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WEP and GPO: To Repeal or Not?

Posted on Friday, February 9, 2024
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by AMAC, Gerry Hafer
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23 Comments
Cost-of-living adjustment for social security cards

Just before last Christmas, Martin O’Malley was sworn in as Commissioner of Social Security. His term will run through January 19, 2025, giving him two full years to wrestle with a lineup of troublesome matters facing this venerable program.  

First, there’s the overarching and well known issue of Social Security’s steadily evaporating trust fund reserves and the rapidly approaching point of insolvency, now less than a decade away. More recently there’s the public outcry over the Agency’s aggressive demands for repayment of benefits mistakenly paid out to millions of seniors. Customer service issues have also plagued Social Security for several years, some aggravated by the extended pandemic-induced field office closings. 

Getting Congressional Attention 

And if that’s not enough, the nagging movement to repeal two of the most unpopular parts of the Social Security rulebook—the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO) —is again drawing attention in Congress. These two provisions—sometimes referred to as Social Security’s “evil twins”—have been the subject of repeated Congressional Bills calling for their abolishment.  

More than a dozen related proposals have been introduced in the last three Congressional sessions, none resulting in legislative change. Now, in the current Congressional session, H.R. 82—the Social Security Fairness Act of 2023—is gaining momentum as the latest incarnation of the campaign to eliminate WEP and GPO.  

Despite having over 300 co-sponsors, H.R. 82 has made no progress in Congress since its   introduction and referral to the House Ways and Means Committee last year. As a result, supporting organizations have mounted aggressive campaigns to enlist backing from sympathizers to help push for a floor vote on the Bill.  

The National Active and Retired Federal Employees Association (NARFE), the National Education Association (NEA), and the American Federation of Teachers (AFT) are examples of substantial organizations putting their weight behind the push to repeal WEP and GPO. Fueling their opposition is the belief that retiree benefits are unfairly reduced via the way these provisions calculate benefits at retirement. 

Fair or Unfair—You Decide  

In the overall picture, the number of workers impacted by WEP and GPO is relatively small. Slightly over 2 million current Social Security beneficiaries are affected by WEP, while GPO affects roughly 735,000. With 67 million beneficiaries receiving Social Security benefits, one can quickly dismiss the issue as being insignificant—statistically, anyway. Rest assured, though, that the emotional impact is anything but insignificant to those affected. 

Our AMAC Foundation Social Security Advisory Service is regularly contacted by new retirees shocked by the reduction in their anticipated monthly retirement benefit. Last year, our Advisory Service handled hundreds of calls from retirees outraged by what they see as an “unfair,” “unwarranted,” and “unjustified” penalty imposed on them.  

We approach each of these situations with care, recognizing that the caller is most often angered by the unexpected impact on the retirement income they assumed in their financial plans. This is understandable. One of the first steps we take in response is to explain the reason why these provisions were enacted decades ago, followed by a recap of how they work.  

At the conclusion of our discussions with callers, we often sense that understanding the “why” and “how” satisfies their curiosity, but not their anger. From our discussions, it seems that many were never told they would be affected, may not have understood the implications of the provisions, or may have forgotten something they were told about years ago. In any case, their arrival at the retirement gate presents a setback in their financial planning.  

So, anger and disappointment aside, we offer here a summary–but heavily researched–analysis of WEP and GPO to help frame discussion on this volatile subject. The next few sections of this article will explore why these provisions emerged more than four decades ago and provide condensed analyses of the math that leads to the reduced benefits seen by those affected.  

Why Was WEP Enacted? 

To understand the reasoning behind these two provisions, it is first necessary to understand how benefits are calculated. 

The Standard Formula for Calculating Benefits 

Each year after a worker’s federal income tax return is filed, the IRS forwards earnings records to the Social Security Administration (SSA), where the information is stored in individual work records. Only the earnings on which payroll tax was assessed are recorded by SSA. If the worker had no such earnings, zeros would be entered for that year.  

Social Security’s standard formula for computing benefits breaks the beneficiary’s average indexed monthly earnings into three portions called “bend points,” multiplying each portion by a unique percentage and totaling them to arrive at the recipient’s Primary Insurance Amount (PIA).  Most of the PIA comes from the first bend point, which is normally 90% of the first $1,174 of average monthly earnings for someone applying in 2024. 

In Social Security terminology, the PIA reflects the worker’s income replacement rate, or the amount of pre-retirement earnings replaced by Social Security. It’s a progressive formula designed to produce a higher replacement rate for workers with lower career-average earnings. The worker with the lower earnings history—the lower AIME—ends up with a higher income replacement rate than the worker with a higher AIME.  

How WEP Changes the Formula 

The WEP formula adjusts the percentage used in that first “bend point” to something less than 90%, depending on the number of years of Social Security covered employment. If a recipient has 20 or fewer years of substantial Social Security earnings, the percentage used in the first bend point will be 40%, rather than 90%.   

If the recipient has more than 20 years of Social Security covered earnings, the first bend point percentage increases by 5% for each year over 20. Since 90% is the normal first bend point computation, if the recipient has 30 or more years of substantial Social Security earnings, WEP doesn’t apply. As somewhat of a “cushioning” effect, the WEP formula ensures that the reduction cannot exceed half of the pension earned through non-covered employment. 

Why Adjust the Formula?  

As the Congressional Research Service notes in their analysis of WEP,  the formula used to calculate PIA, and therefore the income replacement rate, “cannot distinguish between workers who have low career-average earnings because they worked for many years at low earnings in Social Security-covered employment and workers who appear to have low career-average earnings because they worked for many years in jobs not covered by Social Security.”  

Consequently, the benefit calculation prior to WEP provided an unintended replacement rate advantage for workers with less than full careers in employment covered by Social Security, while simultaneously their non-covered employment provided a benefit designed to replace Social Security. In effect, without the WEP adjustment, the income replacement rate attributable to non-covered employment would be higher than the replacement rate earned by a worker paying into Social Security during their entire employment.  

What About GPO? 

The Government Pension Offset provision does not affect worker retirement benefits; rather, it is focused on spousal and survivor benefits and, specifically, on the benefits available to individuals receiving their own Social Security benefits or retirement benefits earned via non-covered employment. The GPO stipulates that anyone who becomes entitled to Social Security spousal or survivor benefits and who also receives a pension earned without contributing to Social Security will have their Social Security benefit offset by their non-covered pension. 

GPO was enacted as a refinement to Social Security’s dual entitlement rule. Under dual entitlement, a dependent spouse would be eligible, at FRA, for 50 percent of the higher-earning spouse’s FRA benefit while both partners are living and 100 percent of the higher earning spouse’s benefit as a widow(er).  

GPO results in two-thirds of any non-covered retirement benefit being excluded from the Social Security benefit available to the spouse, in effect limiting the benefit paid to a spouse also qualified for benefits from non-covered employment. Without the GPO refinement, the spousal benefit would not consider the simple fact that the spouse’s benefit is higher because of earnings from non-covered employment.  

It is interesting to note that the spouse’s or survivor’s GPO benefit reduction is less than the reduction imposed by the standard dual entitlement rule affecting all other recipients. Making spousal and survivor benefits more reflective of the way they’ve been earned (covered employment vs. non-covered employment) is the key point in the GPO’s design. 

Arguing the Pros and Cons 

The WEP Argument 

Since it was enacted decades ago, many have argued the WEP’s design premise of adjusting benefits to level the playing field between workers with noncovered earnings and those with full working careers in covered employment. Provision supporters maintain that WEP removes the unintended advantage of a higher first bend point in the benefit calculation and recognizes that those affected by the provision enjoy a pension earned through non-covered employment. ` 

Philosophically, WEP ensures that Social Security’s primary purpose – to reduce poverty risk for aging Americans—remains intact by helping keeping benefits better aligned with contributions to the program. Also, for those in career non-covered employment, WEP includes a method of systematically mitigating the benefit reduction.  

The counter position on WEP, and the one that we hear most frequently at the AMAC Foundation Advisory Service, is that it results in a substantial—and unexpected—loss of income included in retirement plans. Further, opponents argue that the 40 percent starting point for the reduction is subjective and considered somewhat imprecise in measuring the actual “windfall.” 

The GPO Argument 

Although much of the GPO opposition relates to the belief that the impact on Social Security benefits is not clearly understood by many affected by it and, as a result, retirement plans made by these folks are unprepared for the reduction. Conventional reasoning, though, is that since GPO has been in effect since 1977, retirement planning has had sufficient time to plan for the reduction. 

GPO advocates also are quick to point out that the benefit reduction formula is less punitive than the reductions experienced by that affected by the “dual entitlement” rule for Social Security beneficiaries. 

With respect to both WEP and GPO, it’s important to note that the annual statements issued to beneficiaries by the Social Security Administration contain advice that “participation in a retirement plan or receipt of a pension based on earnings for which he or she did not pay Social Security payroll taxes could result in lower Social Security benefits” along with a link to additional information on the SSA website explaining WEP and GPO. 

Wrapping Up 

Our objective with this research paper is to provide a measure of objectivity to the concerns raised on many fronts regarding the perceived fairness or unfairness of WEP and GPO. As noted in the paper, the first step that anyone wishing to weigh in on the arguments—for or against—should take is to review and understand the mathematical process for determination of benefits, and to understand the progressive nature of Social Security as a societal program.  Without understanding those fundamentals, taking a position on the matter becomes somewhat of an exercise in futility. 

This paper summarizes material related to the Windfall Elimination Provision and the Government Pension Offset, but we know there is quite a bit of conversation necessary to arriving at a conclusion regarding their place in the world of Social Security; accordingly, a more detailed forum will be presented for public participation. This forum, which will be presented in webinar format, has been scheduled for March 13, 2024, and details for accessing the program will be posted on the AMAC Foundation’s Events page. 

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Freedom will ring!
Freedom will ring!
11 days ago

WEP & GPO are two rules of law that should have been repealed years ago. They reduce both SS benefits & survivor benefits unreasonably & extremely! They affect not only teachers, but first responders, such as firemen & policemen; as well as those like me, that retired from the U S Post Office & many others that chose a career in various areas of public service at the local, state & federal levels. It only requires forty quarters of covered service to be eligible for SS benefits.
In my case, I have over fifty quarters of covered SS service. I worked in the private section for years prior to, & after my postal career, as well as working second jobs, while employed by the post office, that all withheld SS payments from my paychecks. I started drawing SS when I turned 62 & my initial award payment was supposed to be well over $800, but because of WEP it was reduced to $311 per month! I am now 73 1/2 & WEP has cost me more than $60,000 in lost benefits that I worked for, paid into & earned in my working years. My wife & I are doing ok, but that money would have made a big difference in our quality of life & enjoyment of our retirement years, that was unfairly withheld from us because of WEP, & if I pass away before her, GPO will also adversely affect her for the rest of her life, unless WEP & GPO are repealed.
Please support HR82, The SS Fairness Act & it’s sister bill in the Senate, S597, by contacting your representatives in Congress & asking them to expedite the passage of both bills. There are currently 308 cosponsors of HR82 in the House, out of a total of 345 Representatives (90%) & 51 cosponsors in the Senate out of a total of 100. Both bills have broad bi-partisan support & it is time to bring them out of committee to be voted on, passed, & sent on to the Whitehouse for signing into law before the 118th Congress is over at the end of this year. Both WEP & GPO are unfair & unjust; it is time to make it right by eliminating both of them thru the passage of HR82 & S597. If we can spend $60 billion+ on aid to the Ukraine, we can certainly afford to right this unfair treatment of a couple million loyal, dedicated public servants! Call or write your representatives, make your voice heard & let freedom & fairness ring in the USA!
God Bless America!

Timothy Flaherty
Timothy Flaherty
7 days ago

As it stands now the WEP/GPO are totally unfair to those that have paid into Social Security. In particular the GPO is especially hard on widows and widowers. Congress knows this but chooses to do nothing

William Trimble
William Trimble
7 days ago

As a member of AMAC with a spouse impacted by these unfair laws, I would expect that AMAC would support the full repeal of WEP and GPO in fairness to teachers, police, firefighters, etc.

Terry Labs
Terry Labs
7 days ago

As a retired law enforcement officer, we have seen cuts in the pensions we were promised when we hired on. Many time when we are late in our careers with no time to adjust financially. Many of us were hired on before it was mandatory for an employer to inform us about the WEP . So we did not find out about it until ether we filed or very late in our careers. AMAC needs to get behind the appeal of this very unfair practice, unfair to us as retired officers, and unfair to the widows of officers. Thank you

Pam
Pam
7 days ago

It would be great if AMAC supported a full repeal of the WEP & GPO. Thank you so much for the work you are doing.

Maria
Maria
7 days ago

 Public service workers deserve better.
With the shortage of Educators, Law Enforcement, Firefighters, Nurses, and other Public Service workers, I encourage you to learn more about the draconian penalties of WEP/GPO. Why would anyone become a Public Service worker? Offices of Co-Sponsors Senators Brown and Collins would be a starting point for information and real-life stories.
 Why is this penalty enacted in 15 states and within these states only workers from certain retirement plans penalized? The majority of us were unaware of WEP/GPO until a few years before retirement. A distressing surprise after a long career. No time to make up and save for lost income.
 In my case I worked for 20 years, in private sector and became an educator at age 40. Worked in a district with a retirement plan called California Public Employees Retirement System, known as CalPers. CalPers retired employees are entitled to their EARNED SOCIAL SECURITY Benefits and Survivor Benefits. I was eight weeks shy of being vested. Unknowing, I transferred to another district whose retirement plan was California State Teachers’ retirement system, known as CSTRS. In transferring to CSTRS, I lost 40% of my EARNED SOCIAL SECURITY Benefits and am no longer qualified for Survivor Benefits.
 How does this make sense? I can’t wrap my mind around this logic. It’s OK to collect earned benefits from one plan but not the other? What “Windfall” is one plan allowing while another does not?  My story is just one of many Public Service workers who have been negatively impacted by this law.
 Please read my story below:
Here is the impact. If I receive my spouse’s benefits, my Social Security payment would be $1,570 a month. I am entitled to receive my own earned benefits of $1,264 a month minus the Windfall Elimination Provision (GPO/WEP) I now receive $762.00 a month. A loss of $9,969 a year. If my spouse predeceases me, I am not able to collect his survivor’s benefits. $30,000 a year. We currently purchased a life insurance policy for my spouse to add to my income upon his passing. This policy will only cover lost income for two years.  Cost of this insurance is $4,800 a year.
 Please co-sponsor HR 82 & SB 597
20 years Private Sector
26 years Educator

Ken
Ken
7 days ago

I wish the person or people who wrote this article were affected by WEP/GPO. It’s easy to talk about something that doesn’t affect you. It’s not your money that is being stolen by WEP/GPO.
To get full SS benefits you need to have paid for & earned 40+ WORK Credits (10+YEARS) per SSA. We did that. 40+ YEARS ago they changed the rules by creating WEP/GPO. Employers didn’t have to tell employees about WEP/GPO until 2005. Do you think you would be angry when you found out your SS would be reduced/eliminated?
The only reason WEP/GPO have lasted for 40+ years is because only 3% are affected. Can you imagine the uproar if the other 97% were affected? If Congress were affected the “EVIL TWINS” WEP/GPO would never have been created.
Make SS FAIR FOR ALL as originally intended. Everyone should get what they PAID FOR. Why punish WORK?!

E Parker
E Parker
7 days ago

Please push for full repeal of the GPO and WEP!! Everyone should receive their full earned social security benefits!

Barbara
Barbara
7 days ago

While married for 37 years, my household paid into social security. Now divorced and since I work in education….because of the WEP and GPO, I will not receive a dime from Social Security. 37 years….and nothing!

Bertha
Bertha
6 days ago

I found the following comment to be the most accurate and to the point so I am repeating it. We need term limits for all of these legislators and to remember them in the voting booth and ballot box.
“I wish the person or people who wrote this article were affected by WEP/GPO. It’s easy to talk about something that doesn’t affect you. It’s not your money that is being stolen by WEP/GPO.
To get full SS benefits you need to have paid for & earned 40+ WORK Credits (10+YEARS) per SSA. We did that. 40+ YEARS ago they changed the rules by creating WEP/GPO. Employers didn’t have to tell employees about WEP/GPO until 2005. Do you think you would be angry when you found out your SS would be reduced/eliminated?
The only reason WEP/GPO have lasted for 40+ years is because only 3% are affected. Can you imagine the uproar if the other 97% were affected? If Congress were affected the “EVIL TWINS” WEP/GPO would never have been created.
Make SS FAIR FOR ALL as originally intended. Everyone should get what they PAID FOR. Why punish WORK?!”

Judith Lutsky
Judith Lutsky
6 days ago

As an 80 year old retired CA teacher who is impacted by GPO as a single, divorced woman from a 20 year marriage and by WEP because of working in other jobs and other states. 40 years of the unfairness must end.

Timothy Porter
Timothy Porter
21 days ago

If the US Government would follow our constitution they’d all be on Social Security as well and they would protect it better, just like our health insurance, if they depended on as we do it would be a sound organization ????????????

Rudolph Sumpter
Rudolph Sumpter
7 days ago

In your carefully worded analysis, something is woefully missing. You need to acknowledge that people who’ve inherited wealth and do not suffer any reduction to their social security benefit. At the same time our poorly paid teachers, firefighters, LEOs, and other essential public servants are punished for earning a meager pension from decades of hard work. How is this justifiable? The answer is it’s not.

Maria
Maria
6 days ago

This is about Public Employees retirement systems. Law Enforcement, Firefighters Educators, Mail Carriers, Park Workers, U.S. citizens working overseas, and more. We paid into Social Security and also paid into our retirement plans. It effects some retirement systems but not others. How is this fair?
We are the pillars of the community and society. To find out at the end of a long career that our benefits are being denied is like a punch in the gut. If we had know about this “Off set” we could have planned or invested more money.
These “Evil Twins” effect 83% of women placing them in a situation of precarious retirement. We are asking for the promise of “The Sacred Trust” in Social Security to give us the funds we have earned. Our Social Security statements show what our payment would be without noting the Windfall Elimination Provision. Even our financial advisor was shocked and had no idea. So you can imagine the surprise when we realized how much of a loss we would take.
We are asking for a dignified retirement without the embarrassment of seeking state and federal funds to help us in our senior years. It’s time to repeal these laws from 40 years ago. Give us the funds we have earned.

GTPatriot
GTPatriot
10 days ago

Boy if only the Feb could be as cost consious when planning next years general budget.
They never mind increasing next years budget by trillions but will bust their ass to reduce your SS benefit by a nickle. Lets let the SS admininstration run general budget spending for a while so we can cut ( I mean really cut instead of cutting increases) overall federal spending.

David Millikan
David Millikan
11 days ago

They are both a joke.

m harrigan
m harrigan
11 days ago

Some retirees worked for companies that there is NO IRS record. Seems IRS does not store info for more than 10 years! So I was short a few of the 40 quarters went back to work after working 36 years for the DoD. But job was shutdown due to COVID-19 tho did manage to achieve 40 credits my SS is $350 per month

Terry
Terry
2 days ago

I agree with the writer below having been the recipient of a much lower Social Security check than I should be receiving having worked both in the private sector for most of my working life after raising 2 children, and then also teaching. I am one of the people who are hurt by the WEP every month now that I am retired. It is shocking and way past time that these two additives to the Social Security rule of law should be abolished. PLEASE act now. WEP and GPO affects us every day of our lives even though we worked so hard for so many years.

Donald Russell
Donald Russell
3 days ago

Will it be retroactive?

David Millikan
David Millikan
21 days ago

Try living on a Fixed Income with ONLY a PUNY 1% to 3% (If lucky) Cost of Living Increase with democrats INFLATION while EVERYTHING JUMPS UP OVER 50% or MORE each year they are in office.
Remember the whole Big $1 raise we got in obama’s last year and NO RAISE for 6 out of his 8 years while gasoline was OVER $4.65/gal.
Since Dictator Beijing biden’s INFLATION the COLA was WIPED OUT before we even got it the coming year.
So NO, I don’t feel sorry for the Teachers Union and their whining.

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