Disagreement Among Advocates Raises Concern
JULY 18, 2016: A week that began with the promise of legislation reforming the Social Security Windfall Elimination Provision (WEP) advancing in Congress, has instead ended with the bill suffering a setback.
Association officials spent two days last week in Washington, DC, working side-by-side with coalition partners from Texas in an effort to advance WEP reform through Congress this year.
Disagreement Among Advocates Raises Concern
JULY 18, 2016: A week that began with the promise of legislation reforming the Social Security Windfall Elimination Provision (WEP) advancing in Congress, has instead ended with the bill suffering a setback.
Association officials spent two days last week in Washington, DC, working side-by-side with coalition partners from Texas in an effort to advance WEP reform through Congress this year.
H.R. 711, federal legislation backed by our Association and a nationwide coalition of public retiree associations, retirement systems and unions, was scheduled to be released favorably and “marked up” by the House Committee on Ways and Means last Wednesday. The markup would have placed H.R. 711 on track to be voted on in the US House in September.
The bill balances relief for current retirees impacted by the WEP, with changing the Social Security formula to accurately calculate benefits for future retirees on employment covered by Social Security vs. non-covered employment (public sector work outside of Social Security). Savings generated by the change in the Social Security formula for future eligible retirees would be used to pay for increased benefits for current retirees.
In anticipation of the bill being approved by Ways and Means last Wednesday, Legislative Director Shawn Duhamel joined Tim Lee of the Texas Retired Teachers Association and spent Tuesday meeting with members of the Committee and their staff in an attempt to shore up support.
However, with the release of a redrafted H.R. 711 on Tuesday afternoon, a day before the hearing, disagreement broke out between the bill’s advocates and some public employee unions representing active employees. The nature of the disagreement rests on the delicate balance between crafting a new benefit formula that is fair to both current and future retirees.
On Wednesday, Association President Frank Valeri and our federal consultant Tom Lussier joined Lee and Duhamel for direct conversations with the bill’s sponsors, along with senior Ways and Means staff.
As the impasse deepened, a decision was made by the bill’s sponsors just moments before the hearing was to begin to pull H.R. 711 back from markup and allow time for stakeholders to work through their differences.
At the outset of the hearing Ways and Means Chairman Kevin Brady (R-TX), who is the bill’s chief sponsor, publicly called for retiree and employee advocates to utilize the summer Congressional recess to work together on solutions that will improve the bill.
Brady’s plea was echoed by lead cosponsor Congressman Richard Neal (D-MA), who made it clear that he believes H.R. 711 is a sound and fair proposal providing equal treatment for all Social Security beneficiaries – current and future retirees. Neal went on to thank our Association and praised our efforts on behalf of public retirees.
“Given the circumstances, it was a wise decision to delay the release of the bill. While any setback is certainly a disappointment, we have two cosponsors who remain firmly committed to resolving the issue of WEP this session,” said Valeri. “I cannot thank Richie Neal and Kevin Brady enough for the support and hard work that has gone into this bill. They have not waivered and neither will we.”
Watch the full hearing below
H.R. 711: New Draft Takes Shape
Under the proposal the current WEP law would be repealed for future retirees, and replaced with a new Social Security formula that would calculate benefits based on employment covered by Social Security vs. employment under a pension plan not covered by Social Security. This would impact anyone eligible for Social Security beginning January 1, 2018.
Those eligible for Social Security prior to 1/1/18 would receive a rebate based on their reduction under the current WEP law. The rebate would restore a portion of the Social Security benefit reduced by the WEP.
A key component of the earlier draft of H.R. 711 was a provision called enhanced enforcement, would have required Social Security to aggressively verify the accuracy of benefits received by current retirees. If calculation errors were discovered, benefits would be adjusted and the retiree would be held responsible for repayment of any overpayments received. In practice, this measure would have resulted in thousands of elderly retirees receiving bills from Social Security that they would not be able to pay (It was predicted that the average bill would be upwards of $8,000 per retiree).
When coalition officials met with Brady and Neal in June, they called upon the Congressmen to reconsider this approach and remove the enhanced enforcement provision from the bill. The sponsors since agreed and enhanced enforcement has been cut from the bill.
While this move is fair, it leaves the overall WEP reform proposal without a major revenue source to help pay for the rebate to current retirees. The goal of H.R. 711 is to bring about equity and fairness for everyone currently eligible for a Social Security benefit of their own, as well as those becoming eligible in the future.
“For those of us representing current retirees, it is absolutely essential that our members receive financial relief from the WEP. The adjustment for current eligible retirees is known as the rebate,” explains Legislative Director Shawn Duhamel, who has long been the Mass Retirees point person on federal issues. “A key aspect of the rebate is the fact that funding for it comes directly from the Social Security system itself. No new taxes or funding from the federal budget is or will be involved with whatever change is ultimately passed into law.
“Over the course of thirty-plus years the cost of repeal or reform of the WEP has always been an insurmountable obstacle. A full repeal would cost tens of billions of dollars each year and we do not expect to ever garner enough votes in Congress to pass such a proposal. Our only option to bring relief to retirees is to craft a reform, such as that proposed within H.R. 711.”
Important to note is the fact that the sole funding source for the rebate is the calculation of Social Security benefits for future retirees that accurately reflects time worked under Social Security, as opposed to time worked outside of Social Security.
“We feel strongly that it is unfair that public retirees from non-Social Security states are penalized with a reduction in benefits, while others with non-covered service are not. Everyone should only receive credit for the time they paid into the system. That is truly fair and equal for us all,” says continued Valeri. “No existing retiree would see any reduction in their Social Security benefit. We also do not view equal treatment for time worked to be anything but fair. Everyone should receive only what they earned – nothing more and nothing less!”
One point of contention with H.R. 711 involves the end of the so-called “30 Year Rule”, whereby those public retirees with 30 or more years of substantial earnings under Social Security are exempt from any WEP reduction. This exemption would end if the bill were to pass in its current form.
In recent months there had been an attempt to construct a phase-out of the 30 year rule, whereby public employees currently in the system would be grandfathered under the old law. However, Social Security has indicated that the cost of doing so would virtually eliminate the ability to provide a rebate to existing retirees.
“Due to the budget restraints in Washington, DC we are not likely to end up in a situation where everyone comes away with 100% of what they want in a deal. Our members already know that we’re not going to win a full repeal of the WEP law and that we can’t include a GPO (Government Pension Offset) fix at this time,” continues Valeri. “If we allow the perfect to become the enemy of the good and no WEP reform passes, then all that will result is the continued suffering of all of our members and public retirees lose, with many of whom passing away having received no relief whatsoever.
“We have asked the groups that have concerns about the current bill, such as the International Association of Fire Fighters (IAFF), National Educators Association (NEA) and the National Association of Retired Federal Employees (NARFE) to work with us to find a solution. These groups have to be willing to step up with concrete workable solutions, otherwise everyone continues to be hurt.”
With Congress now in recess until September, the bill’s sponsors have asked that stakeholders come together and craft a viable bill that can be marked up by Ways and Means, then advanced in the House before the fall election. Look for updates here, as well as our weekly hotline and in the Voice.
Statement by Chairman Kevin Brady on the delayed release of H.R. 711.
Click here for the new draft of H.R. 711, as well as to review supporting materials.