Congressional Bill Could End Windfall Elimination




  • In Business
  • 2022-08-07 19:00:44Z
  • By SmartAsset
Congressional Bill May Soon End Windfall Elimination
Congressional Bill May Soon End Windfall Elimination  

The windfall elimination provision and government pension offset both can reduce the Social Security payments a public employee collects. But there's a bill in Congress, which has strong backing, that could eliminate both the windfall elimination provision and the government pension offset. Here's what you need to know about both and how it might affect your Social Security payments. Consider working with a financial advisor as you create or update a retirement plan.

Windfall Elimination Provision (WEP)

The wind fall elimination provision (WEP) reduces the amount of Social Security benefits people can collect if they receive a government retirement plan in addition to Social Security. It applies only to workers who did not pay Social Security taxes, and so did not earn credits toward Social Security income during their working years.

According to the Congressional Research Service, roughly 6% of workers don't receive Social Security credits in a given year. Most are local, state and federal employees who don't pay Social Security taxes because they qualify for government pensions instead. For example, these are federal civilian employees who receive their retirement through the Civil Service Retirement System. The rest are workers covered by alternative retirement schemes, such as Railroad Retirement, or poverty-level workers who earn too little to qualify.

For each year that a worker pays Social Security taxes, they receive what the government calls a "year of overage." These are the credits that accrue toward the system, and each year of coverage increases a worker's ultimate benefits once in retirement up to a maximum of 30. Government workers who receive alternative pensions, such as teachers, police officers and civil servants, often don't earn years of coverage because they don't pay Social Security taxes. This is highly state-specific and does not apply to all state or local workers.

Windfall elimination does not apply to someone who spends more than 20 years paying Social Security taxes, regardless of pension status. Also, it only applies to workers who receive some form of government pension.

Government Pension Offset (GPO)

Congressional Bill May Soon End Windfall Elimination
Congressional Bill May Soon End Windfall Elimination  

The GPO cuts the benefits issued to retirees who receive both their own Social Security payments and a spouse's government pension payments. The GPO aims to prevent double earning by someone who begins collecting their spouse's retirement benefits. In the case of the GPO, it reduces a recipient's Social Security payments by two-thirds of the pension payments that they receive. For example, say that a government worker received a monthly pension of $750. After their death, their spouse is eligible to continue collecting that pension. The pension offset, however, would reduce the surviving spouse's Social Security payments by $500 per month.

The GPO only applies when someone directly collects their spouse's pension benefits in addition to their own Social Security benefits, such as when that spouse dies. It does not apply to a household where both people are alive and collecting their own retirement benefits. It also only applies when the government worker did not pay Social Security taxes during their working years.

Why Public Employees Oppose WEP and GPO

Public employees have long called for Congress to repeal both windfall elimination and the pension offset. In particular, they say, it unfairly targets people who paid Social Security taxes during their working lives. For example, if a teacher also has a summer job in the private sector, they would earn Social Security credits through this work. Windfall elimination could reduce the Social Security payments that they receive even though they paid into the system through that second job.

Other civil servants who work in states where they do pay Social Security taxes may find themselves caught up in a confusing system of overlaps, with their government pension set against their years of paying into the system. This can create confusion and lead to errors that reduce someone's lifetime benefits in retirement.

What Congress Is Poised to Do

 

Almost 340 members of Congress agree that it's time to eliminate the windfall elimination, and retired public workers could benefit by more than $6,000 per year. In 2021 Rep. Rodney Davis, R-Ill., introduced the Social Security Fairness Act. This bill would repeal the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO) from Social Security payments. If it passes public employees could see a significant bump in their retirement incomes, and it may pass soon.

At time of writing the Social Security Fairness Act had 294 sponsors in the House of Representatives. Its companion bill in the Senate had 41 sponsors. The measure has been placed on a legislative fast-track. By removing the Windfall Elimination Provision and the Government Pension Offset, this law targets two issues that public unions have long criticized.

The Bottom Line

Government workers have long opposed the WEP and GPO, two policies that have the effect of reducing the Social Security benefits of public employees. The House of Representatives is fast tracking a bill, which has an unusually high number of sponsors, to eliminate both. The Senate version also has a high number of sponsors.

Retirement Tips

  • Calculating what you should be getting in pension payments can be challenging. That's where the insight and guidance of a financial advisor can be very helpful. Finding a qualified financial advisor doesn't have to be hard. SmartAsset's free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you're ready to find an advisor who can help you achieve your financial goals, get started now.

  • Use SmartAsset's no-cost Social Security calculator to get a quick estimate of what you will be getting in retirement.

For important disclosures regarding SmartAsset, please click here.

Photo credit: ©iStock.com/Douglas Rissing, ©iStock.com/BackyardProduction, ©iStock.com/AJ_Watt

The post Congressional Bill May Soon End Windfall Elimination appeared first on SmartAsset Blog.

COMMENTS

More Related News

SSI Schedule: Supplemental Security Income Payments Won
SSI Schedule: Supplemental Security Income Payments Won't Be Sent in October 2022

Social Security recipients who also qualify for Supplemental Security Income (SSI) benefits don't get SSI payments every month -- and October 2022 is one of ...

Millions of Americans will save on Medicare fees next year
Millions of Americans will save on Medicare fees next year
  • World
  • 2022-09-27 18:30:12Z

For the first time in a decade, Americans will pay less next year on monthly premiums for Medicare's Part B plan, which covers routine doctors' visits and...

How to turn stock losses into tax savings, and other ways to trim your tax bill
How to turn stock losses into tax savings, and other ways to trim your tax bill

It's tough to fight inflation when you have no control over the rising costs of many goods and services.

Government Shutdown: What
Government Shutdown: What's Behind Current Congressional Stalemate, and How Food Stamps, Social Security and More Could Suffer

In what seems to be an annual tradition in the United States, the federal government is once again threatened with a shutdown amid delays in passing a short-...

Social Security: Can My Grandchild Receive Dependent Benefits?
Social Security: Can My Grandchild Receive Dependent Benefits?

Under certain circumstances, Social Security may pay dependent or survivor benefits to a grandchild -- if the parents are deceased or disabled, or if you...

Leave a Comment

Your email address will not be published. Required fields are marked with *

Cancel reply

Comments

  • casinosite
    (2022-08-08 06:50:52Z)

    When I read an article on this topic, casinosite the first thought was profound and difficult, and I wondered if others could understand.. My site has a discussion board for articles and photos similar to this topic. Could you please visit me when you have time to discuss this topic?

    REPLY

Top News: Business