[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]


    SOCIAL SECURITY AND PUBLIC SERVANTS ENSURING EQUAL TREATMENT

=======================================================================

                                HEARING

                               BEFORE THE

                    SUBCOMMITTEE ON SOCIAL SECURITY

                                 OF THE

                      COMMITTEE ON WAYS AND MEANS
                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             March 22, 2016

                          Serial No. 114-SS03

                               __________

         Printed for the use of the Committee on Ways and Means
         
         
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                      COMMITTEE ON WAYS AND MEANS

                      KEVIN BRADY, Texas, Chairman                       
                                      
SAM JOHNSON, Texas                   SANDER M. LEVIN, Michigan
DEVIN NUNES, California              CHARLES B. RANGEL, New York
PATRICK J. TIBERI, Ohio              JIM MCDERMOTT, Washington
DAVID G. REICHERT, Washington        JOHN LEWIS, Georgia
CHARLES W. BOUSTANY, JR., Louisiana  RICHARD E. NEAL, Massachusetts
PETER J. ROSKEM, Illinois            XAVIER BECERRA, California
TOM PRICE, Georgia                   LLOYD DOGGETT, Texas
VERN BUCHANAN, Florida               MIKE THOMPSON, California
ADRIAN SMITH, Nebraska               JOHN B. LARSON, Connecticut
LYNN JENKINS, Kansas                 EARL BLUMENAUER, Oregon
ERIK PAULSEN, Minnesota              RON KIND, Wisconsin
KENNY MARCHANT, Texas                BILL PASCRELL, JR., New Jersey
DIANE BLACK, Tennessee               JOSEPH CROWLEY, New York
TOM REED, New York                   DANNY DAVIS, Illinois
TODD YOUNG, Indiana                  LINDA SANCHEZ, California
MIKE KELLY, Pennsylvania
JIM RENACCI, Ohio
PAT MEEHAN, Pennsylvania
KRISTI NOEM, South Dakota
GEORGE HOLDING, North Carolina
JASON SMITH, Missouri
ROBERT J. DOLD, Illinois
TOM RICE, South Carolina

                     David Stewart, Staff Director

         Janice Mays, Minority Chief Counsel and Staff Director

                                 ______

                    SUBCOMMITTEE ON SOCIAL SECURITY

                      SAM JOHNSON, Texas, Chairman

ROBERT J. DOLD, Illinois             XAVIER BECERRA, California
VERN BUCHANAN, Florida               JOHN B. LARSON, Connecticut
ADRIAN SMITH, Nebraska               EARL BLUMENAUER, Oregon
MIKE KELLY, Pennsylvania             JIM MCDERMOTT, Washington
JIM RENACCI, Ohio
TOM REED, New York

                            C O N T E N T S

                               __________

                                                                   Page

Advisory of March 22, 2016 announcing the hearing................     2

                               WITNESSES

Jeannine English President, AARP.................................    79
Jason Fichtner Ph.D. Senior Research Fellow, Mercatus Center, 
  George Mason University........................................    61
Stephen C. Goss Chief Actuary, Office of the Chief Actuary, 
  Social Security Administration.................................    47
Tim Lee Executive Director, Texas Retired Teachers Association...    71
Samara Richardson Acting Associate Commissioner, Office of Income 
  Security Programs..............................................    30

 
    HEARING ON SOCIAL SECURITY AND PUBLIC SERVANTS: ENSURING EQUAL 
                               TREATMENT

                              ----------                              


                        TUESDAY, MARCH 22, 2016

             U.S. House of Representatives,
                       Committee on Ways and Means,
                           Subcommittee on Social Security,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:06 a.m., in 
Room 1100, Longworth House Office Building, the Honorable Kevin 
Brady [chairman of the subcommittee] presiding. Advisory
    [The advisory announcing the hearing follows:]

		ADVISORY FROM THE COMMITTEE  ON WAYS AND MEANS 
                       SUBCOMMITTEE ON SOCIAL SECURITY

                                                CONTACT: (202) 225-3625
FOR IMMEDIATE RELEASE
Tuesday, March 22, 2016
No. No. SS-03

                 Chairman Johnson Announces Hearing on

   Status of the Social Security and Public Servants: Ensuring Equal 
                               Treatment

    House Ways and Means Social Security Subcommittee Chairman Sam 
Johnson (R-TX) announced today that the Subcommittee will hold a 
hearing on ``Social Security and Public Servants: Ensuring Equal 
Treatment.'' The hearing will focus on Social Security provisions that 
affect certain public employees, as well as proposals for calculating 
public employees' benefits in a proportional manner. The hearing will 
take place on Tuesday, March 22, 2016 in B-318 Rayburn House Building, 
beginning at 10:00 AM.
      
    In view of the limited time to hear witnesses, oral testimony at 
this hearing will be from invited witnesses only. However, any 
individual or organization may submit a written statement for 
consideration by the Committee and for inclusion in the printed record 
of the hearing.
      

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
      Please Note: Any person(s) and/or organization(s) wishing to 
submit written comments 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 ``Hearings.'' Select the hearing for 
which you would like to make a submission, and click on the link 
entitled, ``Click here to provide a submission for the record.'' Once 
you have followed the online instructions, submit all requested 
information. ATTACH your submission as a Word document, in compliance 
with the formatting requirements listed below, by the close of business 
on Tuesday, April 5, 2016. For questions, or if you encounter technical 
problems, please call (202) 225-3625.
      

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 
Committee by a witness, any materials submitted for the printed record, 
and any written comments in response to a request for written comments 
must conform to the guidelines listed below. Any submission not in 
compliance with these 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 submitted in 
a single document via email, provided in Word format and must not 
exceed a total of 10 pages. Witnesses and submitters are advised that 
the Committee relies on electronic submissions for printing the 
official hearing record.
      
    2. All submissions must include a list of all clients, persons and/
or organizations on whose behalf the witness appears. The name, 
company, address, telephone, and fax numbers of each witness must be 
included in the body of the email. Please exclude any personal 
identifiable information in the attached submission.
      
    3. Failure to follow the formatting requirements may result in the 
exclusion of a submission. All submissions for the record are final.
      
    The Committee seeks to make its facilities accessible to persons 
with disabilities. If you are in need of special accommodations, please 
call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four 
business days notice is requested). Questions with regard to special 
accommodation needs in general (including availability of Committee 
materials in alternative formats) may be directed to the Committee as 
noted above.
      
    Note: All Committee advisories and news releases are available at 
http://www.waysandmeans.house.gov/.

                                 --------

    The subcommittee met, pursuant to notice, at 10:00 a.m., in 
Room 1100, Longworth House Office Building, the Honorable Sam 
Johnson, [chairman of the subcommittee] presiding.
    Chairman JOHNSON. Good morning, and welcome to today's 
hearing on ensuring equal treatment for all workers who receive 
Social Security benefits.
    I would like to welcome to the subcommittee Mr. Smith of 
Nebraska, Mr. Buchanan of Florida, both join us again after 
working on the subcommittee previously, as well as Mr. Rice 
from South Carolina. We are glad to have you all onboard.
    Without objection, I would like to at this time recognize 
the chairman of the Ways and Means Committee, Chairman Brady, 
to make a few remarks.
    Chairman BRADY. Thank you, Mr. Chairman.
    I am so grateful to have the opportunity to talk today 
about how we are working to help America's teachers, police and 
firefighters and other public servants.
    As you know, Social Security benefits are based on the 
workers' earnings. The benefit formula is designed so that the 
lower lifetime earners receive a higher replacement rate than 
higher lifetime earners.
    However, for some workers Social Security's formula does 
not work well. Some teachers, firefighters, police officers and 
others work in jobs where they do not pay Social Security 
taxes. They pay into a Social Security substitute, and so this 
causes their average lifetime earnings to appear lower to 
Social Security than they actually are because all of those 
years they did not pay Social Security tax but into a 
substitute count as zeros.
    The Windfall Elimination Provision, or WEP, created in the 
1980s addresses this problem, but unfortunately its one size 
fits all approach is just unfair. This is not just a Texas 
problem. It affects people in Massachusetts, California, Ohio, 
Illinois, Louisiana, frankly, all over the country.
    We all hear often from constituents whose benefits are 
reduced substantially by the WEP, asking when Congress is going 
to address this problem.
    Since 2004, I have worked to repeal the WEP and replace it 
with a formula that treats our firefighters, police officers, 
teachers and other affected workers fairly. One that looks at 
all earnings and bases Social Security benefits on proportions 
of earnings that were subject to Social Security taxes, in 
other words, providing equal treatment.
    Most recently I have partnered with Representative Neal to 
introduce H.R. 711, ``The Equal Treatment of Public Servants 
Act of 2015.'' We worked with many organizations representing 
teachers, firefighters, police officers and other retirees who 
have had their benefits unfairly reduced by the WEP.
    Many of them are in the audience today, and specifically I 
would like to thank the Association of Texas Professional 
Educators, Texas Retired Teachers Association, Mass Retirees, 
and the Ohio Public Employees Retirement System for all of 
their work on this issue. Representative Neal and I have 
received overwhelming support from the non-covered worker 
community, including groups such as the Fraternal Order of 
Police, the California Public Employees Retirement System, 
National Active and Retired Federal Employees Association, and 
many others.
    And I ask unanimous consent to place these letters into the 
record.
    Chairman JOHNSON. Without objection.
    [The information follows: The Honorable Kevin Brady 
Submission]
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                               --------

    Chairman BRADY. For new retirees, our bill repeals the WEP 
and replaces it with a formula that is fair. Our solution takes 
into account all earnings and reflects how much of a person's 
earnings were subject to Social Security payroll taxes. Under 
our approach, two workers with the same lifetime earnings, one 
who has spent an entire career in Social Security covered 
employment and another who has worked in both covered and 
Social Security substitute work, will receive a Social Security 
benefit that is calculated the same way. No more unfair formula 
for teachers, firefighters and police officers. Instead we use 
the same benefit formula for everyone, looking at all earnings.
    Now, some of those earnings are not from Social Security 
covered employment. We adjust benefits to reflect the 
proportion that are.
    But it is not enough to fix the WEP for future 
beneficiaries. We have to provide relief to current seniors 
already affected by the WEP, and these individuals will have 
their monthly benefits increased using the savings from this 
bill.
    Finally, this bill makes sure that everyone is treated 
equally by requiring Social Security make sure that those 
current retirees who should be subject to the WEP have their 
benefits adjusted correctly.
    At this time I would like to yield, and I am pleased to 
yield, to the gentleman who has worked with me so hard on this, 
the gentleman from Massachusetts, Mr. Neal.
    Mr. NEAL. Thank you, Mr. Chairman.
    I am happy to be here this morning at this hearing of the 
Ways and Means Social Security Subcommittee. I no longer serve 
on this Subcommittee, but I have had a longstanding interest in 
the WEP issue and am an original cosponsor of this bill with 
Chairman Brady.
    I am pleased that the subcommittee is holding this hearing 
today, and it is also nice to see representatives from the Mass 
Retirees who are with us as well.
    Our bill, H.R. 711, permanently repeals the current 
Windfall Elimination Provision and replaces it with a fair 
formula that treats public servants like all other American 
workers. Public servants who earn both a Social Security 
benefit and a pension from Social Security's substitute will 
finally receive treatment equal to other workers.
    This legislation was developed in close consultation with 
teacher and public servant organizations, particularly those in 
Massachusetts, Texas and Ohio. It provides relief to current 
retirees already affected by WEP, and it guarantees public 
servants receive the benefits they earned while they paid into 
Social Security.
    In addition, H.R. 711 is budget neutral in the short run 
and improves Social Security solvency over the long run.
    The Equal Treatment of Public Servants Act guarantees 
public servants will receive Social Security benefits that 
reflect their actual work history. Social Security benefits 
will no longer be figured by the arbitrary WEP formula 
established in 1983, but will be based on each worker's Social 
Security contributions just like everybody else.
    Under the Public Servant Fairness Formula, the worker's 
benefit amount will be calculated using total lifetime earnings 
and then adjusted for the proportion of earnings that came from 
the job that was covered by Social Security. Public servants 
who turn 62 on or after January 1st, 2017, will benefit from 
the new Public Servant Fairness Formula. Social Security 
benefits will increase for teachers, firefighters, police 
officers, and other public servants currently subject to WEP.
    Retired public servants currently subject to the WEP and 
those who turn 62 before December 31st, 2016, will see a 
reduction in the WEP offset leading to an increase in Social 
Security benefits.
    Repealing the WEP has been a priority of mine for many, 
many years, and I want to thank Chairman Brady for the 
attention he has paid to this issue, and I look forward to 
working with him and the others who are panelists today, as 
well as the expert testimony we are about to receive, in 
passing this legislation in this session of the Congress.
    Chairman BRADY. Reclaiming my time, I thank my colleague 
from Massachusetts for his work on this important issue through 
the years and all of my committee colleagues as well as those 
who have interest in it.
    It seems to me the police, teachers, firefighters I know 
never worked just one job. They have a second and a third. They 
have first careers. They have last careers, and creating equal 
treatment for them just seems like the right thing to do.
    So today's hearing is critically important. As Speaker Paul 
Ryan has said, we are returning to regular order. So today is 
an important step in that process, having a hearing to talk 
about this problem and some good solutions to fix it.
    I have had a chance to review the excellent testimony from 
our witnesses that they have submitted, and I look forward to 
advancing this bill in the weeks ahead.
    And, again, Chairman Johnson, thank you for your leadership 
on this issue and, Ranking Member Larson, thank you for helping 
lead this hearing today.
    I yield back.
    Chairman JOHNSON. Thank you, Mr. Chairman, for your 
leadership on this issue.
    You know, hard-working Americans who have paid into Social 
Security ought to have their benefits calculated fairly, and 
they deserve to know how much they can expect to receive from 
Social Security.
    Unfortunately for many of our teachers, firefighters, 
police officers and others, that is not the case. When Social 
Security was created in 1935, some State and local governments 
already had a retirement program in place, and the law allowed 
those governments and workers to keep their separate program 
and not participate in Social Security.
    In fact, in Texas many firefighters, police officers and 
teachers do not participate in Social Security because they 
have an alternative retirement program. However, many of these 
good folks have had other jobs either in the summer when school 
is out or working for a different employer where they paid into 
Social Security.
    So if there is an issue I regularly hear about when it 
comes to Social Security, it is the Windfall Elimination 
Provision, or WEP. Take, for example, Janice from Plano, who 
recently wrote to me. She has worked for 31 years as a teacher. 
In the summers she also worked in the private sector paying 
Social Security taxes on those earnings. Because Janice has 
some earnings that were not subject to payroll tax and others 
that were, she is subject to the Windfall Elimination 
Provisions, or WEP, and she very much wants us to address this.
    So now what is WEP exactly? And when did it come about? And 
what can we do about it?
    Simply put, WEP uses a slightly different benefit formula 
than the regular Social Security formula, but this slight 
difference can have a meaningful impact on benefits. WEP came 
about as part of the Social Security reform effort in 1983. The 
idea was to ensure that workers who pay into a separate 
retirement system are treated similarly to other workers with 
respect to Social Security benefits.
    Both the House and Senate wanted to modify the benefit 
formula for those workers who spent part of their careers not 
paying Social Security taxes. I guess it should come as no 
surprise that the House and Senate did not agree on the 
numbers. The Senate took a more aggressive approach than the 
House. As tends to happen here, they ended up somewhere in the 
middle.
    Ever since the WEP was put into place, those public 
servants have pointed out just how arbitrary it is, and they 
are right.
    On top of that, right now the WEP and Government Pension 
Offset, or GPO, make it really hard for our firefighters, 
police officers and teachers to plan for retirement. As we will 
hear today, the Social Security statement, that is required by 
law, shows them the wrong number. Their statement gives them 
the amount of Social Security benefits they would receive if 
the WEP and GPO did not exist.
    These workers, just like every other American, have a right 
to know what their Social Security benefit is going to be so 
they can prepare for their retirement.
    Bottom line, it is time to replace the WEP and GPO with an 
approach that treats all workers fairly, and so that is what 
Chairman Brady and Representative Neal are trying to do. They 
have introduced a bill that does just that for the WEP. I am a 
proud cosponsor of their bill. The President included a similar 
proposal for WEP and GPO in his budget this year.
    Some folks may call for a full repeal of the WEP and GPO. 
While these provisions are not fair, getting rid of them would 
not be fair either. Public employees who are eligible for 
Social Security should be treated just like everyone else, no 
better and no worse. And just as important, at a time when 
Social Security is already in trouble, doing so would only 
worsen the financial standing.
    Today we are going to hear from one panel of witnesses. Our 
witnesses will provide background on the WEP and GPO, discuss 
the problems with the current approach, including their own 
frontline experiences, and talk about ways we can finally fix 
it.
    I want to thank each of our witnesses for being here today 
and look forward to hearing your testimony.
    Chairman JOHNSON. I now recognize Mr. Larson for his 
opening statement if he wishes to make one.
    Mr. LARSON. Well, thank you, Mr. Chairman.
    And I want to thank our panelists as well for being here, 
but I especially want to give kudos to our chairman for his 
continued work and Chairman Brady and Representative Neal, and 
primarily something beyond this particular hearing today, but 
something this Committee has distinguished itself in doing, and 
that is working in a collaborative manner across the aisle to 
come to compromise and move the Nation forward.
    This is just one of several examples of how this Committee 
has stepped forward to do it, and while there may be 
differences, et cetera, the end goal here, which is to move the 
country forward and in this case, as has already been well 
stated by Chairman Brady and by Mr. Neal and Chairman Johnson, 
is that so many people have been adversely affected who have 
worked other jobs.
    As a former school teacher myself and having a daughter who 
is a school teacher in the State of Connecticut, as Mr. Johnson 
does in Plano, I hear back in my district from those 
individuals impacted all the time, and frankly, it is unfair.
    In Connecticut, more than 75,000 people, mostly teachers, 
work in non-covered employment and face the prospect of having 
their future Social Security reduced by the WEP. And while it 
was the intent of the WEP to equalize the benefit formula for 
workers with similar earnings, the WEP takes a one size fits 
all approach that has the effect of unfairly penalizing public 
servants, as you have heard here today, as well.
    I have long been a proponent of reducing and eliminating 
the WEP and the GOP [sic] altogether. This bill works towards 
that goal, although I think there are winners and losers in 
this provision.
    Chairman BRADY. Would the gentleman yield?
    Mr. LARSON. I would yield.
    Chairman BRADY. Please do not eliminated the GOP.
    [Laughter.]
    Chairman BRADY. Please do not do that. We have just got to 
be around.
    Mr. LARSON. I think Donald Trump is doing a pretty good job 
of that, Mr. Chairman.
    Mr. NEAL. Would the gentleman yield?
    That was the most important thing you said.
    [Laughter.]
    Mr. BRADY. So much for the bipartisanship.
    I yield back.
    Mr. LARSON. A Freudian slip there. I apologize, but 
Shakespeare would say more truth is said in jest than not, but 
thank you for correcting me.
    But I would also point out that as someone who has long 
felt that these were unfair, and I concur with Mr. Johnson that 
we have to work on this to bring about the fairness, I am 
anxious to hear from our panelists because I do think this is a 
great compromise. This is a great step forward, but I do think 
it may have some uneven results.
    And I want to submit for the record a letter from the NEA 
with the unanimous consent of the chair.
    Chairman JOHNSON. Without objection.
    [The information follows: The Honorable John Larson 
Submission]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

                               -------

    Mr. LARSON. And I look forward to the consideration. The 
long-term goal here is that we have to focus on Social 
Security, and I am so pleased that Stephen Goss is here today 
because I think the one thing that we ought to make sure with 
respect to Social Security is its actuarial soundness, and not 
only its actuarial soundness, but that it is sustainably 
solvent for its required 75 years.
    I look forward to future hearings. We have legislation that 
we think will accomplish that goal that I hope we can approach 
bipartisanly. Certainly the discussion needs to be put on the 
table because increasingly as we saw after 2008 when people's 
401(k)s became 101(k)s that they are more and more and more 
reliant on Social Security. That makes this legislation have an 
added sense of urgency for people already in the system who 
have been treated unfairly.
    But the long-term goal that was neglected in 1983, or shall 
I say as we dealt with what is an insurance issue, that we did 
not look to adjust or index the concerns that would be created 
by a growing number of Baby Boomers into the future. This is a 
responsibility of this Committee. I know we have the talent on 
both sides of the issue to address this.
    I look forward and welcome the hearing today and what we 
are going to hear from our value added witnesses and look 
forward as well to discussing Social Security 2100 in the 
future.
    Thank you, Mr. Chairman, and I yield back my time.
    Chairman JOHNSON. Thank you, sir.
    As is customary, any member is welcome to submit a 
statement for the hearing record.
    Before we move on to our testimony today, I want to remind 
our witnesses to please limit their oral statement to five 
minutes. However, without objection, all of the written 
testimony will be made a part of the hearing record.
    We have one witness panel today. Seated at the table are 
Samara Richardson, Acting Associate Commissioner, Office of 
Income Security Programs, Social Security Administration. That 
is a mouthful, is it not?
    Stephen Goss, Chief Actuary, Office of the Chief Actuary, 
Social Security Administration.
    Jason Fichtner, Senior Research Fellow, Mercatus Center, 
George Mason University.
    Tim Lee, Executive Director, Texas Retired Teachers 
Association.
    Jeannine English, President, AARP.
    Welcome, and thanks for being here.
    Ms. Richardson, you are recognized. Please go ahead.

STATEMENT OF SAMARA RICHARDSON, ACTING ASSOCIATE COMMISSIONER, 
      OFFICE OF INCOME SECURITY PROGRAMS, SOCIAL SECURITY 
                         ADMINISTRATION

    Ms. RICHARDSON. Thanks. Chairman Johnson, Representative 
Larson, and Members of the Subcommittee, thank you for inviting 
me to discuss Social Security coverage and treatment of 
individuals who receive pensions based on work not covered by 
Social Security.
    My name is Sam Richardson, and I am the Acting Associate 
Commissioner in the Office of Income Security Programs at SSA.
    Social Security is rooted in principles of equity. Workers 
earn benefits based on contributions to Social Security that 
accumulate throughout a worker's career. In jobs covered by 
Social Security, workers and employers each contribute 6.2 
percent of earnings. Workers earn credits through covered work, 
which allows them to qualify for benefits.
    In addition to the worker benefit, Social Security provides 
benefits for spouses of covered workers whether or not the 
spouse had earnings covered by Social Security.
    My written testimony details how we calculate Social 
Security benefits. I want to highlight two key points about 
Social Security benefits and the WEP and GPO provisions that 
affect non-covered workers.
    First, Social Security is progressive. Covered workers with 
low career earnings receive a benefit that replaces a greater 
portion of earnings than those with high career earnings.
    My second point concerns spousal benefits. A spouse's 
benefit is generally reduced dollar for dollar by the amount of 
any Social Security benefit he or she earned as a worker in 
covered employment.
    Although most jobs today are covered by Social Security, 
some exceptions remain. These non-covered jobs tend to be in 
State and local government. In non-covered jobs, neither the 
employee nor the employer pays any Social Security 
contribution. Instead these employees may have retirement 
arrangements other than Social Security, such as pensions.
    When Social Security was enacted, the benefit formulas did 
not account for these scenarios, which resulted in two types of 
inequities. The first inequity affected individuals who had 
both covered and non-covered work. Because not all of their 
lifetime earnings were counted in the benefit formula, people 
with considerable non-covered earnings appeared to have spent 
their careers in low paying jobs. These beneficiaries received 
combined Social Security and pension benefits that exceeded 
those of individuals who worked solely in either covered or 
non-covered work.
    Congress addressed this inequity with the enactment of the 
WEP in 1983. The WEP requires us to reduce a worker's Social 
Security benefit if he or she also receives a pension based on 
non-covered work.
    Second, spousal benefits were originally intended to 
benefit a financially dependent spouse. As both spouses began 
entering the workforce and one member of a couple worked in 
employment covered by Social Security while the other worked in 
primarily non-covered work, a second inequity resulted. In this 
scenario, the spouse in non-covered work could receive both a 
retirement benefit from a pension and an unreduced Social 
Security spousal benefit.
    Congress recognized this inequity and enacted the GPO in 
1977. The GPO requires us to reduce a person's spousal benefit 
by two-thirds of the amount of his or her non-covered pension.
    With both WEP and GPO, a non-covered pension is seen as a 
substitute for a person's non-covered earnings. Congress chose 
to use the pension for this purpose because at that time we did 
not have the non-covered earnings data in our records.
    To preserve Social Security's fairness, benefits should 
continue to be adjusted if a person has covered and non-covered 
work, but the WEP and GPO can be improved. Both provisions are 
complicated. Often non-covered workers realize late in their 
retirement planning that their Social Security benefit will be 
offset. These provisions are also very challenging to 
administer because we rely on beneficiaries to report when they 
receive a non-covered pension.
    The President's Budget for Fiscal Year 2017 includes a 
legislative proposal that would improve how we offset benefits 
for non-covered work. First, it would require State and local 
government pension payers to provide us with data concerning 
non-covered pensions. This would reduce our reliance on 
beneficiary's self-reporting to administer the WEP and GPO.
    Second, it would modify the WEP and GPO for individuals who 
become eligible for benefits in 2027 and later. We would no 
longer reduce benefits based on an individual's receipt of a 
pension. We would simply use the information on non-covered 
earnings in our records to adjust benefits.
    Until now we have not had sufficient information on non-
covered earnings to consider a more equitable benefit formula. 
Now we do, and with each year our records become more complete.
    Before concluding, I would like to acknowledge Chairman 
Brady's leadership on this issue. The chairman's bill has much 
in common with the Administration's proposal, and we look 
forward to working with the Congress on this issue.
    I appreciate the opportunity to appear before you today and 
would be happy to answer any questions you may have.
    Chairman JOHNSON. Thank you, ma'am. We appreciate that.
    [The prepared statement of Ms. Richardson follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    

                              -------

    Mr. Goss, welcome. Please go ahead.

  STATEMENT OF STEPHEN C. GOSS, CHIEF ACTUARY, OFFICE OF THE 
         CHIEF ACTUARY, SOCIAL SECURITY ADMINISTRATION

    Mr. GOSS. Thank you very much, Chairman Johnson, Mr. 
Larson, and other Members of the Committee. It is really a 
pleasure to be here with you today to talk about this important 
subject.
    I do want to say what an incredible pleasure it is working 
with people like Amy Shuart and the rest of your folks on this 
and other issues, and I much look forward to what Mr. Larson is 
talking about, talking about broader issues for Social Security 
maintaining its good actuarial status in the future.
    What we are here to talk about today really is principally 
the Windfall Elimination Provision, and what I want to focus on 
in the very brief time we have is this proposed change to the 
way that it has been functioning.
    As Samara and others have mentioned, we have the approach 
we have got now because that was put in the law back in 1983, 
and really there was no choice back then because of the nature 
of data that were available.
    The current approach really, if we think about this 
philosophically what these two approaches do, the current 
approach is basically a matter of a benefit offset. For people 
we know are receiving a pension based on non-covered 
employment, there is an offset applied to their worker benefit, 
retired worker or disabled worker benefit, up to one-half of 
the amount of that non-covered pension.
    But to apply this, it requires that we know and we have 
knowledge of this non-covered pension, and there are lots of 
complications in that.
    The proposal would take a very different approach. The 
proposal would take the approach as has been mentioned a few 
different ways here in basically saying: what if we looked at 
all of the earnings that a person had, covered and non-covered, 
and looked at the level of benefit that they would be getting 
if all had been covered, but then importantly, look at the 
replacement rate that would be provided for that person, that 
is, the ratio of the amount of benefit they would get versus 
their average earnings when they had been working, with all of 
their earnings, covered and non-covered.
    Now, because it is a progressive formula, people with 
higher overall career earnings get a lower replacement rate 
than people with lower career earnings.
    In a little example that I provided on page 2 of the 
written testimony, you can see we show that for a person who in 
their lifetime career earnings had an average earnings of about 
$48,000, which we call sort of our medium earner throughout 
their career of covered and non-covered earnings, if it was 
covered earnings only, they would get a benefit replacement 
rate of about 40 percent of the level of earnings they had been 
getting. That would be their benefit, about 40 percent at age 
65.
    But if a little bit over half of those earnings were in 
non-covered employment, the way our formulas are working now, 
the person would get a benefit replacement rate of 53 percent, 
where 40 percent would seem to be more appropriate for a person 
with that kind of a lifetime career earnings level.
    So what the proposals do basically is say for that portion 
of the earnings that were in covered employment, rather than 
providing the 53 percent replacement rate, provide the 40 
percent replacement rate, which by our formula is deemed to be 
appropriate for that level of lifetime career earnings.
    So it is in that sense that it would be argued, I think, 
that the proposed formula by both Chairman Brady, Mr. Neal, and 
the President would be a more appropriate approach.
    And, by the way, they are really exactly the same formula 
for looking forward. The only difference is that the Brady-Neal 
proposal would start with people newly eligible for benefits in 
2017, where the President's would wait until newly eligible in 
2027.
    Now, let me just share with you a couple of numbers related 
to this. Currently we have about 1.5 million retired worker and 
disabled worker beneficiaries subject to the Windfall 
Elimination Provision. About 84 percent, or one and a quarter 
million of those, if we were to be able to magically change to 
the new formula today, just to give you a sense of what the 
impact would be, 84 percent of them would have actually less 
reduction, that is, an increase in benefit, of about $77 per 
month. That would be about a 19 percent increase in benefits 
for about 84 percent of the people currently subject to the 
WEP.
    About one-quarter of a million of the people, or about 16 
percent, would have about a $13 per month reduction or about an 
eight percent reduction in benefits. These are people who are 
currently reduced, but they are not reduced by very much under 
the current formula.
    Now, importantly, there is another group of folks. There 
are about 15 million people that we estimate in our retired 
worker and disabled worker population who are in receipt of 
benefits that are not being reduced by the Windfall Elimination 
Provision even though they do have some years of non-covered 
earnings.
    If we were to apply the new formula to them, about one 
million, or seven percent of those folks, would not receive any 
reduction at all. Why? Because their earnings even including 
all of the covered and non-covered earnings, are still well 
enough below our first bend point, and they have a 90 percent 
replacement ratio with or without consideration of the 
provision.
    The other 14 million, or 93 percent of this 15 million 
people, would receive a small reduction. It would average about 
$27 per month, which is about two percent, on average, of the 
benefits that they are currently receiving. These folks are 
relatively high level beneficiaries under current law.
    Chairman JOHNSON. The gentleman's time has expired. Can you 
close it?
    Mr. GOSS. The one further little item on this is that about 
one-half of these 15 million people who would be affected with 
a reduction, one-half of them would receive the least affected, 
only $3 on average.
    Chairman JOHNSON. I do not think you are listening to me. 
Your time has expired, sir.
    Mr. GOSS. Apologies, Chairman Johnson. Okay. I will stop at 
this point and look forward and hopefully you will have an 
opportunity for some questions.
    [The prepared statement of Mr. Goss follows:]
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    Chairman JOHNSON. Thank you.
    Dr. Fichtner, you are recognized.

  STATEMENT OF JASON FICHTNER, Ph.D., SENIOR RESEARCH FELLOW, 
            MERCATUS CENTER, GEORGE MASON UNIVERSITY

    Mr. FICHTNER. Thank you, sir.
    Chairman JOHNSON. Thank you.
    Mr. FICHTNER. Good morning, Chairman Johnson, 
Representative Larson, Members of the Committee. Thank you for 
inviting me to testify today. It is good to be back before you 
again.
    From my testimony I hope to leave you with the following 
take-aways: first, a full repeal of the Windfall Elimination 
Provision, WEP, or Government Pension Offset, GPO, would 
violate the principles of fairness and equity. These provisions 
were originally intended to protect.
    The original public policy intent of the WEP and GPO is to 
ensure fair treatment between workers with earnings covered by 
Social Security and workers with earnings that are not covered 
by Social Security. It is important that disparate treatment 
between covered and non-covered workers remain.
    Two, the current WEP and GPO provisions create an overly 
complex structure. This can sometimes result in higher 
replacement rates for some people with high lifetime combined 
earnings and those with low lifetime earnings.
    Further, the complexity and lack of transparency in the 
current WEP and GPO provisions can hinder people's ability to 
accurately plan for retirement and potentially cause undue 
hardship for retirees.
    Third, a proportional or prorated formula would improve 
fairness of the WEP while maintaining fairness overall. This 
change would allow for the use of one benefit formula for all 
Social Security beneficiaries. It would be simple to understand 
and would be fairer than the current system, while still 
maintaining the original intent of fairness and equity of the 
WEP and GPO provisions.
    Social Security retirement disability benefits are funded 
via payroll tax on covered earnings. The system is designed as 
a progressive benefit formula that provides a higher 
replacement rate for low income earners than for higher income 
earners.
    The result is that monthly Social Security benefits 
represent a larger share of lifetime earnings for low income 
workers than high income workers. This does not mean that a low 
income worker's monthly benefit amount is higher in nominal 
dollars than a higher income worker, but rather that the 
replacement rate is higher.
    For workers with entire careers in covered employment, 
lower lifetime wage earners receive a higher replacement rate 
than higher lifetime wage earners. But problems arise when 
workers have earnings from non-covered employment, such as 
earnings received through State and local governments and 
careers such as public school teachers, police officers or 
firefighters. If these workers have an entire career in State 
and local government that is not covered by Social Security, 
there is no problem with the WEP.
    However, many of these State and local government employees 
still qualify for some Social Security benefits either because 
they have employment history in both covered and non-covered 
employment or because they work simultaneously in two or more 
jobs that include covered and non-covered employment.
    While the WEP is intended to ensure that Social Security 
beneficiaries are treated fairly and that benefits are provided 
only for years in which people paid into the Social Security 
system, the result is that the replacement rate for some with 
high lifetime combined earnings is higher than those with low 
lifetime earnings.
    The WEP mistakenly treats some high income earners as if 
they were low income earners. That is unfair. The WEP formula 
is complicated and hard to explain to beneficiaries.
    Further, the current Social Security statement provides 
estimated monthly benefit amounts that are not adjusted for the 
WEP. For people relying on the Social Security statement as a 
retirement planning tool, the current non-WEP adjusted 
information in the statement could cause people to overestimate 
their financial readiness for retirement.
    Completely eliminating the WEP will only return Social 
Security to its pre-WEP state and reinstate a windfall for 
those with both covered and non-covered employment. Hence, 
repeal is not advised.
    However, a proportional or prorated form would improve 
fairness of the WEP while maintaining fairness and equal 
treatment.
    As of January 2017, SSA will have 35 years of employment 
history, including both covered and non-covered employment. 
Thus, we now have both the information and tools necessary to 
reform the WEP and move to a prorated formula.
    President Obama's budget contains such a proposal and so 
does a similar bill introduced by Chairman Brady and 
Representative Neal. They are very, very similar. For workers 
whose entire careers are in covered earnings, the resulting 
Social Security benefit amount is the same. However, for those 
with non-covered earnings but with similar combined average 
annual lifetime earnings, now their covered earnings are 
receiving the same replacement rate as those whose entire 
careers are spent in covered employment.
    In other words, their replacement rate on covered earnings 
is now the same and treats both workers with identical lifetime 
earnings history equally, thus restoring some fairness to the 
system while still maintaining the original intent of WEP to 
avoid a, quote, unquote, windfall to those with non-covered 
earnings.
    The simplicity and fairness of the proposed new formula is 
that it would apply to all workers, those with both covered 
earnings only and those with both covered and non-covered 
earnings, making it easy for Social Security to administer and 
for beneficiaries to better plan for retirement.
    Additionally, the Social Security statement could provide 
accurate monthly benefit amounts to better enable people to 
plan their financial security in retirement.
    It is not often that a Social Security reform proposal 
comes forward that has bipartisan support and support from both 
Congress and the President. The original intent of the WEP and 
GPO still applies today. However, we now have the opportunity 
to get the formula right for the improvement of the Social 
Security program and its beneficiaries.
    Thank you again for your time and this opportunity to 
testify. I look forward to your questions.
    [The prepared statement of Mr. Fichtner follows:]
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    Chairman JOHNSON. Thank you, sir.
    Before I recognize Mr. Lee, I would like to recognize Dr. 
Boustany so he can enter a statement for the record.
    Mr. BOUSTANY. Thank you, Mr. Chairman. I appreciate it.
    I ask unanimous consent to enter into the record a 
statement regarding this very important issue from my home 
State of Louisiana.
    Chairman JOHNSON. Without objection.
    [The information follows: The Honorable Charles Boustany 
Submission]
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    Mr. BOUSTANY. Thank you.
    Chairman JOHNSON. Okay. Mr. Lee, I believe you are next in 
line. You are recognized for five minutes.

    STATEMENT OF TIM LEE, EXECUTIVE DIRECTOR, TEXAS RETIRED 
                      TEACHERS ASSOCIATION

    Mr. LEE. Thank you, Chairman Johnson, Mr. Larson, Mr. Neal, 
Members of the Subcommittee.
    I am Tim Lee. I am the Executive Director of the Texas 
Retired Teachers Association. I appreciate the opportunity to 
be here today to testify on behalf of TRTA's over 80,000 
members on the Windfall Elimination Provision and the 
Government Pension Offset.
    TRTA is the largest association for retired public school 
and higher education employees and now ranks number one in 
membership in the Nation. TRTA is part of a growing ad hoc 
coalition of public employee retiree associations, public 
employee organizations, and some of the nation's largest public 
employee retirement systems who are working together to support 
the passage of fair and equitable WEP reform legislation.
    Some of TRTA's closest partners, such as the Retired State 
and County Municipal Employees Association of Massachusetts and 
the Association of Texas Professional Educators, are here today 
in support of your efforts to pass WEP reform this session.
    I have spoken with many of the leaders of other 
organizations that could not be here today, and they also 
extend their appreciation to each of you for this hearing.
    We have already listened to testimony today about the 
origins of the WEP and the GPO, and this is good background 
information, but it does not really capture the sense of 
hardship these two provisions create for both retired and 
active workers.
    For private sector employee contemplating a career shift in 
public education, the impact is the future benefit loss felt 
after years in another field, and for those contemplating 
education as a career, from the beginning the provisions 
provide arguments against entering the profession at all.
    As a parent with four children in public schools, this is 
very concerning to me as I want education and other vital 
public service roles to be highly sought and rewarding for the 
best and most talented job seekers.
    And for our retirees, the consequences are very severe in 
that they lose dollars for their benefits every month.
    Setting aside our views regarding underlying arguments for 
both the WEP and the GPO, TRTA has always believed the 
congressional response to these arguments have been arbitrary 
and based on incomplete data and faulty reasoning. Like many 
organizations with similarly affected membership, TRTA has long 
supported legislation to fully repeal the WEP and the GPO.
    However, despite large numbers of bipartisan cosponsors, 
little has changed in almost 30 years these provisions have 
impacted public workers. We acknowledge that a full repeal is 
costly and denies any merit that may support the initial basis 
for their enactment.
    Over the years congressman Brady has graciously worked with 
our organization and others to find a fair and reasonable 
solution to this growing problem. As early as 2004, Congressman 
Brady wrote, in part, ``A teacher's Social Security should be 
based on the same thing every American's Social Security is 
based on: work history and contributions, not more and 
certainly nothing less.''
    Today H.R. 711, the Equal Treatment of Public Servants Act, 
is before you for your consideration. Replacing the current WEP 
calculation with a formula that takes into consideration the 
individual's entire working career is an important step towards 
greater fairness in the system. While the increased benefit 
that will become available to those impacted does not fully 
restore the Social Security earnings lost under the current 
formula, the additional income will be significant for the 
poorest retirees in our ranks.
    In Texas, the vast majority of TRTA pensioners earn in very 
modest retirement benefits, and replacing and reforming the WEP 
is a need. Our retirees are in desperate need for fairness and 
for the maximum possible increase in Social Security benefits.
    In October of last year, the Social Security Advisory Board 
published a position paper on the WEP, acknowledging that when 
Congress established the WEP formula and the Social Security 
Administration lacked data on earnings in jobs not covered by 
Social Security that are necessary to make an exact benefit 
adjustment.
    Beginning in 2017, the Social Security Administration will 
have 35 years of data on earnings from both covered and non-
covered employment. According to the SSAB's paper, the 
availability of this complete and complex data means that 
Congress can now apply the more accurate approach. This greater 
accuracy should implore Congress to repeal the arbitrary WEP 
formula and provide fairness to government workers by adopting 
H.R. 711.
    Even more recently, it is important to note the President's 
fiscal year 2017 budget proposes to adjust Social Security 
benefits based on the extent to which workers have non-covered 
earnings. While we do appreciate the President's proposal, we 
do not see a need to delay this important transition for ten 
years as his proposal suggests.
    It is critically important to note and acknowledge the need 
for the alternative approach based on actual earnings. I can 
assure members of this Committee that the thousands of retired 
public workers impacted by the current WEP formula would 
appreciate action now instead of waiting another decade in the 
future.
    After years of failed attempts to find a solution and 
underlining the inadequacies associated with the WEP, TRTA 
appreciates the support which we now find from Members of 
Congress, the SSAB, and the Obama Administration. We believe it 
is time for Congress to enact H.R. 711, The Equal Treatment for 
Public Servants Act. H.R. 711 will permanently repeal the 
current WEP and it will provide public servants, teachers, 
firefighters, police officers and other State and local 
employees equal treatment under the law on the benefits they 
have provided and reduce the WEP for current retirees as much 
as 33 percent.
    [The prepared statement of Mr. Lee follows:]
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    Chairman JOHNSON. Thank you, sir.
    Mr. LEE. Thank you.
    Chairman JOHNSON. Ms. English, Please proceed.

         STATEMENT OF JEANNINE ENGLISH, PRESIDENT, AARP

    Ms. ENGLISH. Thank you. On behalf of our 38 million members 
throughout 50 States, the District of Columbia, Puerto Rico, 
and the U.S. Virgin Islands, including our National Retired 
Teachers Association members, and all Americans 50 and over, 
AARP thanks Chairman Johnson, Ranking Member Becerra, and 
members of the Social Security Subcommittee for the opportunity 
to testify today in support of The Equal Treatment of Public 
Servants Act.
    We are happy to join numerous other organizations 
representing retired educators, firefighters, law enforcement 
officers, Federal workers who support this bipartisan effort. 
Both H.R. 711 and a similar proposal included in President 
Obama's fiscal year 2017 budget request offer a resolution to 
the longstanding issue of calculating a fair Social Security 
benefit for workers employed by both the private sector and for 
employers who do not participate in Social Security.
    The Windfall Elimination Provision, or WEP, was intended to 
recover an unfair advantage that Social Security benefit 
formula provided to workers in dual careers. Without the WEP, 
some public sector employees who do not pay Social Security 
taxes would receive a higher replacement rate of their earnings 
than workers who paid Social Security taxes on all of their 
equivalent earnings.
    The one size fits all approach of the current system has 
several drawbacks. It cannot address the great diversity in the 
earnings of State and local workers.
    In addition, research has shown that the WEP can be 
regressive and disproportionately affects lower earners. For 
decades, efforts to design a fair and accurate method to 
calculate Social Security benefits of these workers with dual 
careers was hampered because there was no effective method for 
Social Security to accurately track all earnings for State or 
local government employment.
    Fortunately, more recent data records are making it 
possible to do more to easily track earnings from all 
employers. As a result, it is now possible to adopt and 
administer a fair solution.
    Under The Equal Treatment for Public Servants Act, the 
current WEP will be replaced by the Public Servants Fairness 
Formula, PSFF. The PSFF will first calculate Social Security 
benefits of a worker with public and private sector earnings as 
if all of those earnings were subject to Social Security taxes, 
using the same formula that applies to all workers.
    To ensure there is no windfall, the benefit will then be 
multiplied by the fraction of earnings on which the worker paid 
Social Security taxes. This new calculation will allow for 
benefits that accurately reflect the individual's lifetime 
earnings of dual career workers, while recognizing that not all 
of those earnings were subject to Social Security taxes.
    President Obama has recently proposed a similar process to 
replace the WEP. We are encouraged by the President's support 
for an approach that is generally consistent with H.R. 711. 
Millions of retired State and local workers, including many 
teachers, have received a Social Security benefit that is 
excessively reduced because the current WEP formula fails to 
consider an individual's specific work history.
    AARP's founder, Dr. Ethel Percy Andrus, established the 
National Retired Teachers Association to serve the needs of 
retired educators. Today the NRTA is an important part of 
AARP's history and our organization. We have listened to our 
members throughout the country and others affected by the WEP, 
and we believe that H.R. 711 is an opportunity to treat more 
fairly the 1.6 million workers affected by the WEP, including 
many teachers who belong to the NRTA.
    We applaud the committee members for working to advance a 
bipartisan solution to this issue. We are pleased that this 
effort builds on Congress' work last year to achieve bipartisan 
solution to fund the Social Security Disability Insurance 
Program with reasonable anti-fraud protections.
    We are encouraged that the committee and this Congress can 
likewise reach agreement with the Administration to address the 
WEP this year. AARP stands ready to help on this and other 
proposals to strengthen and improve Social Security and protect 
the income security needs of America's families.
    [The prepared statement of Ms. English follows:]
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                          --------

    Thank you.
    Chairman JOHNSON. Thank you. I appreciate that testimony.
    And as is customary for each round of questions, I will 
limit my time to five minutes and ask my colleagues to also 
limit their time to five minutes.
    Dr. Fichtner, welcome again.
    Mr. FICHTNER. Thank you, sir.
    Chairman JOHNSON. It is not every day the President and the 
chairman of the Ways and Means Committee agree on something.
    Mr. FICHTNER. It sure is not.
    Chairman JOHNSON. And so when it comes to WEP, we are on 
the same page but with a few differences. So when does H.R. 711 
take effect?
    Mr. FICHTNER. H.R. 711 would take place starting in 2017, 
sir, where the President's proposal would start ten years later 
in 2027.
    Chairman JOHNSON. Does the bill help only new beneficiaries 
or does it help current seniors as well?
    Mr. FICHTNER. The current bill offered by Mr. Brady and Mr. 
Neal helps current beneficiaries as well as future 
beneficiaries. It is equal treatment for equal beneficiaries.
    Chairman JOHNSON. You are saying both.
    Mr. FICHTNER. Both, yes, sir.
    Chairman JOHNSON. And what about the President's proposal? 
When does the new benefit formula take effect?
    Mr. FICHTNER. Not until 2027. So it would delay it for ten 
years, and as my old boss, Commissioner Astrue said, justice 
delayed is justice denied.
    Chairman JOHNSON. Does the President's proposal provide any 
relief for current retirees affected by the WEP?
    Mr. FICHTNER. Not for current retirees, no; just for future 
ones, sir.
    Chairman JOHNSON. Mr. Lee, it is good to see you again.
    In my opening statement I talked about Janice from Plano 
and her experience with the WEP. Her story is like that of so 
many Texans, and under Chairman Brady and Representative Neal's 
bill, Janice's benefits would increase.
    Unfortunately, the President has proposed to take his time 
when addressing WEP. Can you tell us why you feel it is 
important to provide relief to those currently affected by the 
WEP and not just new retirees?
    Mr. LEE. Mr. Johnson, it is also good to see you again, 
sir, and thank you for the invitation to come and present 
today.
    Chairman JOHNSON. We are glad to have you.
    Mr. LEE. Thank you so much.
    We have thousands of our retirees that are in desperate 
need for additional dollars in their monthly annuities and 
their Social Security benefits. I have so many retirees that 
have very modest retirement benefits, and so the work that can 
be done today to advance proposal that does not delay it for 
ten years and puts a little extra money in our retiree's 
pockets will go a long way to help make ends meet for those 
folks.
    Chairman JOHNSON. Is there any reason why using the same 
benefit formula for everyone is not the fairest way to go?
    Mr. LEE. Mr. Chairman, we believe in fairness. We think 
this has been the best proposal that has been brought forward 
in a number of years, and fairness is the right way to go.
    Chairman JOHNSON. Dr. Fichtner, some argue that since the 
WEP and GPO are unfair, the only fair thing to do is repeal 
them. What do you think?
    Mr. FICHTNER. I think that would actually be the opposite 
method. Repealing them would actually make things more unfair, 
sir than making things fair.
    Chairman JOHNSON. And, Mr. Goss, can you tell us how you 
think about repeal? How would that affect Social Security's 
finances?
    Mr. GOSS. Well, I would agree with Dr. Fichtner to the 
extent that repealing the WEP and the GPO would then not take 
into account whatever the non-covered earnings that people have 
had in the past. So some approach does certainly make sense.
    Chairman JOHNSON. You know, this is a popular subject, and 
we have had a number of non-subcommittee members, non-committee 
members join us today, and we welcome you.
    Without objection we will follow our custom of allowing 
members of the Ways and Means Committee who are not Members of 
the Subcommittee to ask questions after the Members of the 
Subcommittee have completed their questioning.
    Other members may make submissions for the record which 
will remain open for two weeks.
    I recognize Mr. Larson.
    Mr. LARSON. Well, thank you again, Mr. Chairman, and I want 
to thank our witnesses as well.
    Mr. Goss, I would like to go back to your testimony, and I 
think it is important as well for the record, and I understand 
the philosophical notion and the fairness of making these 
adjustments with respect to both the WEP and the GPO, and I 
wonder though if you can explain to us as you were going 
through your diagrams who would be the losers in this.
    What happens here? That seems to be some of the concern 
that is raised by the NEA and others, and I was just trying for 
the record to better understand this.
    Mr. GOSS. Well, it is true, as several have mentioned, that 
there would be a lot of dare we say winners, that is, people 
who would be less strongly affected by the new proposal than 
what we have now.
    But there would, as in almost any change, there would be 
some people who would be affected somewhat more. Of the roughly 
1.5 million worker beneficiaries now affected if we were to be 
able to apply the new formula to them, about 16 percent or 
about a quarter million of those folks would be reduced by 
about $13 per month.
    That is not a strong change. This would be about an eight 
percent reduction in their benefit level. These are people who 
are currently affected, but because of the size of the pension 
that we know of, they are being affected relatively little. 
They would be affected only slightly more under the new formula 
approach.
    The much larger group that would be affected you might say 
negatively would be out of the 15 million people who are worker 
beneficiaries today, if we were to apply the new formula to 
them, who have some non-covered earnings but are not reduced 
currently for the Windfall Elimination Provision, a large 
majority of them, 93 percent, would have some very small 
reduction under the new formula. We estimate that that 
reduction would be on the order of $27 per month, on average, 
which is only a two percent reduction ion the benefits for 
those individuals.
    Breaking that down into the people most affected versus 
least affected by applying the new formula to those who 
currently are not being reduced by the WEP, the group that 
would be the least affected would be affected by only $3 per 
month on average reduction, and the percentage reduction would 
round to zero percent. It would be less than half a percent 
reduction.
    The group of that 14 million that would be most affected 
would be affected by a reduction in their benefit of about $46 
per month, which is only a $3 per month reduction for those 
individuals.
    So there would be some individuals obviously who are not 
affected by the WEP at all now with this broader application of 
the under the new proposal would be affected to the smaller 
extent.
    Mr. LARSON. But as Ms. Richardson pointed out, because of 
the progressivity within this that is why it is getting the 
favorable review from the panelists.
    What does an average Social Security recipient receive 
today?
    Mr. GOSS. On average Social Security recipients are getting 
on the order of $1,300. This is retired worker beneficiaries, 
around $1,300 per month.
    Mr. LARSON. And as I said earlier, we have not made an 
adjustment really to Social Security since 1983 when it was, I 
think, unwisely not indexed at the time, which places us in 
this horrible actuarial situation that we find ourselves in 
wondering about the solvency of the program.
    I think one of the mistakes that we make is to refer to 
this as a tax instead of an insurance premium. This is, after 
all, an insurance premium that is paid by both the employer and 
by the employee, but it is insurance nonetheless that the 
employee has paid for.
    And I hear this everywhere I go in my district, that this 
is the insurance I paid for, and I do not know of any insurance 
premium that has not risen since 1983 in any major category. So 
that when we look at these things, if we look at it going out, 
looking at a premium perspective and to make sure as they do in 
all insurances that they are actuarially sound, your advice on 
this is going to be tantamount.
    And I thank you for your testimony.
    Chairman JOHNSON. Thank you.
    Mr. Dold, you are recognized.
    Mr. DOLD. Thank you, Mr. Chairman.
    And I certainly want to thank all of you for coming today 
and for your testimony.
    And just to pick up where my good friend Mr. Larson was 
leaving off in terms of an insurance policy, one of the keys to 
an insurance policy is certainty. So, again, having that 
certainty is extremely important.
    And we hear it each and every day. We hear it from 
businesses. We hear it from individuals. Planning and having 
certainty is absolutely critical.
    And so individuals who are planning for retirement rely on 
the statements that they receive from Social Security to have a 
sense of what the benefit is that they can expect going 
forward. However, those statements do not take into account the 
Windfall Elimination Provision or the Government Pension 
Offset.
    So people who are subject to the WEP or the GPO may not 
know how they will be affected until they actually come into 
retirement and they apply for their benefits, and it is not 
until then that they learn how much less they will receive on 
Social Security, whether it be that benefit that they were 
expecting.
    Not only is this unfair; it interferes with the ability of 
retirees who have worked in public service jobs, including 
educating our children, from being able to enjoy the retirement 
that I believe they so richly deserve.
    Now, some of the things that I have heard, and again, I am 
sure you can imagine we have heard a lot from constituents. One 
wrote in to me, Lucile, who is a teacher from Vernon Hills, and 
she taught in a Catholic school for many years and switched to 
the public school system after her husband passed away. She 
worked in the public school system for 17 years, and she wrote 
to let me know that she was trying to do her retirement 
planning when she learned that because of WEP, she will not 
receive any of her late husband's Social Security benefits and 
hers will be reduced by two-thirds.
    In addition, because she has only worked for 17 years in 
the public school system, she will not qualify for a full 
pension benefit.
    Robert, who is a former postal worker from Wheeling, 
learned that he would not receive his Social Security benefits 
for his covered employment because he received a pension from 
the Federal Government for his non-covered employment.
    Nick, a retired educator from Deerfield, wrote in to 
express the unfairness of the Windfall Elimination Provision, 
and he notes that he has paid into Social Security and deserves 
the benefits that he has earned, and that only Illinois and 
about 15 other States reduce Social Security benefits along 
those same lines.
    Each of these people, and again, there are thousands and 
thousands of others that have been negatively impacted, and I 
do believe that this is a bipartisan effort for us to be able 
to try to solve this problem.
    So, Mr. Lee, let me just first direct this. When teachers 
receive their Social Security statements or their statements if 
it is not Social Security, are their estimated benefits 
accurate?
    Mr. LEE. Congressman, I think you are exactly right in 
saying that the amount of monthly benefit they may receive may 
be accurate, but it does not reflect the impact of the 
Government Pension Offset or the Windfall Elimination 
Provision.
    In your first example, it sounded like that individual was 
going to be hit with a double whammy, both with Government 
Pension Offset and the Windfall Elimination Provision.
    So to the extent that they are accurate, yes, but they do 
not provide good financial accounting for the fact that the WEP 
will affect them, and when they go to retire to collect the 
benefit, it is a very big surprise, and it does impact how they 
are able to make ends meet.
    Mr. DOLD. Dr. Fichtner, Ms. English, how important is it 
that those statements, regardless of where they are, are 
accurate?
    Mr. FICHTNER. Congressman, it is very important. For many 
people the Social Security statement that they get in the 
pension plan is the one time a year they sit down and try to 
figure out their adequacy for retirement planning. If those 
statements and the benefits estimate in those statements are 
wrong, we could be doing a lot of harm to people as they try to 
plan for a secure retirement.
    Mr. DOLD. Mr. Goss.
    I do not mean to cut you off, Ms. English, if you wanted to 
add in.
    Ms. ENGLISH. The only thing I wanted to add is that is 
absolutely right. We talk to our members all the time, and if 
they cannot plan for their Social Security, their pension, and 
their savings, they cannot plan for their future, and so 
knowing what they are going to have in Social Security is 
crucial.
    Mr. DOLD. Mr. Goss, let me just say, I understand you 
cannot be a clairvoyant, and I recognize that situations are 
happening you do not know that they may have had a different 
work time somewhere else. How can we try to avoid this?
    Mr. GOSS. Well, you make an extremely good point. Due to 
the complexity of the current approach where one would have to 
know the size of the pension and when a person was going to 
receive a pension based on non-covered employment, we simply do 
not have that information available.
    We do have more detail benefit calculators available on the 
WEP principally used by financial planners, not by citizens 
because of the complexity.
    There is no question but that this new approach would 
afford us in the Social Security statements the ability to take 
into account those years of non-covered earnings and give a 
much better estimate for individuals, especially if they 
indicate during the remainder of their career where they think 
they will be working. We can give a very good assessment.
    Mr. DOLD. And in my last one second, the legislation that 
we are proposing today would rectify this problem; is that 
correct?
    A nod I am seeing, Dr. Fichtner.
    Mr. FICHTNER. Yes, sir.
    Mr. DOLD. Okay. Thank you so much.
    Mr. Chairman, my time has expired.
    Chairman JOHNSON. Thank you.
    Mr. Kelly, you are recognized.
    Mr. KELLY. Thank you, Chairman.
    And thank you all for being here,
    My wife is a teacher back home in Pennsylvania and my 
daughter is a teacher. My wife taught elementary; my daughter 
in secondary. So we have approximately 35,000 Social Security 
beneficiaries that are all adversely affected by the WEP 
Program.
    Mr. Lee, you talked about this pretty clearly. The bulk of 
my life has been in the private sector, and one of the things 
is if you are going to attract the best people, you have got to 
have the best ways of attracting them. Most of that is through 
a compensation package that makes sense, that allows them to 
get through their everyday life, and then allows them to get 
ready for the time that they retire.
    So looking at what we have today, and this is really one of 
those days where we all agree on the same thing, but to attract 
the best people, and I really do believe teachers are the key 
and education is the key for anybody getting from what level 
they are to the next level higher, and they can do it by 
themselves by preparing for a job that they want in the future 
that actually does allow them to sustain their lifestyle, 
family and children and take care of everybody.
    So if you can just talk a little bit more about when it 
comes to what we have to do to attract more teachers, to 
attract more people to go into that profession to make it seem 
to them, and I would just share this. My daughter was at Notre 
Dame, and she was in pre-profession of science, and she was 
having trouble from the standpoint of it was not exactly what 
she wanted. She was a track girl. She ran cross-country in 
track.
    And I said to her--her name is Charlotte but I call her 
Charlie--I said, ``Charlie, you know what? You love kids. You 
love competing. Why do you not go into education?''
    And she said, ``I cannot make any money doing that, Dad. 
Why would I ever do that?''
    And I said, ``It is not always going to be about money. It 
is going to be at the end of your life not how much you have in 
the bank but how many people you have actually touched and how 
many people you have helped.''
    And she said, ``well, that is easy for you to say, but it 
is not going to be that way for me.''
    So, by the way, she did become a teacher, and she is also 
coaching cross-country and track, and she started a program 
called Girls in the Run, which really helped a lot of little 
girls who did not feel really good about themselves for 
whatever reason and started them off by walking around the 
track and talking about what do you have to do to fit in and 
how you have to compensate for people who say things about you 
that are not real nice, but at that age that kind of goes with 
the territory.
    But my point is to get people like my daughter Charlotte, 
to get Charlie to say, ``Do you know what? I do not need to 
be--but I do have to have something that is sustainable.''
    That is a huge problem right now, is it not? Attracting the 
really top people to work with our kids, the most valuable 
asset we have going forward where our future is secured?
    How hard is it right now to bring those folks into the 
fold?
    Mr. LEE. Congressman, I appreciate that story and 
appreciate your wife's services as a teacher, and certainly I 
can tell you are a proud father.
    I have a picture recently from one of my retirees who is 
109 years old, and he is receiving a benefit from the Teacher 
Retirement System in Texas. So is his son and so is his son's 
son, and so it is a generational teaching family.
    And I think that we have to support our educators. 
Obviously teaching is one of the most difficult positions that 
you can go into as a career. My own daughter also, who is going 
to be 13 next month, wants to be a teacher, and so I think 
immediately about the obstacles that she will face.
    I think one of the major obstacles that we can remove from 
that situation is creating a greater sense of transparency and 
helping somebody understand the value of not only the dollars 
they are receiving in their payroll today, but also the dollars 
they are putting away for their future retirement benefits 
through the State Teacher Retirement System, as well as into 
the Social Security system. That transparency will help them 
understand that the career of public education is not only 
helping the children today, but it will help those teachers 
when they retire in the future.
    So I would say greater transparency, and of course 
everything that we can do to encourage our teachers, good 
teachers, to stay in the profession, and looking at the other 
professions where people are coming into schools. In Texas we 
have Troops to Teachers, obviously lots of military folks 
coming into teaching, and I know if they look at provisions 
like the Windfall Elimination Provision and say, ``Look. If 
there is no reason, no benefit for me to go into teaching 
because I am going to be hurt because I do that financially in 
the future,'' I think that is the wrong message that we need to 
be sending.
    So it is a big step forward today in looking at how can we 
treat people fairly and transparently in the future.
    Mr. KELLY. And, Chairman, thank you again for this hearing 
because it is about fairness, and I think that we champion 
these people. We want them to touch our children's lives and we 
want to be part of that whole process, but then they look at it 
and say, ``But at the end of my time, when I retire, I am not 
being treated fairly. So you want me to come in and do all of 
that, you want me to give you my life, and you want me to give 
all of my talents and my passion, but I am not going to be 
treated fairly.''
    And I think that is the problem. You all touched on that, 
and I think that is the answer.
    So, Chairman, thank you so much for having this hearing 
today.
    Chairman JOHNSON. Thank you.
    Are you ready to question? You are recognized, Mr. 
McDermott.
    Mr. MCDERMOTT. Thank you, Mr. Chairman.
    I have been on this Committee long enough to remember the 
Notch Babies. So I sort of look at these questions where you 
are making decisions here that are ten years out before they 
take effect, and I am asking myself: what are we setting up 
here?
    If I understand, Mr. Goss, one and a half million people or 
one and a quarter million will get an increase of something 
like 77 bucks on average, and then there is the 15 million that 
are going to get cut. And it looks to me like this bill is one 
where nobody wanted to raise any money. They do not want to do 
anything about the money situation in Social Security. They 
just wanted to shift it from one bunch to another.
    So we have got the public employees, and I think this is a 
benefit for them they should have, but we are doing it at the 
expense of 15 million people who do not know it is coming. They 
do not belong to an organization that lets them know; is that 
correct?
    Mr. GOSS. The numbers that I was speaking about are really 
in reference to sort of what in the long run the implications 
would be. The 14 million people who are not currently receiving 
any reduction for WEP, if we were to be able to apply the new 
approach to them, there would be 14 million who would be 
affected somewhat by that, but to a very small extent.
    Mr. MCDERMOTT. What is the logic for that except for saving 
money, just cutting benefits from them?
    Mr. GOSS. Well, the logic would be really just the basic 
logic of the notion of reflecting the replacement rate or the 
level of benefit people should get from their Social Security 
covered earnings to have that be commensurate with the level of 
their overall earnings on the basis of our progressive formula.
    Really, I think the best way I could express the logic on 
that is for that portion of a person's career when they were 
working in State and local or Federal Government employment and 
not paying them or their employers the 12.4 percent combined 
payroll tax rate, that they would not, in effect, be getting 
credit towards Social Security benefits and having a higher 
replacement rate on the basis of not counting those earnings.
    This new formula would look at those earnings in addition 
to their covered earnings and determine their overall level of 
earnings and their overall level of benefit replacement that 
would be deemed to be appropriate under our current formulas, 
and give them on their Social Security covered earnings no 
higher replacement than people would get who had had their 
whole career covered.
    Mr. MCDERMOTT. When the bill passed here in 1983 and they 
advanced the retirement age from 65 to 67, I am sure there were 
thousands, millions of people in this country who never thought 
that was going to ever affect them, and they did not even hear 
about it. They were not paying any attention to it.
    What kind of educational effort is there going to be for 
people to understand what their future benefits are? How do 
they sit down and plan their future?
    If they are 55 today, they are going to be 65 when this 
kicks in ten years from now or whatever. How are they going to 
know what is going to happen to them then?
    I mean, how will the ordinary citizen find out about this?
    Mr. GOSS. I would imagine that Mr. Lee would be in really a 
very, very positive position under this new formula for future 
beneficiaries to indicate to them that you can simply look, and 
we have in your Social Security statement. We do identify not 
only your covered earnings, but also your earnings that are not 
covered through the Social Security statement.
    Through a modification of that we could indicate to people 
on the basis of their covered and non-covered earnings what the 
implications of this new formula would be in a way that we 
really cannot with----
    Mr. MCDERMOTT. I do not remember that.
    Mr. GOSS. That education would be very possible.
    Mr. MCDERMOTT. I do not remember the point at which I 
started getting announcements from Social Security about what 
my benefit was going to be. When does that start?
    Does that start when you are 65? I got mine at 65. Does it 
start at 65 or 67 or whatever, or does it start ten years 
before where they tell you, ``This is what your benefit is 
going to be''?
    Mr. GOSS. The good news is even before that. We first start 
sending statements to people when they attain age 25, and I 
think our current practice now is to do it every five years 
thereafter until they reach something like 60, and then we do 
it even more often, perhaps every year at that point. So the 
notices are available for people either online or if they are 
not signed up, they receive those through the mail.
    Mr. MCDERMOTT. And it will tell them what their benefit cut 
would be from what they presently have or it will just tell 
them what the benefit is going to be?
    Mr. GOSS. Well, if we enact H.R. 711 or the equivalent 
through the President's budget proposal, once that goes into 
effect for people who will be affected by the new formula, we 
will be in a position to modify the calculation shown in the 
Social Security statement and indicate to people what their 
benefit would be without and with, probably just with, the 
implications of this new formula change.
    Mr. MCDERMOTT. I will not be here in 2027. So I will not 
meet the next crop of Notch Babies, but I will bet you there is 
going to be somebody organizing these people and telling them.
    Thank you. I yield back the balance of my time.
    Chairman JOHNSON. Thank you for your question.
    Mr. Renacci, you are recognized.
    Mr. RENACCI. Thank you, Mr. Chairman, for holding this 
hearing. I want to thank the members of the panel for their 
testimony.
    I would also like to thank Chairman Brady and Mr. Neal for 
their hard work on this issue and for working towards really a 
common sense solution to address the outdated and arbitrary 
formula.
    While WEP may impact every State, my State of Ohio has more 
than 120,000 people who will be subject to the Windfall 
Elimination Provision, trailing only behind the significantly 
larger States of California and Texas. This is due to the State 
having multiple pension funds that predate Social Security and 
whose members do not have income that contributes to Social 
Security.
    Mr. Chairman, I ask unanimous consent that a letter from 
the Ohio Public Employees Retirement System in support of H.R. 
711 be included in the record.
    Chairman JOHNSON. Without objection.
    [The information follows: The Honorable Jim Renacci 
Submission]
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    Mr. RENACCI. In my five years representing Northeast Ohio I 
have heard from countless constituents who have spent part of 
their career serving their community as public school teachers 
and police officers, firefighters or State employees who have 
been impacted by the Windfall Elimination Provision. Like many 
of my colleagues, the stories I hear from constituents have 
real impact on their lives and their planned retirement.
    While efforts have been made both by the State and Federal 
level to better educate individuals impacted by WEP, still many 
retirees do not realize that they will lose benefits due to WEP 
until their first benefit check.
    This was the unfortunate case of a constituent of mine 
named Thomas, who is currently retired in Medina, Ohio. Thomas 
worked many years starting as a teenager in a variety of jobs 
that paid into Social Security prior to joining the City of 
Cleveland Police Force where he served the community for 27 
years.
    Throughout his time working in public law enforcement, he 
also worked as a private contractor paying into Social Security 
only to be told that he would receive reduced benefits due to 
WEP.
    I have also heard from Tina who lives in Brunswick, Ohio, 
who spent more than 20 years working in the private sector 
before being hired by the Brunswick City School District in 
2008. She is planning to retire in the next five to seven years 
and is already preparing for an impact that the current WEP 
formula will have on her retirement.
    Under the President's proposal, we have heard the Windfall 
Elimination Provision will not be fixed for ten years. That is 
an awful long time when we have the data to fix it starting 
next year in order to provide a solution for individuals like 
Tina and Thomas.
    Mr. Lee, can you give me any reason why we should wait ten 
years?
    Mr. LEE. No, sir. I think that you set that up very well. 
Those are problems that need to be addressed now. We have 
recognize the arbitrary nature of the current Windfall 
Elimination Provision formula.
    We know how to fix it today. We have had excellent 
testimony and the work that you have done and many members of 
this Committee have done and have made it available to present 
a reasonable solution. I think now is the time to do it.
    Mr. RENACCI. Thank you.
    Mr. Fichtner, often one of the reasons to wait would be 
implement a change, is to give people, you know, time to plan. 
However, since we know the Social Security statements are not 
accurate for those affected by WEP and GPO, how does this delay 
really help them?
    Mr. FICHTNER. The delay actually would not really help 
them. It is just giving them proper information to make the 
proper planning they need to do.
    And the other point, to follow on Mr. lee's point and yours 
as well, is that if we delay making this change until 2027 
instead of doing it in 2017, there are beneficiaries now who 
are being affected by the WEP that are getting a lower benefit 
than they would in a proportionate amount.
    So we are basically delaying giving them the benefit that 
they deserve, and again, justice delayed is justice denied.
    Mr. RENACCI. Thank you.
    You know, this is a great opportunity where we can work 
together as a bipartisan group to get things accomplished. So I 
agree that we need to work together. As a cosponsor of H.R. 
711, I again want to thank you, Mr. Chairman, for holding this 
hearing and for working towards this common sense solution.
    I yield back.
    Chairman JOHNSON. Thank you, sir.
    Mr. Smith, do you care to question?
    Mr. SMITH. Yes, just briefly. Thank you, Mr. Chairman.
    I am happy to be back on the Social Security Subcommittee. 
I know changes have been made along the way. We have got some 
work to do, and we have had young people filing in and out of 
the room. I hope that this might spark some interest in their 
financial futures, and as we work hopefully together to address 
the solvency of Social Security, this issue is one that I hope 
we can resolve here fairly quickly.
    I believe it is appropriate that we work to improve Social 
Security so we can ensure benefits are paid out accurately and 
reflect the need of beneficiaries as well.
    So I thank the Chairman for calling today's hearing.
    One question, Ms. Richardson. Whether or not the WEP and 
GPO apply is based on if a person is also receiving a pension. 
What information does the Social Security Administration use to 
actually make the determination?
    And are you relying on beneficiaries to provide this 
information when they claim the benefit?
    Ms. RICHARDSON. Under the current law, yes, we are. We rely 
on self-reporting, and that is part of the challenge of 
administering the current law.
    Mr. SMITH. Okay. By fixing the WEP and GPO in the way the 
President proposes, would you need pension information for new 
beneficiaries once the policy goes into effect?
    Ms. RICHARDSON. We would need pension information for those 
current beneficiaries, but at the point in 2027, when the 
Administration's proposal would take effect, we would use just 
the non-covered earnings data for newly eligible beneficiaries.
    So for any of those beneficiaries up to that point who will 
continue to receive benefits after that point in 2027, yes, we 
would continue to need their pension information. We need the 
details about when the pension starts, when it stops, and when 
the amount changes.
    Mr. SMITH. Okay. Thank you.
    Does anyone else wish to comment?
    [No response.]
    Mr. SMITH. If not, I yield back. Thank you.
    Chairman JOHNSON. Thank you.
    Mr. Rice, do you care to question?
    Ms. RICE. I yield, Mr. Chairman.
    Chairman JOHNSON. Thank you.
    Mr. Tiberi.
    Mr. TIBERI. Thank you, Mr. Chairman.
    I appreciate you holding this hearing today, and I want to 
thank Mr. Brady and Mr. Neal for their leadership.
    I am going to associate myself with Mr. Renacci's comments. 
Being from Ohio, I, too, know the perils that many of my 
constituents face and have heard from many of them over the 
years that I have been in Congress, including my mother-in-law 
who is impacted by this Windfall Elimination Provision.
    Last fall I was contacted by a woman by the name of Liz 
Mackey. Ms. Mackey worked as a nurse for 18 years before an 
injury forced her out of that very noble profession, Mr. 
Chairman, and rather than retire on disability, she decided to 
pursue another career, put herself through school, became an 
employee in Franklin County Government in Columbus, and worked 
in a job that paid much lower than she did get paid as a nurse 
for 18 years.
    So as a result of that decision, Mr. Chairman, that 
decision to keep working instead of giving up, she will see her 
Social Security benefit greatly reduced by this WEP provision 
unless we fix it.
    And so she cannot wait another ten years. She needs this 
fixed now.
    Dr. Fichtner, in your testimony you discussed how using the 
proportional formula devised in this bill instead of WEP allows 
that same benefit formula to be used for all workers. Can you 
explain how that would be impacting someone like Ms. Mackey who 
had a job in the private sector at a higher scale and then went 
to public service work working for government in a Public 
Employee Retirement System at a lower scale?
    And now Ms. Mackey who may be choosing between taking a 
non-covered job in the future or retiring simply to keep a 
higher retirement benefit, the perverse incentive, if you will.
    Mr. FICHTNER. So, Congressman, there is a perverse 
incentive sometimes to try to seek additional employment and 
just for the sole purpose of getting years of coverage under 
Social Security when you have also non-covered employment.
    The benefit of going to a proportional formula is it is one 
formula that applies to everybody. So it is transparent. Under 
the current formula, the first bend point, as Chief Actuary 
Goss mentioned, changes. Instead of being 90 percent it could 
be lowered to as much as 40, but it scales down depending on 
years of coverage.
    So it is very confusing. It is not very transparent, and 
people cannot plan accurately. Going under the plan by 
Congressman Brady and Congressman Neal, that would make it one 
formula that would apply to everybody, and it would be 
proportional for those years that are non-covered earnings, 
which means you could have one formula for Social Security that 
could do a better job in the statement of telling people what 
their benefit would be, and it would no longer give a perverse 
incentive to game the system.
    Mr. TIBERI. Mr. Renacci brought this up with respect to 
police officers, but I know it was brought up that teachers and 
others face the same impact they have supplemental jobs, second 
jobs throughout their career paying into Social Security in 
their supplemental jobs that are paying into the Public 
Employee Retirement System in the primary job.
    Mr. Lee, you brought up in your testimony how WEP can be 
particularly harmful to teachers in our State of Ohio. So does 
the approach taken in the new formula effectively stop that?
    Mr. LEE. Yes, sir. And, first of all, I want to say that 
many of my friends in Ohio speak very highly of the gentleman 
on this Committee and they appreciate your service. I know 
quite a few retired teachers from your State that are watching 
today and are very interested, and they have sent email 
expressing appreciation for your participation today.
    We look at this situation as a very unfair formula, a very 
arbitrary formula and confusing and needs to end with the work 
done for the folks here today and Mr. Brady and others, this 
formula has become fair, and if you ask educators what they 
value more than maybe anything else, it is fairness. They just 
want to be treated fairly under the law.
    In this current situation we do not believe it is fair. A 
person who is a high wage earner and perhaps administrator 
level position is going to be hit one way, and a person who is 
in a low wage position is going to be hit exactly the same, and 
so a person earning lower income needs to be treated 
differently based on their earnings than somebody who is maybe 
in a higher paid position.
    And so that is what the current formula is trying to fix, 
get rid of the arbitrary nature of the existing WEP and replace 
it with something that is fair based on their earnings over 
their career.
    Mr. TIBERI. Thank you. My time has expired.
    Mr. Chairman, I'm a proud sponsor of this legislation, and 
I want to thank you for your leadership.
    Chairman JOHNSON. God bless you. Thank you.
    Mr. Larson, you are recognized.
    Mr. LARSON. Thank you, Mr. Chairman.
    And what a great hearing this has been, and I want to thank 
the members that have joined us as well.
    And I want to go back to something that both you and Mr. 
Renacci said with respect of the ten-year gap and why this 
legislation that takes effect in 2017 comes under what Martin 
Luther King would call the fierce urgency of now.
    And so I commend this Committee that has been in a 
nonpartisan way grappling with this issue, and I think this 
bodes well for the overhaul and the work that still needs to be 
done on Social Security.
    Mr. Chairman, I commend you for always being fair and 
thoughtful and I hope that we in the not too distant future can 
have a hearing that focuses on the actuary soundness of this 
and bring our actuaries here and talk about in a nonpartisan 
way how we can come up with constructive solutions that make 
it, I think as Mr. Goss said, sustainably solvent for the whole 
program.
    I think that is what we are all interested in as members 
here who understand how vital a program that Social Security is 
to all Americans.
    Again, kudos to Mr. Brady and Mr. Neal, and thank you 
again, Mr. Chairman, for having this hearing.
    Chairman JOHNSON. Thank you.
    And I want to thank all our witnesses for their testimonies 
today. Thank you also, the members that are still here. I 
appreciate your presence.
    It is clear that current law is not working, and we need to 
fix the WEP and GPO so that all workers are treated fairly, and 
the time to act is now.
    I look forward to working with all my colleagues on this 
important legislation. And with that, this Subcommittee stands 
adjourned.
    [Whereupon, at 11:30 a.m., the subcommittee was adjourned.]

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