Social Security Provisions Affecting Public Employees



Chairman Shaw, Ranking Member Matsui, Members of the Subcommittee:

I am Colleen M. Kelley, the National President of the National Treasury Employees Union (NTEU). NTEU represents more than 150,000 federal employees across 29 agencies and departments of the federal government. Thank you very much for holding this important hearing today and inviting NTEU to share its views on the Government Pension Offset (GPO) and Windfall Elimination Provisions (WEP).

As you know, NTEU has presented testimony before your Subcommittee on numerous occasions in support of legislation to either repeal or reform the Government Pension Offset and Windfall Elimination Provisions. These two Social Security provisions have negatively affected NTEU members for many years and attention to the difficulties they have caused is long overdue.

The Government Pension Offset unfairly penalizes recipients of government pensions who are also eligible for Social Security based on a spouse’s work record. The GPO reduces the spousal Social Security benefit by two-thirds of the amount of the government pension, in many cases entirely eliminating the Social Security benefit that a federal retiree is otherwise eligible for.

The Government Pension Offset has a particularly devastating effect on female federal retirees who frequently are eligible for smaller federal pensions than their male counterparts. This stems from a number of reasons, including interruptions they may have had in their careers while raising their families or working at lower paid positions for the bulk of their federal careers.

A good example of the effects of the Government Pension Offset is the elderly widow who is eligible for a monthly pension of $600 based on her federal government service. Two-thirds of her pension, or $400 must be used to offset any Social Security spouse’s or widow’s benefit for which she is also eligible. Assuming she is eligible for a monthly spousal Social Security benefit of $500, the application of the Government Pension Offset results in her receiving only $100 in Social Security each month. The Government Pension Offset has effectively slashed this individual’s retirement income from $1100 monthly to only $700 each month.

More often that not, the Government Pension Offset disproportionately affects those who can least afford to forgo this retirement income. Had individuals such as the widow in the above example not dedicated their careers to public service, they would remain fully eligible to collect their spousal Social Security benefits. As you know, Mr. Chairman, the Government Pension Offset does not apply to individuals who collect private pension benefits and are also eligible for Social Security.

As of December 1999, according to the Social Security Administration, more than 300,000 former federal employees had their Social Security benefits reduced as a result of the Government Pension Offset. It is particularly troubling that 69% of these individuals were women and the average offset applied to their Social Security benefits was $391 each month. These numbers do not even account for those federal retirees who are eligible for Social Security but do not bother to apply because of the GPO.

These facts have again led to the introduction of bipartisan bills in this 108th Congress in both the House and Senate. Congressman William Jefferson (D-LA) has introduced H.R.887, legislation to impose the GPO only in situations when the combined federal pension and Social Security exceeds $2000 monthly. His legislation has already attracted 115 cosponsors. Senator Mikulski (D-MD) has introduced similar legislation in the Senate, S.363. Her bill, which already has 24 cosponsors, would only apply the GPO when the combined pension and Social Security income exceeds $1200 monthly.

However, the Government Pension Offset is not the only provision that penalizes individuals for spending their careers in public service. The Windfall Elimination Provision (WEP) unfairly reduces the retirement income of many federal retirees by reducing their own, earned Social Security benefit by as much as 50%. Under current law, an employee eligible for both Social Security and a pension from work not covered by Social Security (such as under the Civil Service Retirement System) finds that a lower benefit formula is applied when calculating the Social Security benefit to which he or she should be entitled.

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

The use of this lower formula – simply because the individual chose to spend his or her career in public service – has a devastating and unfair effect on the retirement plans of many federal employees. Federal employees who have 30 or more years of substantial Social Security covered employment are exempt from the WEP, however, it is a rare federal employee that can complete a public service career and also have 30 years of Social Security covered employment.

Because federal employees are also being financially devastated by the Windfall Elimination Provision, several important bills have been introduced to correct this situation. Congressman McKeon (R-CA) has introduced H.R.594 to repeal both the Government Pension Offset and the Windfall Elimination Provision. This bipartisan bill already has 183 cosponsors. In addition, Senator Feinstein (D-CA) has introduced S.349, legislation that would also repeal both the Government Pension Offset and the Windfall Elimination Provision. Her bill, which has also received strong bipartisan support, currently has 16 cosponsors.

Thank you again Chairman Shaw for scheduling this important hearing today. NTEU strongly supports legislation either reforming or repealing the Government Pension Offset and the Windfall Elimination Provision. On behalf of all of our members, I hope that you will act on the bills referred to your Subcommittee without delay.