Social Security Fairness Act of 2009 H.R. 235

[Zoocat]

Please consider writing to your congressman/woman to support this bill which would repeal the Windfall Elimination Provision. This WEP says that if you earned a government pension then you are not allowed to draw your entire SS entitlement. Instead, the SS entitlement is offset in part or in total by the amount of your government pension. It doesn't matter if you worked for 20 years in the private sector and then 20 years in the government. Under the WEP those 20 years of paying into SS are null and void.

Please learn about H.R. 235 and if you support it write to your congressperson. Thanks very much.
OpenCongress - Text of H.R.235 as Introduced in House Social Security Fairness Act of 2009

 

[MasterBlaster]

As I see it the whole SS system is set up to be quite a bit less than fair. Think about it more like welfare for old people rather than as an annuity that you pay into.

And yet you expect fairness from SS and from the government. Good luck with that - and let us know how it turns out.

 

[Peter]

Oldbabe, I don't think the WEP is quite as bad as you're making out. Have you looked that this chart:

Retirement Planner: How the Windfall Elimination Provision can affect your Social Security benefit

Taking your example of 20 years in government, plus 20 years in the private sector, this chart seems to say that the maximum reduction would be $372 per month, for someone reaching retirement age in 2009. And it could be less than that, depending on your private sector average income over the 20 years.

I hope I have this right, because I'm eligible for a small pension from my years working in the UK.

Peter

 

[ziggy29]

Wasn't this intended to snare people who didn't have to pay SS for some of their working years, before government employees had to start paying SS in the 1980s? I know if you've paid SS for 30 years, it doesn't apply.

 

[samclem]

This Congressional Research Service document has a brief and evenhanded discussion of the issue: How WEP came about and the pros/cons.

It seems like there should be a way for the public sector employees who were not covered by SS to "buy-in" to full SS coverage, if they choose to, to make up for that lost time.

 

[Zoocat]

I think the "fairness" issue comes into play in this way: a person who paid into SS for ten years then was a teacher, for ex., for 20 years and has a state pension should be able to also collect the same SS payment as anyone else who paid into the system for 10 years.

That's the argument I read anyway. I really don't know the whole background of WEP. Thanks for the link, SamClem.

 

[NW-Bound]

I think the "fairness" issue comes into play in this way: a person who paid into SS for ten years then was a teacher, for ex., for 20 years and has a state pension should be able to also collect the same SS payment as anyone else who paid into the system for 10 years.

Oldbabe, your argument is a reasonable one. However, SS benefits do not increase proportionally to the years of service. A person who paid 30 yrs into the system does not get 3 times the benefits of someone who paid into the system for 10 yrs.

In this case, the person in your example, when her 20-yr teacher pension is added to the 10-yr benefits of SS, is getting paid more than someone who was with SS for straight 30 yrs.

In a way, SS is a form of welfare. The payout was never intended to be proportional to what one paid in. Again a person who paid in for 30 yrs does not get out 3X the amount of a person who worked for 10 yrs. So, if you paid into SS for 10 yrs, then paid 20 yrs into something else, you may end up ahead of someone who paid 30 yrs of SS.

Compared to someone who paid 30 yrs of SS, you are getting a "windfall". Compared to someone who paid only 10 yrs of SS, you would think fairness is when you get the same she does.

See how complicated things become when wealth gets redistributed?

That's my understanding, and Samclem or Masterblaster will correct me if I am wrong.


PS. Whether this form of welfare is beneficial to society or not is not being debated here. I am only trying to explain what it is.

 

[ronin]

I paid in to SS for 10 yrs yet my benefit is reduced by nearly 60% because I worked somewhere else and contributed to a different system. Patently unfair from my perspective. I've written numerous letters over the years. Not likely anything will change as increasing my cohorts' benefits will make SS worse off financially. It is not a life changing amount to me, so it's pretty much an "oh well" moment.

 

[ziggy29]

I suspect a lot of people relying on a 401K-based retirement would love to have a pension and these reduced SS problems.

Maybe we're each seeing greener grass on the other side, I don't know.

 

[target2019]

Wasn't this intended to snare people who didn't have to pay SS for some of their working years, before government employees had to start paying SS in the 1980s? I know if you've paid SS for 30 years, it doesn't apply.

It seems so to me.

"If you work for an employer who does not withhold Social Security taxes from your salary, such as a government agency or an employer in another country, the *pension you get based on that work may reduce your Social Security benefits."

My brief look at the SSA pages tells me it is implemented to reduce the benefit to those who paid into a pension plan, and did not pay SS taxes.

 

[ronin]

The thing is, if you worked 10 yrs then stopped completely until FRA, you'd get your full benefit, but if you continue working elsewhere you don't. And my pension is not a windfall. I contribute 8%, which is more than the SS employee contribution.

 

[Westernskies]

I suspect a lot of people relying on a 401K-based retirement would love to have a pension and these reduced SS problems.

Amen.

 

[samclem]

NW-Bound's post is spot on.

I can see this thread is going to heat up fast.

As previously stated, SS is partially a welfare system designed to transfer wealth two ways: from young to old and from wealthy to less wealthy.

It does seem unfair that a worker pay SS for ten years, but has the SS benefits >>reduced<< merely because he worked for another employer who didn't deduct SS.

OTOH, SS is now a "universal" system. It only works (to the degree it does) because individuals/employers cannot opt out of it. SS is a terrible "investment" for wealthy and even middle-class individuals, they'd be far better off if they could put their SS contributions into individual accounts even at fairly low interest rates. But, we aren't allowed to do that--everyone has to pay so that money can be shunted to the old and the poor.
Because of the way laws were written, certain employers were allowed to elect not to participate in SS. Their workers didn't pay SS taxes and the employers didn't pay SS taxes for many years. Instead, they got to contribute to another pension plan (an option most people would have preferred to participating in SS).

There are a couple of "fair" ways to address this (from my perspective).
1) Allow the workers who did not participate in SS to "buy in" by paying all the SS taxes (theirs and the "employer's half," just as I have to do as a self-employed person) they skipped during their years with the non-participating employer. For this payment, they'll get the full amount of the SS check they would have been entitled to if they'd been paying into SS the entire time. That's precisely the deal everyone else got. Trust me--anyone who does the math will quickly reject this option.
2) Allow everyone else to retrospectively "opt out" at whatever level of years of SS participation they choose, and reclaim what they paid in beyond that level. I'd love to have the option to retrospectively decide that I would like my SS work record to show only 10 years of SS payments (thus qualifying as a low-paid worker and assuring I will receive far more in SS benefits than I paid in) and receive a huge refund of all the SS taxes I paid after that 10 year point. I wouldn't even ask for interest on the money the government had used, nor would I quibble about/demand payment of the "employer's half" of the payments that were made. Of course, giving people this option would destroy the Social Security system.

 

[ronin]

I'd happily opt out as well. And anyone that wants to opt for the pension can have my job... it'll be available July 1, 2010! Have at it.

 

[Zoocat]

Reading all these explanations makes the whole thing so much more complicated. I thought I had done my research and figured out what I think. But now I don't know.

It does seem "unfair" to pay into the SS system and never receive any benefit just because you switched jobs and began paying into another retirement system. But, as I said, now it seems much more complicated.
I'm going to give up thinking about policy issues. Better things to do in life, what I have left of it.

 

[NW-Bound]

Oldbabe, you sound pretty discouraged about this whole thing. However we are all faced with this social issue, and there may not be much we can do about it.

Here's another example, but this time it involves only one person: myself. As reported some time ago on another thread, same as everybody else, I got a statement from SS Administration showing how much I would get at 62 if I quit working. Out of curiosity, I downloaded an SS benefit calculator, and tried to project what I would get if I worked another 10 years (I am 52 now). To my surprise, the benefits would increase very little. In other words, my last 10 years of work would not get me much. Compare that to the private 401k, where my contributions would keep adding up as long as I worked.

Progressive taxes and regressive benefits are really the same thing!

Progressive taxes cause obvious pain to the payers, therefore the high tax rates are set at the $200K+ per year level so that the majority of the people would not know it, except for the upper middle class and above. Some even say to soak it to the rich.

The regressive benefits are set to cut in at lower levels which affect even the middle class where most of our forum members belong. The formulas are just not obvious for us to see. That is until someone like you brought it up.

So, that is the price for our social policies. I just wish it were made more obvious so that everybody knew what it cost us. The cost may be worth it, but that's another debate.

 

[youbet]

The thing is, if you worked 10 yrs then stopped completely until FRA, you'd get your full benefit, but if you continue working elsewhere you don't. And my pension is not a windfall. I contribute 8%, which is more than the SS employee contribution.

The "windfall" SS is refering to is not your public pension. It's the fact that you would appear to be a low wage worker to SS and receive the favorable calculation of SS benefit that low income folks receive. The WEP simply provides an alternate formula for calculating benefits for folks who contributed little to SS but were not low wage earners. They were folks contributing to a public pension system instead.

 

[youbet]

Please consider writing to your congressman/woman to support this bill which would repeal the Windfall Elimination Provision. This WEP says that if you earned a government pension then you are not allowed to draw your entire SS entitlement. Instead, the SS entitlement is offset in part or in total by the amount of your government pension. It doesn't matter if you worked for 20 years in the private sector and then 20 years in the government. Under the WEP those 20 years of paying into SS are null and void.

Please learn about H.R. 235 and if you support it write to your congressperson. Thanks very much.
OpenCongress - Text of H.R.235 as Introduced in House Social Security Fairness Act of 2009

Oldbabe,

You're mingling parts of WEP with parts of GPO. I can forward you a well done Power Point presentation which explains each if you'd like. Or, the document SamClem referenced above does a good job too.

It doesn't matter if you worked for 20 years in the private sector and then 20 years in the government. Under the WEP those 20 years of paying into SS are null and void.

That's definitely not true for either the WEP or the GPO.


The real way to fix this problem going forward is to mandate that EVERYONE participate in SS for all earned income. Then there will be no need for WEP or GPO.

 

[Texas Proud]

I don't know the law well and don't want to... but I disagree with NWBound..

If you pay into a teacher retirement system for 20 years (or any of the government systems I have seen here in Texas) you will get a LOT more than I would paying into the SS system for 30 years... it is just a lot better system...

HOWEVER... I think it was designed for a small loophole that existed when a someone retired and did not pay into the SS system... as an example... if you were a long time teacher in Texas you did not pay SS... but when it came time to retire you qualified to receive the 1/2 of your spouse's SS (I think this was a long time ago)... so it was changed to say that you had to be paying into the SS system when you retired (IIRC).... SO, some smart teachers decided that they could be a janitor for a day... which was a job that paid SS... and qualify for full SS... since they had not paid but one day into the system, they again were paid out based on their husbands payments... this was a big racket in Texas for a number of years..

I am surprised that they reduce your payment based on YOUR OWN payments into SS system...

 

[ronin]

Anyone with a 401k that has an employer match could easily be identified as a "windfall" recipient next relative to another without access to the same. Would that be unfair?

 

[Bestwifeever]

Anyone with a 401k that has an employer match could easily be identified as a "windfall" recipient next relative to another without access to the same. Would that be unfair?

I believe almost all people who have a 401K with an employer match also pay 6.5% of their income into SS--we did. So that is entirely different imho.

 

[ronin]

I agree totally with you, but my point is Congress could easily decide that it isn't entirely different and fairness will have nothing to do with it.

 

[Sue J]

Oldbabe,

You're mingling parts of WEP with parts of GPO. I can forward you a well done Power Point presentation which explains each if you'd like. Or, the document SamClem referenced above does a good job too.

I'm interested in the Powerpoint, please.

My husband has 25 years service in the state's public employee pension system and 37 credits out of the needed 40 for SS. If he finishes his remaining credits we're hoping he'll get something from SS but I understand it will be reduced by WEP.

GPO is what would reduce what he would get as a spouse if he collected from my SS benefit. His spousal or widower benefit based on my record would be reduced by 2/3 of his pension.

Nevermind about the PowerPoint, samclems linked document explains it all.

 

[youbet]

I'm interested in the Powerpoint, please.

My husband has 25 years service in the state's public employee pension system and 37 credits out of the needed 40 for SS. If he finishes his remaining credits we're hoping he'll get something from SS but I understand it will be reduced by WEP.

GPO is what would reduce what he would get as a spouse if he collected from my SS benefit. His spousal or widower benefit based on my record would be reduced by 2/3 of his pension.

Nevermind about the PowerPoint, samclems linked document explains it all.

We have a similar situation here. DW is a retired teacher. She did get her 40 qtrs under SS in due to part time jobs years ago as a high school and college student and teaching part time at a local college for a few years.

The small amount of SS she will receive is calculated using the WEP formula. She will not qualify for a spousal benefit because of GPO. Nevertheless, it really does not seem unfair. She only contributed to SS briefly and in small amounts and will receive a tiny SS pension based on that (actually still a pretty good ROI considering how little she put in). And it's hard to justify her receiving 50% of my SS when she has her own public pension, a pension I would have gladly opted out of SS to get!

If you look at your husband's situation objectively and quantitatively, you'll see he's better off, even with WEP and GPO, than if he had contributed to SS all his career. If you doubt this, ask him and yourself if you would do it differently with him belonging to SS instead of his public pension system.

I do readily admit that if the SS rules are changed and DW could collect 50% of my benefit, we'd gladly take it! Just a nice bonus gift of about $10k/yr we haven't planned on. That would buy a couple of cruises a year, no?

 

[youbet]

I agree totally with you, but my point is Congress could easily decide that it isn't entirely different and fairness will have nothing to do with it.

Actually the "fairness" part is whether folks whose primary public pension is from non-SS covered work get to collect SS (based on working part time or for a short time in a SS covered job) at rates intended for the low income folks........ even though they are not low income.

I guess we'd all like to dine at the trough intended for the unfortunate low income earners even though we're not. Receiving those lucrative high returns for very modest contributions looks pretty darn good. But is it fair? Should public pension folks who contributed to SS briefly or at low levels or both be treated the same as folks who worked their whole life at low wages under SS?