A friend called recently about her Social Security benefit, and she was not happy. Preparing to retire following a successful career in academic, private sector, and federal government positions, she expected to retire on a mix of Social Security, a pension, and savings.
Then she checked the amount of her projected Social Security benefit and was surprised to learn that she’d be getting roughly 40 percent less than the projection she had seen on the annual benefit statements she had received over the years. Could I explain what was going on?
Welcome to the WEP–the Windfall Elimination Provision, a little-understood Social Security rule designed to prevent double-dipping from Social Security and public-sector pensions. The WEP and its cousin, the Government Pension Offset, can mean very sharp benefit cuts.
Under the WEP, a worker retiring this year who might otherwise receive a $976 monthly Social Security benefit could see that chopped to $548, according to the Congressional Research Service. The GPO can result in even sharper cuts to spousal and survivor benefits.
The WEP affected 1.7 million beneficiaries at the end of 2015, according to the Social Security Administration, while the GPO impacted about 652,000. The provisions impact many teachers, police, firefighters, postal workers, air traffic controllers, and some federal government state, county, local, and special district workers.
The WEP was enacted as part of broader Social Security measures taken in 1983 to avert a solvency crisis. The intention was to eliminate a supposed advantage in the Social Security benefit formula to people who also had pensions from jobs that are not covered by Social Security.
But the logic is inscrutable to all but policy analysts and actuaries. And the WEP’s whack regularly generates outrage from retirees, who approach this with a very straightforward question: “If I earned the benefit, why am I not receiving it?” Employee associations representing affected state and municipal workers have been pushing for reform of the WEP for years. Legislation has been introduced repeatedly in both chambers of Congress that would repeal both the WEP and the GPO. That would be expensive; the SSA’s chief actuary estimates that it would bring the depletion date for Social Security’s trust fund one year closer; in 2007, the SSA estimated that repealing the WEP only would cost $40 billion over 10 years.
Several of the reform proposals also include changes to enforcement mechanisms to make sure that whatever reductions remain are spread evenly across all affected workers, since the current system is imperfect.
The Obama administration’s fiscal 2017 budget included a reform proposal for both the WEP and the GPO. But the plan that seems to have traction takes an incremental approach and focuses on the WEP only.
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