Social Security and Windfall Elimination

[Chuckanut]

In my case I paid into SS and into my pension plan as a teacher at the same time. I paid SS taxes on every dollar I earned as a teacher for over 20 years. At times my pension contributions and SS tax took well over 10% of my gross salary. And, of course, I paid into SS on every dollar I earned in non teaching jobs before I was teaching. That is over 40 years of paying SS taxes.

The people who worked many years and did not pay into SS had the advantage of being able to keep and take home the money that most of would have to pay into SS.

The best way to fix this confusion, IMO, is to eliminate the exemption for SS participation. In 40 years the confusion will go away.

 

[Chuckanut]

f

I still think it's unfair, and maybe you will when you realize people who paid $0 into SS get quite a bit of SS money.

How is that for unfair, they didn't work and they get free SS money !

It's the rules (which I think in various situations are unfair), and the rule is spousal benefit.

IMO, the solution to that is not another unfair payment to people who earned money and did not pay SS taxes on their earnings. One solution is to cut off those spouses and dependent children who get SS payments on their deceased spouse's or a parent's SS account.But that is rather harsh and will throw a lot of people (mostly older women) into great financial pain. Do we really want to go there? I don't.
Note that the offset for spouses who worked but did not pay SS taxes is only $2 for every $3 earned. If the spouse worked and paid SS taxes the offset is dollar for dollar, $3 for $3.

From the article I mentioned above:
https://www.creators.com/read/your-social-security/05/22/explaining-wep-and-gpo

And the GPO law actually gives these public employees a bit of a break. Social Security retirement pensions offset spousal benefits dollar for dollar. But a non-Social Security retirement pension causes only a two-thirds offset. In other words, for each $3 you get in a teacher's or other non-covered pension, you lose only $2 from Social Security spousal benefits.

As I said, let's just do away with SS exemptions and let the confusion die off in a few more decades.

 

[Teacher Terry]

I split my career between a job paying into SS and a job not paying into it. I didn’t realize that Nevada didn’t pay in until I moved across the country and got my first paycheck. They never told me in the phone interview.

 

[TPC229]

Wep/gpo & ssa

In my case I paid into SS and into my pension plan as a teacher at the same time. I paid SS taxes on every dollar I earned as a teacher for over 20 years. At times my pension contributions and SS tax took well over 10% of my gross salary. And, of course, I paid into SS on every dollar I earned in non teaching jobs before I was teaching. That is over 40 years of paying SS taxes.

The people who worked many years and did not pay into SS had the advantage of being able to keep and take home the money that most of would have to pay into SS.

The best way to fix this confusion, IMO, is to eliminate the exemption for SS participation. In 40 years the confusion will go away.

I have mixed feelings on that because I strongly believe in the fundamentals of Capitalism. Not socialism. The SSA was created to force people into saving for retirement in a govt run retirement savings plan. This was established to prevent extreme poverty for future retiree’s. Many people, for different reasons, just wont save for their future need's. A problem that can be mitigated in our education system by giving the subject of Economics a higher priority than modern day irrelevant social issues. The most important thing I can do as a citizen is to embrace capitalism. Without it we would not have a middle class, and I chose not to live in a country like , Cuba, Russia, China, Venezuela, et al. The WEP/GPO provisions punish those people who choose to save for their retirement years, by saving in multiple programs (IRA, govt pensions, SSA, etc). If the govt forces me to pay into ssa, then the govt must pay me like anyone else the same amount, based upon my qualifications age, earnings contributions, and statutory provisions. We are only asking for fairness not punishment. Congress seemingly recognizes the unfairness of WEP/GPO, but that bill is part of a political process. It will pass if amendments are not added to it. We just need a straight up vote, or a federal lawsuit by a fair and impartial judge, to recognize the punitive aspects of these provisions. I hope I didn’t offend others, that is not my intent. Fairness and respect goes along way in life!

 

[Gumby]

.....
One could argue the unfairness or inequality of a childless couple having to pay significant taxes toward public education. The counter argument would be that those children are important to the future working force.

I agree, which is why I have never begrudged the property taxes that I pay to my town. But what I really, really dislike are parents who whine about the property taxes here. And I hear a lot of that.

In my town, currently, the average property tax bill is about $4500 per year. Of our taxes, about half goes to the school and half goes to the town (fire, police, public works, etc.). So the average household pays about $2250 to the town for schools every year. However, the school system spends close to $15,000 per year per pupil. So, if you had two kids go the schools from K-12, that would be 26 student years of school or $390,000 to educate your progeny. At $2250 per year, the part of your property taxes going to the schools, you would need to live in the town and pay taxes for 173 years to pay back the cost to educate your kids.

Meanwhile, I pay triple the average amount of taxes and have never used a single bit of the school resources. If I can make that contribution without pissing and moaning about it, you can make your much smaller contribution without constantly carping and threatening to leave when you retire.

 

[bada bing]

SS is unfair *by design*. It is redistributive, not proportional. A couple of ways that the redistribution is accomplished mathematically are the bend points and the spousal rules. Complaining that SS shorted you because of WEP and/or GPO is really just complaining that you are on the wrong side of the bend points and spousal rules when your pensioned employment is accounted for. I'm a single SS account. Your WEP'ed/GPO'ed SS is not shortchanged any worse than mine. I have a 35 year max'ed earning record as a single, which is the worst deal available from SS. So I hope those looking for legislative relief don't forget about those of us on the absolute far end. But guess what, if you managed to make SS fair (proportional), then either the system goes immediately, irretrievably broke or millions depending on current payouts would starve.

The best way to fix this confusion, IMO, is to eliminate the exemption for SS participation. In 40 years the confusion will go away.

A counter way to "fix" the inequity is to allow everyone to divert their FICA into a .GOV pension system. I would love to have my lifetime FICA contributed into any .GOV pension payout I've seen. I'm being a bit facetious since allowing long career people to opt out (the ones SS generally redistributes away from) would collapse the SS system. Exempt employees should appreciate the special deal they get by being allowed to not participate in SS. If you're going to work a minimum of 20 years (a usual vesting period for exempt pensions) then SS would almost certainly be a worse deal for you than your pension.

Exempt .GOV jobs are exempt because their pension plan is in lieu of SS. Most/all of the funding for such pensions is the money that otherwise would have been paid into SS. I have several family members on exempt pensions from a couple of states. Exempt pensions are quite a bit more lucrative than SS for the money contributed for the individual worker. One of the big reasons for this is because exempt pensions don't have nearly the redistribution in payouts. Exempt pensions are much more proportional to contributions. It is a curious argument from those with exempt pensions that they are presumably all for the more proportional payout from their pensions but they also want full access to the redistributive aspects of the SS system.

 

[Gumby]

It may have escaped your notice, but the general rule in working for the government is that you are going to make far less money than you would make working in the private sector. This is certainly true for professionals (maybe not so much for the clerks at the DMV). When I moved from private legal practice to public service, I took a 77% pay cut to do essentially the same thing I was already doing (duking it out in court with partners from big NYC and DC law firms), but with far less support staff. A pension that required me to pay 6% of my much reduced pay (and also contribute to social security) was scant compensation.

That said, no need to cry for me. I knew exactly what I was doing and I had already saved enough in my portfolio to be indifferent to the pay cut. But pretending that everything is sunshine and rainbows for government workers is just insulting.

 

[Buckeye]

Yes, I try to avoid contacting government organizations at all cost. However, like you I recently had an issue with Xfinity. I won't go into the detail, but I was stuck in an endless phone loop with no ability to speak to a real human. I think internet and cable providers are all about the same. Their customer service is atrocious.

If you use Twitter, you will be much less frustrated using direct messaging to @XfinitySupport. The reps who are responding to the DM's have been very competent and you usually get an initial response within 10-15 minutes of your post. I finally got my sister disengaged from Xfinity and over to Ziply (saving about $25 per month for the same speeds and no data cap) but I have been using direct messaging to communicate with them for at least the last 2+ years (negotiating the next years rate agreement). I also communicate with T-Mobile support this way.

 

[Teacher Terry]

I totally agree Gumpy!! I made much less money working in public service and had to contribute 14% to my pension. People don’t seem to understand that without pensions professionals wouldn’t work for the government.

 

[1242Vintage]

The pension (and retiree health care) is what kept me shackled to a government job, climbing the ladder and grinding away in public sector for nearly 40 years. I also contributed to social security.

Working in government was pretty much a “golden handcuff”.

 

[Fermion]

Would you say the stress level was more or less in the professional government job setting vs private sector? Not talking about working at the post office or DMV.

I know right now in the private sector it is decent in regards to job mobility and security, but it hasn't always been that way. Was there a feeling in the public sector that your job was pretty secure as long as you didn't commit a crime or gross negligence?

 

[1242Vintage]

Regarding the stress level ….

I retired at the highest levels of engineering management in government and the pressure was intense. Had to deliver on project commitments made by others within extremely tight timelines and budgets. Missing the target was usually very painful.

Many (most) of the upper level positions in the public sector are political appointments and have no civil service protections. Have seen a few of those appointees suffer career ending injuries.

Am now a very part-time consultant for an engineering company. So I see the private sector side too. They engage me when a project hits a financial snag and needs an influx of funds. I have a pretty good handle on the various state and federal funding cycles and can usually work up a competitive proposal. Pretty easy and highly compensated work.

 

[FIYes]

I worked in a nonSS job for my entire career, so I’m very familiar with WEP and GPO. For me personally, it is okay. I knew the rules and planned accordingly. I knew the rules early in my career so I had plenty of time to plan.

Naturally, I had colleagues and friends who are impacted WEP and GPO. I do think that WEP and GPO are more widely known than they were years ago. The people who I saw that were the most negatively impacted by WEP were the people whose careers were half and half, SS/nonSS. I believe Teacher Terry is an example of that.

Years ago I had a discussion with a colleague about GPO that ended up almost being an argument because she didn’t believe me. She was getting a divorce. Her attorney had advised her that because she had been married for over 10 years, she would get spousal social security benefits based on her ex husband’s record. I strongly advised her to look at the impact of GPO.

Yes, the pension did become a bit of a golden handcuff later in my career. I was approached a couple of times about jobs outside of the pension plan and quickly realized the additional money would not make up leaving before I could get my full pension. WEP made that impact even greater.

 

[GenXguy]

As somebody who has paid SS taxes on every penny I have ever earned, I would be very upset if people who paid very little into SS got the same benefit as me. After all they kept all the money that I had to pay into SS. Why in the world would they think they should get the same benefit as I do? That would be very unfair.

The solution, IMO, is to do away with the exemptions for paying into SS. They simply cause a lot of confusion. When everybody pays into SS on an equal basis, then everybody can be treated the same. You might read this article as the author explains it a lot better than I can.

https://www.creators.com/read/your-social-security/05/22/explaining-wep-and-gpo

Yes, that makes complete sense. And that should include getting rid of spousal benefits when both spouses are living.

 

[Chuckanut]

Naturally, I had colleagues and friends who are impacted WEP and GPO. I do think that WEP and GPO are more widely known than they were years ago. The people who I saw that were the most negatively impacted by WEP were the people whose careers were half and half, SS/nonSS. I believe Teacher Terry is an example of that.

For those currently working for institutions that are exempt from paying the SS tax, I would recommend that Congress require the employer to send a notice to every employee once a year saying something to the effect that

You and your employer are not paying into SS, and may find in later years your SS benefits and/or those of your survivors and dependents are not equal to those who are paying into SS. You may wish to save some of that money you don't have to pay into SS and invest it to replace your SS benefit.

I would put that same notice on the employee bulletin board. Perhaps include a some info on how many quarter one must work to quality for some of the reduced SS benefits.

 

[Teacher Terry]

Would you say the stress level was more or less in the professional government job setting vs private sector? Not talking about working at the post office or DMV.

I know right now in the private sector it is decent in regards to job mobility and security, but it hasn't always been that way. Was there a feeling in the public sector that your job was pretty secure as long as you didn't commit a crime or gross negligence?

Initially there was less stress with the government because working in private meant that I needed to see many clients so I would have a lot of billable hours for the company.

When I started with the state there were 3 of us testing and evaluating clients in Reno which was perfect. As people retired they weren’t replaced so eventually I was doing the work of 3 people. Then I went from a full time secretary to one for only 10 hours a week.

When I retired no one lasted for more than a year and eventually they gave up trying to fill the position. Now they just basically guess about a client’s capabilities and probably waste a bunch of money in the process by paying for training that was never going to be successful, etc. The pension kept me as well as health insurance until I qualified for Medicare. Plus I get $195/month towards my HC costs.

 

[Gumby]

There were actually three separate jobs I needed to do in private legal practice: 1) get the work; 2) do the work; and 3) get paid for the work. In public service, I had one guaranteed client and I didn't have market/schmooze to go find more. I also didn't have to go through the rigamarole about getting paid. To that extent, there was less stress. But the work itself was just as difficult and the stakes were just as high. And I did not have a team of associates and paralegals at my beck and call. So it was a mixed bag. But the one thing that made it worthwhile for me is that for those years I got to "wear the white hat" and work for the benefit of all the people, instead of spending my days making really rich people even richer without any redeeming societal benefit.

 

[Irishgirlyc58]

WEP isn't about people getting Social Security benefits in the years they didn't pay into the system. It's about money being subtracted from the SSA benefits for the years that they did earn and pay into the system.
As far as I know this (including GPO from what I understand) is the only instance that your legitimate SSA earnings and subsequent benefits are reduced. At an arbitrary amount-based on the year of your birth. I'm sure that there is some calculation for the amount but let's face it, it's arbitrary!

For those saying that people shouldn't be compensated for years that they didn't contribute to SSA.

 

[Fermion]

WEP isn't about people getting Social Security benefits in the years they didn't pay into the system. It's about money being subtracted from the SSA benefits for the years that they did earn and pay into the system.
As far as I know this (including GPO from what I understand) is the only instance that your legitimate SSA earnings and subsequent benefits are reduced. At an arbitrary amount-based on the year of your birth. I'm sure that there is some calculation for the amount but let's face it, it's arbitrary!

For those saying that people shouldn't be compensated for years that they didn't contribute to SSA.

I think what they are saying is people who worked and didn't pay into social security but then worked and DID pay in have a lower amount of earnings that have been subject to the social security tax compared to their working career. This puts them at an advantage in the bend points.

An extreme example would be, say you worked for 10 years for some entity that didn't pay into social security, so you got 14% more money than everyone else, then you worked for 35 years for another entity that DID pay into social security. So you worked 45 years, paid 35 years into social security, and get $X from social security in retirement. Compare this with some other person who just worked 45 years, paying into social security the whole time. They also get $X, which might be the exact same as yours if both of you had 35 years of similar pay. But they have paid 10 more years into social security than you have. You are getting a windfall.

The bend points make the above more drastic, as 20 years can reap you a majority of the max social security payment.

 

[Sunset]

WEP is like paying for a hamburger at McD's like the person before you and they serve you only 3/4 of it.
If you paid into it, you should get the full amount for the years you paid into it.

Example:
Joe and I work at a job for 20 year paying into SS , both at the same wage.
Joe goes to prison for 20 more years and doesn't pay into SS while in prison.
I travel to China and take an Job teaching English and don't pay into SS, but earn a pension of $600 in the 20 years I work there.
Joe and I both retire and collect SS
Joe gets his full 20 years of SS that he paid into.
I get my SS Wep'd and they take away $300 of SS.

I paid the same to SS as Joe, and just because I got some other Pension the Dear SS decides to cut my SS.

It simply is wrong as I paid into SS the same as Joe.

This affects me vs Joe even if we both worked and paid into SS while earning $15 per hour. Yes they will WEP a person's SS even if it's a meager amount.

 

[Sunset]

WEP isn't about people getting Social Security benefits in the years they didn't pay into the system. It's about money being subtracted from the SSA benefits for the years that they did earn and pay into the system.
As far as I know this (including GPO from what I understand) is the only instance that your legitimate SSA earnings and subsequent benefits are reduced. At an arbitrary amount-based on the year of your birth. I'm sure that there is some calculation for the amount but let's face it, it's arbitrary!

...

+1

Really arbitrary as WEP doesn't apply if your other pension is from railroad employment.
But applies for all other employment pensions, world wide.
Why are they so special ? What about other employment like truck driving ?

Disabled before 1985 - you get your full SS.
You became disabled after 1985 You get WEP'd

 

[Fermion]

I guess the thinking is that the pension you are getting is the result of the entity you work for not having to pay into the social security system. They have those extra funds available and can offer you the pension, thus it is deducted from your social security payment.

Example. Say Microsoft didn't have to pay the 6.2% part of social security on a employee earning $168,600 a year (or more). That is $10,453 a year that Microsoft could put in a pension fund for the employee (in addition, the employee would not have to pay another $10,453 a year in their own social security tax).

What if Google had to pay the social security tax but Microsoft didn't. Microsoft provided the pension, Google didn't. Without WEP, a person working 30 years for Google and 10 years for Microsoft would get essentially the exact same social security payment as a person working for Google for 40 years. The Microsoft person would also get a pension. That doesn't seem very fair.

 

[Sunset]

I guess the thinking is that the pension you are getting is the result of the entity you work for not having to pay into the social security system. They have those extra funds available and can offer you the pension, thus it is deducted from your social security payment.

Example. Say Microsoft didn't have to pay the 6.2% part of social security on a employee earning $168,600 a year (or more). That is $10,453 a year that Microsoft could put in a pension fund for the employee (in addition, the employee would not have to pay another $10,453 a year in their own social security tax).

What if Google had to pay the social security tax but Microsoft didn't. Microsoft provided the pension, Google didn't. Without WEP, a person working 30 years for Google and 10 years for Microsoft would get essentially the exact same social security payment as a person working for Google for 40 years. The Microsoft person would also get a pension. That doesn't seem very fair.

WEP does not apply as they both worked 30 years in an SS type job.
The 40 year Google employee would get more SS as it's best 35 years , and the Microsoft person would get the lower 30 years of SS plus their 10 year pension from Microsoft.


I paid into SS and should not have some taken away.

SS only takes away if you get a Pension, if you worked some job that didn't pay into SS for 10 years, then worked in a SS type job for 20 years. You would get full 20 years of SS.
But work in a job that had a pension for 10 years then worked in a SS type job for 20 years. Your SS is cut because it is WEP'd.

 

[Fermion]

Are there any jobs which didn't pay into social security AND didn't have a pension though?

The pension is part of the social security, I think is the reasoning. This logic does fail somewhat if there are/were indeed jobs out there where you worked and didn't pay social security and were not offered a pension.

 

[RetiredHappy]

While SS is a form of retirement payment, it also acts as an income redistribution function, favoring those who made and contributed less. Hence, the bend points, which then also apply to WEP and GPO.

The exception to that is spousal benefits. There are those who made about $40K for 35 years and they get less SS than a spouse who never worked but married to a high income earner.