Improvements In Social Security For Women, Seniors And Working Americans

2/28/2002

U.S. House of Representatives

Chairman Shaw, Members of the Subcommittee:

I am Colleen M. Kelley, National President of the National Treasury Employees Union (NTEU). Thank you very much for holding this hearing today to explore changes that may need to be made in the Social Security system to improve benefits for women, seniors and working Americans.

NTEU represents more than l50,000 federal employees and retirees. NTEU has a long-standing interest in two particular Social Security provisions that negatively impact women and working Americans - the Government Pension Offset (GPO) and the Windfall Elimination Provision (WEP). Many of our members have already felt the unfair effects of these provisions. Others are not yet aware of the impact these provisions will have on their retirement income. Federal retirees often first become aware of the existence of these provisions at the time they apply for Social Security benefits.

As you know, the Government Pension Offset unfairly penalizes many recipients of government pensions who are also eligible for Social Security based on a spouse's work record by reducing the spousal Social Security benefit by two-thirds of the amount of the government pension. In many cases, the GPO entirely eliminates the Social Security spouses's or widow's benefit a federal retiree might be eligible for. In other cases, it severely restricts the amount of that benefit.

The effects of this offset are particularly devastating to female federal employees who are often eligible for small federal pensions as a result of either interruptions in their careers while raising their families, or working in lower paid positions for most of their careers.

For example, if an elderly widow is eligible for a monthly pension of $600 based on her federal government service, two-thirds of that amount, or $400, must be used to offset any Social Security spouse's or widow's benefit for which she might also be eligible. If this same individual is eligible for a monthly spousal Social Security benefit of $500 based on her husband's earnings record, the GPO slashes her Social Security benefit to only $l00 each month. This is hardly an isolated example.

More often than not, this offset disproportionately affects those who can least afford to forgo this retirement income. It is particularly galling to the Nation's federal workforce that had they not dedicated their careers to public service, they would remain fully eligible to collect their spousal Social Security benefits. The Government Pension Offset does not apply to individuals who collect private pension benefits and are also eligible for Social Security.

According to Social Security Administration (SSA) data from December of l999, more than 284,000 Social Security recipients were being negatively affected by the GPO. Even more shocking is that the GPO caused 80% of these individuals to lose the entire Social Security benefit to which they should have been entitled. Considering that many of these affected individuals are elderly widows, it is hard to believe that this is what the law intended.

I believe it is facts like this that have led a bipartisan group of 285 Members of the House of Representatives to add their names as cosponsors of legislation authored by Congressman William Jefferson, H.R.664, that seeks to correct this inequity in the law. As you know, H.R.664 would apply the GPO only to combined annuity and Social Security spousal benefits that exceed $l200 each month.

H.R.664 is not the only legislation pending before the House of Representatives on this important topic. Congressman Bud McKeon has introduced H.R.2638, legislation to repeal both the Government Pension Offset and the Windfall Elimination Provision. His bill, introduced on July 3l of last year, has already attracted 90 cosponsors.

In addition, we are grateful to the Chairman for his introduction of Social Security legislation that recognizes the need to reform the Government Pension Offset. It is my understanding that H.R.3497 would reduce the GPO from the current two-thirds offset to a one-third offset.

Chairman Shaw, NTEU continues to believe that the GPO unfairly penalizes individuals who spend their careers in public service. We urge you to move legislation this session correcting this unfair provision of law.

Similarly, the Windfall Elimination Provision unfairly reduces the retirement income of many federal retirees by reducing their own, earned, Social Security benefit by as much as 50%. Under current law, a federal employee eligible for both Social Security and a pension from work not covered by Social Security (such as from the Civil Service Retirement System) finds that a lower benefit formula is applied when calculating the Social Security benefit to which he or she should be entitled.

This is how the lower benefit formula works. A private sector worker with average monthly earnings of $500 would be eligible for $450 each month at age 65 (90% of $500). Using the same earnings as the private sector worker, at age 65, a federal worker affected by the WEP would be eligible to receive only $200 (40% of $500) in monthly Social Security benefits. The WEP requires that instead of using the 90% formula, workers with non-Social Security covered employment have a 40% formula applied.

The use of this lower formula - simply because the individual chose to spend his or her career in public service - has a devastating effect on the retirement plans of many federal employees. Although federal pension recipients with 30 or more years of substantial Social Security coverage are exempt from the Windfall Elimination Provision, it is a rare federal employee that can spend 30 years in service to his or her country as well as 30 years earning substantial Social Security credits.

Federal employees and retirees are being financially devastated by the Windfall Elimination Provision just like they are by the Government Pension Offset. NTEU strongly supports two bills pending before the House that seek to correct this inequity in the law.

The first, H.R.l073, introduced by Congressman Barney Frank, has gathered 2l7 cosponsors. It would restrict application of the Windfall Elimination Provision to individuals whose combined monthly income from both a federal pension and Social Security exceeds $2000 each month. Passage of this legislation would go a long way toward ensuring retirement security for the many affected federal employees represented by this union. The second bill, H.R.848, has been introduced by Congressman Max Sandlin and has attracted l29 cosponsors. H.R.848 would eliminate the Windfall Elimination Provision entirely.

Again, Chairman Shaw, thank you for holding this important hearing today. NTEU hopes that the outcome of this hearing will be legislation headed to the House floor to correct both the GPO and WEP provisions of Social Security law. Thank you very much for your attention to these issues.