HR 711 and WEP/GPO. Who gets screwed?

screwed

-By Andrew Szakmary, a professor of finance at the University of Richmond.

Truth be told, I am a bit like Oskar Schindler in “Schindler’s List” when it comes to HR 711 dealing with Social Security and the WEP/GPO. At first, motivated mostly by self-interest, it was all about what this bill does to me. Then, as I thoroughly digested the testimony of Stephen Goss, who is the Chief Actuary of the Social Security Administration (SSA), I realized that there are much, much larger issues involved.

The main public policy problem with the bill is not what it does to a relative handful of people like me who will have 30 years of substantial covered SS earnings but also a good many years of non-covered employment on which I am drawing a pension. In light of the ISC ruling yesterday with respect to Chicago Pensions, which is hugely significant because for the first time the court explicitly said that if the pension funds run out then the pensions must still be paid from current revenues, I am more confident that my SURS pension is reasonably secure. If my monthly SS benefit is reduced by $300 I will be unhappy, but I will survive.

 The primary problem with the bill is the 14 million people (according to Goss’ testimony, pp.3-4) who are not currently subject to the WEP but will become impacted due to the formula change in HR 711. Most of these folks will almost certainly be people who did short 1-5 year stints as teachers, firemen, policemen, political appointees, nonprofit workers (many of whom were not covered under SS until 1984), etc. and are not collecting a pension related to this employment. Under current law, they are protected from WEP because the WEP can only impact those who are eligible to draw a pension from non-covered employment. But under the formula change and procedures in HR 711, this protection is removed and they will become impacted. As the Goss testimony makes clear, the degree to which these folks will get hit will be highly variable, but on average it will be a benefit reduction of $27 per month.

 But this is not the worst part of the bill. Upon first glance it appears that benefit reductions will only apply to those who are currently 61 and under and had some non-covered employment. A closer reading of Goss’ testimony (p.4), however, indicates that this is NOT the case. Every current SS beneficiary (yes, even 90-year-olds) who since 1977 has any recorded non-covered earnings (even if only 1 year) and has less than 30 years of substantial covered earnings under SS will be subjected to a WEP audit. They will have to obtain a certification letter from any non-covered employer they ever had since 1977 that states that they are not eligible for a pension based on that employment, by the end of 2016. If they are unwilling or unable to obtain this certification letter in the required window, then the WEP will be retroactively applied to them back to the month they first collected a SS benefit. The cumulative “overpayments” they received will then be recovered from their future benefit checks, and in addition, their benefits going forward will be reduced as the WEP reduction is applied. Allow me to sketch out a typical scenario below:

 A 90-year-old receives the WEP audit letter. She is confused/unwilling/unable to obtain certification that she is ineligible for a pension based on what the SSA determines was non-covered employment from 1978-1980. The SSA then determines that she is guilty of concealing a non-covered pension (because she has failed to prove her innocence) and that she should therefore retroactively be assessed a $27 per month WEP penalty. Since she began receiving benefits at age 62, which was 336 months ago, SSA thus determines that she has received a cumulative overpayment of $27 x 336 = $9,072. This overpayment will then be recovered from her future benefit payments, and in addition, her benefit going forward will be reduced by $27 per month from what she was previously receiving.

 Can you imagine the confusion and administrative nightmare this will cause for millions of current beneficiaries, their former non-covered employers, and the poor SSA employees in field offices who will be besieged by current beneficiaries, demanding an explanation for why their benefits were suddenly and unexpectedly cut?

 Even with a modicum of thought one would realize that this bill is discriminatory against women, as females are likely to have lower incomes (thus making it less likely they will have “substantial earnings” in any given year), and tend to leave paid employment for several years to raise children (making it less likely that they will have 30-35 years of covered SS employment and be exempt from WEP). I would not be surprised to learn that two-thirds, or even three-fourths, of the individuals negatively affected by this bill will be female, but admittedly that is conjecture on my part.

 Only people in Congress would have the chutzpah to entitle this bill “The Equal Treatment of Public Servants Act of 2015.” A more accurate title would be “The Retroactive Social Security Benefit Reduction Act of 2015.” I must admit that there is a small, devilish part of me that actually hopes this bill is enacted: the outrage will be so palpable, and so widespread, that the Washington politicians that passed it will be tarred and feathered and run out of town. However, I also fear this would pave the way for demagogues like Trump, so in the end my angelic side must prevail and I must exercise my civic duty to do what I can to either prevent this bill from passing, or at least to correct its most obvious flaws.

9 thoughts on “HR 711 and WEP/GPO. Who gets screwed?

  1. Retroactive theft of social security benefits! This is even worse then I thought. What about already deceased public retirees who also collected some social security? Next they will be tracking down their descendants and demanding payment!

  2. Omg. Again with the doublespeak…pension holiday…..windfall. …..equal treatment…….this deceptive labeling should be outlawed!

  3. Fred, I hope you send this article and the previous one on the same subject to IRTA. I personally would not be affected by the new provisions, but I know many people who would be.

  4. People are buying into this (possible) legislation because it is being hailed as “a repeal of the WEP.” However, while the WEP will disappear, a different formula will take its place, and for many people, their social security benefits could be reduced even more under this new formula. Personally, I liked the idea of a “cap” on the amount that could be taken from your monthly benefits because that could be easily calculated. With this new formula, it is very difficult to figure out exactly WHAT your benefits might be. It almost looks like a money grab from one segment of the public pension group so that slightly more benefits can be paid to another segment. In addition, it looks like it may actually generate a little more money for SS–as described in Stephen Goss’ testimony before the House Ways and Means Committee. It also looks like they are counting on generating new money by “catching” those people who are receivng a pension–one that the government did not know about. I haven’t pored over his testimony, but there are enough red flags in there to warrant a closer look by the teacher retiree groups–and not this wholesale “Rah! Rah!” going on. If some people are going to lose MORE SS benefits under this plan, at least that needs to be spelled out. Maybe it is a fairer ratio, but that needs to be made clear so it can be debated

    I think my husband and I may be in the group that will be less well-off. My husband worked 14 years in social security covered employment–making a small salary, never more than $33,000 a year. Then he worked in the school system for 20 years, ending with a salary of about $52,000. He is 63 and will not take social security for another 3 years. We figured that his $900 SS benefit would be reduced by about $400, so he would make about $500 a month. With this new formula, I think his SS benefit could be reduced even more. Neither his SS benefit nor his teacher pension are very large and living costs continue to rise. I also worked in teaching and in the private sector, so the WEP and the GPO hit me as well.

    Why are some of these questions not being raised by the teacher groups? Am I simply misreading this bill?
    It would be really, really useful to create some real-world type salary scenarios and see how people would fare under the new system. I think there will be a lot more “losers” than people realize.

    CJW

  5. Where’s HRC on this? Now is the time politicians will listen. Time to get their commitment to REPEAL the WEP/GPO completely. No “replacing”, and no rolling state and local employees pensions into social security. After the election, they won’t be interested in listening until right before the next election.

  6. Why make it retroactive? Leave prior years alone. Just give people what they worked for like the original rules were starting now.
    I am an old woman. I get a small government check, and was told I could not draw on my husband, when I applied so I had to draw on my own SS worktime. I was fully vested, but since I got the civil service check, they cut me way back to $117 of which I get a check for $30 from SS, the rest taken out for A and B. My husband died in May. His insurance had decreased to not much above funeral costs because he was 81 years old. I was expecting survivor benefits from his work experience. Although his income is all gone, I cannot get survivor benefits because of getting this small government check. Hey, wake up! Bills don’t go away. I need electricity, food, medicine. What do I do? Go on welfare? Not gonna happen. Make $2 too much for it. I have had to sell almost everything to get by since then. What do I do when everything I have to sell in my house runs out? Sleep in the street? Now I know how the government creates homeless people.
    WEP is not fair. My husband and I both worked long enough under SS to get our full benefits even if we had not had any time under civil service. I only want what is coming to me so I can exist until I die. I don’t want BACK PAY. I am not greedy. Just give me my due starting NOW so I can get by. Why does everything have to be retroactive? Most of us at this age just want to be able to live quietly and buy food, medicine and necessities. We are not greedy. We just don’t want to be given a kick, thrown in the ditch and told “Tough” and that is exactly what I feel has happened to me.

    • What is happening to you is nothing short of financial rape, and is typical of many victims of this WEP/GPO. They need to repeal it completely, and do it NOW!

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