue to live
in my condo and pay all my bills. Receiving my full $550 in earned
Social Security benefits would greatly help me continue to be
independent, and not a burden to my children or the federal government.
Because of the 60% cut due to WEP, I must work for the rest of my
life, or for as long as my health will allow. If I do not work, I will
have to sell my condo and live with my children because I will not be
earning enough money to support even my basic needs like rent,
utilities, health care, and food. Earned benefits are what I need to
keep me independent during the time of my life when I am supposed to be
volunteering to help my community, instead of working.
I am not sure how this will all shake out, but I do know that I
should be receiving my full $550 in earned Social Security benefits. I
ask all lawmakers in the Congress, and specifically those serving on
this Subcommittee, to correct this wrong. Please do not let my 60%
Social Security reduction continue simply because I served my country
by working for the federal government.
Thank you.
Sincerely,
Connie M. Stenlund
Lakeville, Massachusetts 02347
June 6, 2005
Dear Representative;
I will be 60 years of age this July. In 1984, I left the private
sector for full-time employment as a faculty member for the State of
Massachusetts at Bridgewater State College. I am still currently
employed as a member of the faculty on a full-time basis in the School
of Management.
After meeting with members of the Social Security Office in nearby
Brockton Massachusetts, I was shocked to find that my and my wife's
social security will be cut almost 40% due to GPO/WEP laws. I was told
that this is because I am a mandatory member of the Massachusetts
State's Teacher Retirement System.
I started working under the Social Security in 1963 after high
school graduation. I graduated from college in 1967 and made
significant earnings under Social Security until 2003 as my attached
Earnings Record indicates with a few exceptions (zero dollars income)
noting periods when I returned to school or was between jobs.
I continue to pay taxes and make contributions to Social Security
because I often work a second job under social security to compensate
for the low public college faculty wages in Massachusetts which run
some 17% below the national average.
Why does a law-abiding, tax paying citizen with many years of
contributing to Social Security outside the Massachusett's Teacher's
Retirement System get penalized for being forced to join a State
Retirement System?
In my years of employment prior to becoming a college professor, I
worked hard and wanted to live the American dream of retirement at the
proper time. How could I possibly know that my significant
contributions to social security would sometime in the future become
off-set by future contributions in a different state run retirement
system?
I ask that the House revise or repeal the current law of the WEP/
GPO and eliminate the unfair WEP/GPO penalties for workers in America
who contributed to Social Security in good faith. Those, who like
myself, should receive the retirement benefits that echo the amounts
they paid in over the years. Thank you.
Professor Frank W. Sterrett
----------
Earnings Records (from March 28, 2005 Social Security Statement mailed
to F. Sterrett)
------------------------------------------------------------------------
S.S.
Year Earnings Year S.S. Earnings
------------------------------------------------------------------------
1963 $ 377 1986 $ 0
1964 912 1987 500
1965 305 1988 6400
1966 727 1989 6400
1967 2584 1990 0
1968 6421 1991 7800
1969 7330 1992 17400
1970 7800 1993 13399
1971 4975 1994 1500
1972 8546 1995 56072
1973 10800 1996 62700
1974 13140 1997 65400
1975 12761 1998 68400
1976 15300 1999 72600
1977 16500 2000 76200
1978 17700 2001 64212
1979 16754 2002 21700
1980 19426 2003 34897
1981 26983 2004 6747
1982 30500
1983 35700
1984 833
1985 0
------------------------------------------------------------------------
Beaumont, Texas 77706
June 23, 2005
Thank you for giving me the opportunity to make this statement.
Millions of Americans are counting on you to do the right thing. My
name is Bonnie Swain and I have worked as a Texas schoolteacher in the
recent past. I had proudly returned to the university setting in my
late forties to obtain both elementary and secondary teaching
certifications. After more than twenty-five years in the public sector
(mostly as a registered nurse), like many professionals, I felt
unfulfilled in my profession, and was drawn to the field of teaching to
make a difference in children's lives. Not long after entering the
classroom, I was made aware of the Government Pension Offset and
Windfall Elimination Provision that affect social security retirement
benefits. As a single person, I could not afford the massive reduction
to my own personal social security and the PENALTY for switching
careers! How sad for the children who could benefit from educators
entering teaching for the betterment of society! Persons who leave
relatively lucrative professions to teach are certainly not doing this
for monetary gain. But this unfair system continues to drive out some
of the best educators.
The GPO and WEP have been heartbreaking in every respect, as this
also affects many of our first responders--such as policemen,
firefighters. Remember 9/11? At its very core, this country depends on
these professions of CAREGIVERS and CIVIL SERVANTS. It is absolutely
unconscionable to PENALIZE these sacrificing professions. As I stated,
millions of Americans are counting on you to do the right thing. I am
confident that justice will prevail, and the GPO and WEP will be
repealed.
Respectfully submitted,
Bonnie Swain
Former elementary and secondary teacher, Port Arthur ISD, Port
Arthur, TX (2001-2004)
Statement of Juanita J. Terrell, Mont Belvieu, Texas
Thank you for allowing me to wrote to you. I am a retired Texas
school secretary.
The Social Security Offset has deprived me of duly earned benefits.
The WEP cuts benefits directly earned through a job covered by Social
Security. In my case, I paid into the Social Security system while
working at other jobs before becoming a school secretary.
I have paid in enough quarters to receive my benefits but cannot
get my full benefits because of the sentence that says ``must have been
paying social security on the last day of employment prior to
retirement'' I receive $88.00 per month (after Medicare) when I could
be receiving another $300. (or more).
I also know widows who are really hurting because of the GPO.
I am asking you to pass HR147 and S619, known as the Social
Security Fairness Act, to eliminate the Government Pension Offset and
the Windfall Elimination Provision. In each case, receiving a public
pension based on employment not covered by Social Security is all it
takes to trigger the offset.
Thank you for your consideration.
Homer, Illinois 61849
September 12, 2005
Ways and Means Committee--
My letter is to plead with you to repeal Social Security's GPO and
WEP. Being penalized by both these actions is grossly unfair.
My brief history--I was married for 28 years, then, sadly,
divorced. I worked just less than five years in my local public school,
then ten years with my husband, who was self-employed. Around the time
of my divorce I began work as a secretary at the University of
Illinois. I worked sixteen years, and then retired. However, because
sixteen years is not enough to live on, I currently work part-time.
My former husband passed away almost five years ago. I was told by
SSA that I am entitled to $1,400/month from him. However, because of
the GPO and WEP, I am only drawing $383 in widow benefits.
Please do not write to me to explain why these two acts were made
years ago. I am being penalized for having worked in two systems, an
extremely unfair and unjust act. Please--let me draw all of my
husband's social security, to which I am legally entitled, so that I
may completely retire.
Because I have written a number of letters to legislatures, even
President Bush, I will now watch to see who actively works to repeal
the GPO and WEP. I will cross party lines to vote at the next election,
which I have never done before. Also, I will begin e-mailing a number
of media to investigate all this, in particular what this country is
doing to assist Mexican immigrants with social security benefits.
Please, repeal the GPO and WEP. I look forward to the news in the
weeks ahead that this has been done. Thank you for listening to my
situation.
Sincerely,
Carol A. Wakefield
Stow, Massachusetts 01775
September 9, 2005
Dear committee members,
I am writing this letter to ask for your help in repealing the GPO
and WEP. I am a school teacher who when retiring will lose \2/3\ of my
retirement from my husband's social security pension! My husband and I
have worked hard for 30 years and retirement is nowhere in sight. If I
retire in the next 5 years my pension from the teacher's retirement
will be about $2000.00 per month. If my husband dies before me, I will
only stand to collect \1/3\ of his social security pension due to the
penalties in the present laws. I cannot live on this poverty level
amount of income. I don't know of anyone else in all the people I know
and work with who will be treated so badly as myself. Even the
presenter from the social security office told a whole auditorium full
of people (1000) that my particular situation is the most unfair of
all. I was told that it is inhumane what is being done to me and my
family. Furthermore, if social security benefits are modified and cut
further for my age ( 52 yrs old) I will stand to loose more. How can
this happen and nobody cares about me? I have given to my country my
whole life as a teacher. Why am I being treated so badly??? Please help
my cause and repeal the GPO and WEP. Mass is only 1 out of 10 states in
the whole country that does this to its teachers! 40 out of 50 states
treat their teachers with more compassion . . . Many thanks for
listening to my plight . . . ( I hope)
Sincerely,
Sharyn Walczewski
Statement of David M. Wetzel, Baton Rogue, Louisiana
Thank you for giving me an opportunity to write to you concerning
Social Security.
Let me first state where I personally stand with respect to the
current social security system. I am 66 years old. I have worked part
of my life under social security: part time jobs in high school, summer
jobs in college, as an engineer for Gulf Research, and as a faculty
member at the Catholic University of America. I currently work for the
State of Louisiana as a faculty member at Louisiana State University. I
have also made private investments in TIAA, IRA's and 403b's.
My work under social security totals many more than 40 quarters,
and I have 26 years in the Louisiana retirement system.
I am in a bind. I can not afford to retire.
Many of the dollars I put in Social Security were painful. One year
our raise at Catholic U. was insultingly small. The president explained
that social security taxes had gone up and taken most of the raise
money he and managed to put together for us. Now I find I will get
little or no benefit from those social security taxes.
I have a concern about changes in the social security system. It is
that changing the system will have a severe negative effect on some
people, as the 1983 changes did on me. In 1983 the social security law
was changed to say that people can not draw two government pensions.
Thus, my social security benefits will be severely cut. Because I did
not work at LSU for all or most all of my career, my state pension will
not be large. My BS, MS, and PhD meant that there were nine years of my
career during which I did not have an income or any retirement plan
benefits. By the way, my private investments have not done well. The
only one to make any money is TIAA. That is why I must keep working.
What if the proposed ``private accounts'' do not make much money?
What if the investments take a temporary drop at the point of
retirement? In principle they would have been good for me. At least
social security would not be able to cancel that part of my benefits.
But the uncertainty remains.
The best thing you can do for me and many others with split careers
is to undo the reforms of the 1983 law. Please pass HR 147 and S619,
the Social Security Fairness Act and the Windfall Elimination
Provision. Let us receive the benefits we paid for.
My submission is on my own behalf only, however I work for
Louisiana State University.
Retired State, County and Municipal Employees Association of
Massachusetts
Plymouth, Massachusetts 02360
June 9, 2005
Honorable James McCrery, Chairman
House Subcommittee on Social Security
2104 Rayburn House Office Bldg.
Washington, D.C. 20515
Dear Mr. Chairman:
Our Association appreciates this opportunity to offer our comments
on Social Security's Government Pension Offset (GPO) and Windfall
Elimination Provision (WEP), as well as mandatory Social Security
coverage. We thank you for including our statement in the June 9, 2005
hearing record of the Subcommittee on Social Security.
For over 37 years, our Association has been the leading advocate
for public retirees and their survivors in Massachusetts. Currently,
our membership totals over 62,000, of which approximately 11,000 reside
outside of Massachusetts.
While our primary focus has been, and remains, at the state and
local levels, we have also involved ourselves in federal issues,
particularly those related to Social Security and Medicare. Foremost,
in connection with Social Security, are the GPO, WEP and mandatory
Social Security coverage.
Among our members are widows, who, in addition to being homemakers,
worked at relatively modest public sector jobs that supplemented their
family income and enabled them to earn, by today's standards, a
relatively small public pension. These members, and their husbands,
believed that if they became widows, they would hopefully have an
adequate retirement income because they would also receive their
husband's full Social Security benefits.
Unfortunately, when their husbands died, they discovered, to their
shock and dismay, that because of their small pensions, they were not
eligible for their deceased husband's full Social Security. Instead,
they were told by the Social Security Administration (SSA) that because
of the GPO, they would receive far less than they anticipated, in many
cases almost nothing.
Our membership also includes those who worked two jobs--one in the
public sector and another with a private employer--in order to support
their families. Through their private sector employment, they
contributed to Social Security, earning a benefit on their own.
Naturally they expected that their hard work in the private sector
entitled them to the same Social Security benefits as their co-workers.
However, the expectations for many of these members failed to be
realized when they received their first Social Security check. That's
because the WEP reduced their Social Security benefits by as much as
sixty percent.
Over the years, the number of members contacting the Association
over the GPO/WEP's devastating effect on their lives has steadily
increased. Everyday, we receive calls, emails and letters from members
pleading with us to do all we can to relieve their hardship. Their
calls for help have become, tragically, all too commonplace. As a
result, our Association committed itself to resolving their problem.
At this time, we call upon the Subcommittee to report out a bill
for action by the House. We believe that such legislation should repeal
both the GPO and WEP.
We also believe that any bill should not include mandating that
newly hired public employees in Massachusetts, and other non-Social
Security states, be covered under Social Security. Analyses have shown
that the short-term infusion of Social Security taxes from new hires
will have a relatively insignificant effect upon the system's future
solvency. Moreover, the revenues, generated by these taxes, will be
offset in the long term when those employees receive their Social
Security benefits.
More important is the overwhelming tax increase upon the
Commonwealth and its political subdivisions. State agencies have placed
the cost at nearly $3.9 billion over the first 10 years under mandatory
Social Security. As a result, state and local officials would have to
increase taxes, cut essential services in areas, such as education or
public safety, or both. Simply put, the end does not justify the means
in this particular case.
In the 1950s, state and local governments were given the option to
join the Social Security system. While many states and localities did
enroll in the system, Massachusetts and its political subdivisions
chose to maintain their own comprehensive retirement system,
specifically developed for their own retirees and employees, because it
provides superior benefits for those who chose a career in public
service at lesser pay.
If one considers how mandatory Social Security will disrupt the
well-established system and cause new long-term fiscal problems at the
state and local levels, then only one conclusion can be reached. Social
Security should not be mandated for newly hired public employees in
Massachusetts and similarly situated states.
In conclusion, we again appreciate this opportunity to voice our
opinion on the GPO, WEP and mandatory Social Security and urge the
Subcommittee to act promptly on needed legislation repealing both the
GPO and WEP. There is no question that it will bring a deserved measure
of dignity to the lives of those currently being severely hurt by these
laws.
Thank you.
Sincerely yours,
Ralph White
President
Statement of Pete Zimmerman, Mission Viejo, California
This statement from a public servant is written primarily to urge
the House Subcommittee on Social Security NOT to try to partially fix
the WEP by supporting the PSRPA (H.R. 1714). At the same time, it is
hoped that the Social Security Subcommittee will instead take the next
step and support total elimination of both the WEP and the GPO
provisions. I also wish to express my thanks to Chairman McCrery for
conducting a series of open subcommittee hearings with the general goal
of ``strengthening Social Security for the future'' and, in the
specific case of this June 9 hearing, ``to examine proposals to ensure
teachers, police officers, firefighters, and other public employees are
treated fairly under the program.''
Below are specific concerns/flaws relating to the proposed PSRPA
whether it might remain as a ``stand alone'' bill or might eventually
become a part of a broad, omnibus bill crafted to protect older,
retired people in a variety of ways. This may be one of the few times
that you will hear any negative arguments about the PSRPA, other than
the most obvious one which generally asserts that Congress should
eliminate the WEP as well as the GPO in their entirety and not spend
money or time on a bill which might only significantly help a small
minority of public servants. In addition, I have included at the end of
this statement, for your review, excerpts from previously written
letters in which I specify various proposals/options/alternative
solutions to the PSRPA as it is written in its present form.
Although the PSRPA is supposed to modify the WEP in a way that it
will be more ``fair'' to public servants (it is in fact named the
Public Servant Retirement Protection Act), I would argue that this bill
would do little (if anything at all) in the way of protecting a decided
majority of public servants. Many of its sponsors make it sound as if
the PSRPA will do something significant for most all of the public
servants who are affected by the WEP. However, it could be argued that
it is mainly a way to better recruit teachers (starting in their mid
30's) in states like Texas, California, Ohio, etc. (which are the home
states of most of the original sponsors of H.R. 1714 as well as Sen.
Hutchison who has just re-introduced a companion PSRPA in the U.S.
Senate). Its supporters should come right out and clearly admit that
this bill would tend to benefit most significantly a minority of public
servants who have worked in two 10+ year, back-to-back careers (one
covered by Social Security and one not covered), such as those teachers
recruited in states wherein they pay into a retirement system separate
from Social Security. But to argue mostly that this is a bill designed
primarily to significantly benefit most public servants who are
affected by the WEP, is misleading and inaccurate; and, if passed, it
could lead to problems (for the SSA and members of Congress) in the
future as public servants retire and discover just how limited this
bill really is.
Over the past weeks I have provided some members of Congress, as
well as leaders of various public servant organizations, with
calculations of my Social Security benefits under the presently written
PSRPA (H.R. 1714). These calculations using 4 different work scenarios
were done using the PSRPA worksheet provided on the NEA website. The
first scenario showed me working two jobs (one, a career job as a
teacher, not paying into Social Security and the other, a part time job
wherein I did pay into Social Security) during the same time over a 35-
year period. The second scenario showed a person who worked a
``covered'' (by Social Security) career job for 17 years followed by a
``non covered'' career job (teacher?) for 18 years. Scenarios 3 and 4
were similar except they were over a 20-year period (rather than 35).
The scenarios wherein one is working two separate, back-to-back
jobs (neither of which is a part time job) comes out with higher SSA
benefits under the PSRPA ($711/month as compared to $395 for me as
calculated in the first scenario). At this point, it seems very
important to be aware that the key part of the PSRPA formula, or
regular Social Security formula/P.I.A., is that one has to divide the
total average Social Security indexed earnings over 35 years by one's
total combined (``covered'' and ``non-covered'') indexed earnings in
order to arrive at the all-important percentage (line 10 of the PSRPA
worksheet); this percentage is then used in the final step to determine
one's actual benefit. Simple math would demonstrate that in order for
everything to be equal, those public servants, working two jobs at the
same time over their work career, would have to consistently earn on
their part time, ``covered'', second job at least half of what they
make on their main, ``not covered'' public servant job_and that would
be very unlikely for a teacher to keep up unless he/she devoted little
time to his/her family and/or devoted little time to grading papers,
class preparation, or extra curricular activities related to school.
(Please note that the presence of a ``hold harmless'' clause to
protect a large number of public servants from receiving even lower
Social Security benefits than un der the present WEP does not rectify
the wrong that most of these same public servants do not have a
mathematical chance under the PSRPA formula to improve their benefits
to a degree which is even close to being as significant as those who
may work two separate career jobs, back-to-back. So does the inclusion
of a ``hold harmless'' clause really fit into the argument that the
PSRPA is designed to ensure fairness and equal treatment?)
Furthermore, if calculations were done on a public servant affected
by the WEP who earns half as much as me in both jobs (``low income''
category which Social Security was intended to help the most), I submit
that it will show that there is little substantial difference between
the calculated benefits under the present WEP and those calculated
benefits under the PSRPA. Anyway, if Congress really wanted to
concentrate on helping the low income public servants, it probably
should be looking to modify the GPO (which affects a lot of older women
who are at or below the poverty level) before they spend so much money
and time trying to partially fix the WEP (a provision which affects
relatively few at or below the poverty level).
Again, then who does the PSRPA significantly help and to what
degree? Do the billions of dollars set aside for it go to substantially
benefiting onlyh a small minority of public employees over the next 10
years? It would be very helpful if the Social Security Subcommittee
could provide some statistical analysis that would answer these
question, making sure to include calculations using the most common
scenarios_those that include a public servant working a ``covered''
part time job at the same time as a ``non covered'' main job. Although
it is true that the Congress had a statistical study done (by the CRS)
last year on the probable results of the PSRPA, this study (I would
argue) dealt mainly with the scenarios of those working 2 separate,
career jobs, one after the other over a period of time (and NOT
scenarios of those working a career job and a part time job
simultaneously over a period of time). Obviously, there are far more
affected public servants, especially teachers, in the latter scenario.
It should also be emphasized here that NOT ONE of the persons or
organizations to whom I have submitted my views and calculations has
been able to show my arguments and/or calculations to be wrong_and I
have provided them with all of the necessary information to do the
calculations. (To be more specific, all have either failed to complete
the calculations or have not responded to letters requesting that they
check over my own calculations, which are in reality a valid
representation of how the vast majority of public servants would be
affected by the PSRPA.) If it could have been shown that my
calculations were wrong, thus demonstrating that the bill was really
fair to a sizable majority of affected public servants (as touted), it
would be easier for one to accept the PSRPA as written and the SSA and
Congress would not have to worry so much about the resultant problems
that I foresee--from the administration of such a provision to the many
questions/complaints from public servants with whom the SSA and members
of Congress (and their staffs) could very well have to deal for many
years.
Also you should be aware that there seems to be only ONE actual
example of a person's PSRPA calculations on the internet or in any
other documentation; and that lone example deals with the scenario of
working two career jobs, back-to-back. Furthermore, when public
servants are being advised to do their own calculations OR to contact a
Social Security office if they want to know how it will affect them
individually, those giving this advice have to know that it is not that
simple to do--and that many will just give up, assuming (hoping??) that
their Social Security benefits will increase significantly under the
PSRPA as they have been assured. When they get ready to retire in the
upcoming years, only then will many discover that the PSRPA's real
effect on their benefits might be minimal at most.
I wish to emphasize that I have offered alternative solutions
(options) to the presently written PSRPA which clearly would be MUCH
simpler AND MUCH less costly to administer AND would seem to benefit
more public servants, although over the long run it might cost a little
more than that estimated for the PSRPA. These options (see below)
include simply adjusting the ``substantial earnings'' table of the
present WEP. A major objection to these solutions by the proponents of
the PSRPA has been that by only adjusting the ``substantial earnings''
table of the present WEP would be just continuing the use of a ``band-
aide'' approach. However, if one does argue that such changes would be
a ``band aide'' approach, how can he ignore the fact that a ``hold
harmless'' clause (the biggest ``band aide'' of all) had to be included
in the PSRPA. Furthermore, note that there is even a key difference
between these two ``band aides''--the ``substantial earnings'' idea in
the WEP is not limited, whereas the PSRPA's ``hold harmless'' ``band
aide'' was established to give protection only to present or already
retired public servants. What happens in the future with those having
to see their benefits reduced to an amount which could be much lower
than what it would have been under the present WEP?
The other argument that proponents of the PSRPA use to try to
discount my proposed solution(s) is that it would continue using the
(so-called) ``arbitrary'' formula utilized by the WEP; this wrongly
implies that the original (and present) Social Security formula (the
P.I.A.) never was, nor is now, an ``arbitrary'' formula. Some might get
the impression that using the words such as ``band aide'',
``arbitrary'', ``fair'', ``equal'', etc. will help to convince people
that this new bill is so much better than anything else. Instead of
using that tactic, if a partial fix of the WEP is to be passed,
shouldn't it come down to deciding what actual results will be better
for the affected public servants and for the government--those under
the PSRPA or those under a proposal like mine? Again I repeat that the
main arguments of the PSRPA proponents have been centered all along on
the questionable contention that the PSRPA does not contain the use of
a ``band aide approach'' nor does it make use of an ``arbitrary''
formula in its calculations.
Thank you in advance for your consideration. Please review the
attached excerpts which contain an explanation of alternative
solutions/options to the presently submitted PSRPA (H.R. 1714).
NOTE: The following are excerpts from two of my letters written in
2004 explaining the necessity for questioning the PSRPA as well as
explaining the workings and benefits of some alternative solutions/
options to the PSRPA which had been considered during the 108th
Congress (referred to as H.R. 4391 or the Brady-Hutchison bill).
From a letter written on July 30, 2004
``It would seem fair to include a ``Substantial Earnings'' concept
in the final version of H.R. 4391. This concept was included by
Congress in 1983 as one of a number of ``exclusions'' from the WEP--
obviously inserted to protect a significant number from unfair
treatment. If H.R. 4391 is to be more fair to all of those who had
different jobs (one of which required paying into Social Security and
one of which required paying into another government pension), the
following table should be a part of the Brady-Hutchison bill (and be
coupled with the current SSA table wherein the Social Security
Administration identifies the amount necessary to have ``substantial
earnings'' for each year, starting in 1937--attached). By the way, the
following table was designed to ensure that no one under the present
WEP system (with their existing tables) would be penalized any more;
and thus there would be no need for a ``hold harmless'' clause.
------------------------------------------------------------------------
Number of Years of Percentage Substantial Earnings Reduction Factor
------------------------------------------------------------------------
30 or more 90%
29 88%
28 86%
27 84%
26 82%
25 80%
24 78%
23 76%
22 74%
21 72%
20 70%
19 68%
18 66%
17 64%
16 62%
15 60%
14 58%
13 56%
12 54%
11 52%
10 50%
9 or fewer No effect on calculations
------------------------------------------------------------------------
This would affect those with Social Security ``covered'' work which
was of a significant amount; i.e. it would not penalize those working a
good paying part time, covered job over a 30+ year period of time. And
it would set a specific floor on the reduction of Social Security
benefits for those transferring from a ``covered'' job into a ``non-
covered'' job after 10 years. In general, those going into teaching in
their 30's might seem to be a more effective / more energetic teacher
than those in their 40's or 50's.) Obviously, this would thus help the
recruitment of teachers (both quantity and quality) mainly in those
states impacted by the WEP to some degree, including Texas, California,
Ohio, Louisiana, Illinois, Connecticut, Missouri, Georgia, Florida,
Colorado, Maine, Alaska, Kentucky, Rhode Island, Nevada, and
Massachusetts (whose teachers pay into a separate government pension
rather than into Social Security).
Wouldn't it be a much simpler procedure to modify the existing
table (see attached) showing the ``new'' reduction factors and
respective number of years of ``substantial earnings'' while keeping
the other SSA table (see attached) which identifies the amount of
earnings each year necessary to qualify for ``substantial earnings''?
Anyway, it seems as if these tables would have to continue to exist
anyway, since the SSA under Brady-Hutchison will be comparing the new
final benefit figure with the old in order to arrive at the highest
figure for each individual. Inclusion of this provision would seem to
not only make it fairer but also make it much easier, and thus cheaper,
to calculate the benefits of those who have had a decent paying second
job at the same time as they have a full time, career job.
In addition, the total cost born by the federal government would
not seem to be substantially more than what the original H.R. 4391
would cost, in the end; and it will probably benefit many of those
transferring from a lengthy ``covered'' career to a ``non-covered''
government career at about the same level as the formula in the
original H.R. 4391. For example, a person retiring with 15 years of
``substantial earnings'' would calculate his Social Security benefits
after using a 60% (rather than a 40%) ``front'' factor--this 20%
difference would amount to roughly $122 ($612 x 20%) when using the
SSA's formula (90%-32%-15%) for calculating one's entire benefits.
Although this $122 amount is only about 1/3 of the benefit if the WEP
would be completely eliminated, it could be considered a truer ``first
step towards the eventual elimination of the WEP''.
Incorporation of the above table in the final version of Brady-
Hutchinson would ensure that someone contributing fluctuating amounts
to Social Security over a period of many years in a second job (wherein
even zeros would have to be averaged in), would be treated fairly.
According to some of its proponents, the intent of the Brady-Hutchison
bill is ``to create a fair and equitable formula that allows
individuals to get back what they have paid into Social Security''; or,
it is ``to treat all workers fairly''.
From a letter written on August 5, 2004
``First of all, I realize there are many in Congress who prefer
hearing and supporting arguments stating that ``this approach would pay
people exactly what they earned in both systems--no more, no less''.
``Equal treatment for all Americans seems to me like the best
approach''. Or ``getting people the benefits they earned for themselves
''. Or ``in further researching the unfairness of the current arbitrary
formula, I decided to go with a fair approach--I don't see anything
more fair than equal treatment.''
However, two things seem to bother me about these arguments--(1)
the PSRPA does not seem fair to public servants, such as in my case,
who worked a second job which was covered by Social Security during
many of the same years they were working a full time job which was not
covered by Social Security. And (2) if the PSRPA is passed and
eventually approved by the President, could it no longer be looked upon
as a first step toward beginning to address the problem of the WEP--but
rather the last step in addressing the WEP? And if the PSRPA were to be
passed, could it not be argued in the future that because ``all
Americans are now treated equal'' (as many refer to the Government
Pension Offset (GPO) today as an equalizer), why should we treat any
group (teachers, firefighters, police officers, etc. whose one job is
not ``covered'' work) better than other Americans in paying Social
Security benefits? I fear then that it might take a long time to ever
get to take a further ``step'' in dealing with certain inequities. So
that is why I am trying to eliminate any obvious inequities in the
proposal NOW during the discussion stage rather than later after it has
gone into effect as a law.
To my point above about how PSRPA would appear to discriminate
unfairly against many who worked a second, part time job covered by
Social Security during the same years they are working a full time job
not covered by Social Security, I add the following. Accordingly to my
calculations (please correct me if I'm wrong after reviewing the
attached information), under the pre-1983 system when I retire at age
65 I would have collected about $970 (according to the SSA online
calculator); under the present WEP formula I would be collecting about
$660 (according to the SSA online calculator); and under the Brady-
Hutchison formula (if not for the ``hold harmless'' provision) I would
be collecting about $450. This doesn't seem fair to me.
Again, while arriving at the $10 to $11 billion approximate cost of
the bill, did someone try using different work scenarios so that it can
be shown how different groups in the future would be affected by PSRPA?
Roughly what percentage of the public employees subject to the WEP
would fall into the scenario of working two separate, consecutive
careers (one ``covered'' and one ``not covered'') over their 35 work
years whether the ``covered'' job is first or last? And then, roughly
what percentage of public employees would fall into the scenario of
working a part time ``covered'' job during the years that they were
working a full time, public service job which was ``not covered''? (My
guess would be that the second scenario would be significantly larger.)
Because PSRPA is described as a way to allow individuals ``to get back
what they have paid into Social Security'' shouldn't at least those in
the latter scenario who had good paying, part time jobs be benefited
significantly by this proposal? (Roughly what percentage of teachers
within this scenario would be benefited?)
The NEA website uses only one example/scenario to explain the
effects of PSRPA (and various other websites refer to the same one). It
is of a person working 10 years in a ``covered'' job (with indexed
earnings of $200,000) and after that career, teaching for 25 years
(with ``non covered'', indexed earnings of $300,000). In this example
PSRPA would result in a total benefit of about $294 (about $100 more
than under the present WEP). Sounds good for this type of work
scenario. BUT it's not too fair when you compare my indexed earnings
covered by Social Security to that of the examples. I had about
$525,000 in indexed earnings in Social Security covered work over this
same 35 year period--2.625 times as much as the person in the NEA
example. However, under the PSRPA formula my Social Security benefits
would be only 1.514 times as much as the example. Is that really ``fair
and equitable'' and/or does it allow for individuals ``to get back what
they have paid into Social Security''? (By the way, 2.625 times the
example's $294 benefits equals about $780 in SSA benefits to me which
would be about $120 over the $660 that I would receive under the
present WEP formula and about $200 less than what I would have received
had the WEP not been put in effect in the 1980's.
Now I return to the idea of simply modifying the present
``substantial years'' table to correct the inequities of the WEP.
Again, I can't help but wonder if just modifying this table isn't the
best way to go. Hopefully, you will continue to hear me out; and if you
can see any obvious flaws/weak points in my thinking and proposal,
please don't hesitate to spell them out to me.
First of all, I realize that it might be very hard to say
(especially for two people named Brady and Hutchison) that just maybe
the PSRPA as it is written is not the best answer to trying to at least
partially fix the unfair WEP. Maybe we should consider other
possibilities that might be even more fair, would be much simpler to
calculate and thus less confusing to the retiree, would be far less
costly to administer, would take a lot less time to set the system up,
and might cost about the same ($11 billion over 10 years). I would hope
that both Republicans and Democrats, would agree that if there could,
in fact, be a fairer, simpler, and not too costly way to do it, it
should at least be looked into--and especially if this alternative
would fit the requirement (of some) that any change to the present WEP
should result in paying out Social Security benefits based on what was
put in by the individual (at about the same ratio as PSRPA would). Up
to this point, have any of the affected teacher, firefighter, or police
officer groups brought this up as a possible alternative--especially
after listening to the less-than-positive testimony from the SSA
representative at the recent Social Security Subcommittee hearing on
H.R. 4391?
If Congress decided on a temporary fix of the WEP, rather than its
entire elimination, adoption of a table such as Table #1 below would
seem to remove a lot of the headaches, the delays, the potential
inaccuracies, and the high costs associated with implementing/
administering the PSRPA. It would only require the SSA to change one of
their own tables (keeping the table that defines what a ``substantial
year of earnings'' is for each year starting in 1937 when Social
Security went into effect). (Refer to the SSA tables at the back.) It
would be very simple to calculate new benefits, even for those who
retired long ago and/or whose work as a public servant went back many
years. This table would also be less expensive than one in which it
would take only 20 years for the 90 percent factor not to be reduced.
This approach would gradually and uniformly reduce the 90 percent
factor down to a low of a 50 percent factor proportionately to one's
number ``substantial earnings'' years decreasing on a scale from 30 to
10. And I don't see it benefiting fewer individuals than would PSRPA
(even those transferring into a ``non covered'' teaching job from a
``covered'' job). Furthermore, resulting benefits would not be less
than under the present WEP, eliminating any need for a ``hold
harmless'' clause. Finally, it would benefit more of those public
servants working a good paying, part time job while also working a full
time, ``non covered'' job (i.e., it doesn't distinctly favor the
minority of those public servants who have worked in two consecutive
full time careers--one ``covered'' and one ``not covered'').
Table #1
------------------------------------------------------------------------
(Same as in my July 30, 2004 letter
-------------------------------------------------------------------------
Number of Years of Percentage Substantial Earnings Reduction Factor
------------------------------------------------------------------------
30 or more 90%
29 88%
28 86%
27 84%
26 82%
25 80%
24 78%
23 76%
22 74%
21 72%
20 70%
19 68%
18 66%
17 64%
16 62%
15 60%
14 58%
13 56%
12 54%
11 52%
10 50%
9 or fewer No effect on calculations
------------------------------------------------------------------------
An alternative table (such as Table #2 below) could be used if one
of the primary aims for members of Congress (especially those
representing states affected by the present WEP) was to create a
solution that would not penalize people so much who transfer from a
``covered'' job into a ``non-covered'' teaching job while they are
still relatively young. However, such a system would obviously cost
more over 10 years.
Table #2
------------------------------------------------------------------------
Number of Years of Percentage Substantial Earnings Reduction Factor
------------------------------------------------------------------------
30 or more 90%
29 89%
28 88%
27 87%
26 86%
25 85%
24 84%
23 83%
22 82%
21 81%
20 80%
19 79%
18 78%
17 77%
16 76%
15 75%
14 74%
13 73%
12 72%
11 71%
10 70%
9 or fewer No effect on calculations
------------------------------------------------------------------------
Finally, in some future year, if Congress could see a way to afford
it and felt that the many public servants who did not receive a very
significant change in benefits (if any at all) by ``a law going into
effect in 2004 or 2005'', there would still be a WEP (and GPO) to
eliminate completely. In the meantime, at least some public servants
will have received some improvement in their Social Security benefits
by ``a law going into effect in 2004 or 2005'' which was designed and
supported by both Republicans and Democrats as well as the major
organizations representing public servants. AND Congressmen could go
back to their public servant constituents and tell them that they are
behind a bill that is both a substantial and fair first step towards
possibly eliminating the WEP and GPO entirely in some future year when
it is felt that the nation's finances are more able to afford it.
END OF LETTERS