Focus of Congressional Hearing

To restate the obvious, Mass Retirees has sought to end the Social Security Windfall Elimination Provision (WEP) and Government Pension Offset (GPO) since the day the laws were created in 1983. In fact, shortly after it was signed into law by President Reagan, we were one of the first organizations to criticize the Social Security Reform Act because it created WEP/GPO.

Not only are nearly all Association board members impacted personally by WEP/GPO, but there is not a day that goes by when we do not hear from members who are harmed by these federal laws. WEP/GPO are unfair and continue to cause significant financial hardship to more than 2.1 million retirees across the country. Our position is clear: Retirees should receive every penny that they paid for and earned, nothing more and certainly nothing less.

On April 16th, the House Ways and Means Subcommittee on Social Security held a Congressional hearing on the overall issue of WEP and GPO. This was the 2nd public hearing on the issues within the past 5 months. On November 20th of last year, in Baton Rouge, Louisiana, a hearing was held to hear directly from public retirees harmed by WEP and GPO. In addition to the four retirees invited as official witnesses, that hearing produced more than 800 letters from retirees and organizations – including Mass Retirees – entered into the official Congressional record.

Public retirees are being heard on the unfairness and financial hardship caused by WEP and GPO. It is due to the voice of public retirees, and the pressure placed on Congress to act to resolve these issues, that the second WEP/GPO hearing took place in Washington, DC in April.

Unlike the hearing in November, which was designed to focus on the people harmed by WEP/GPO, hear their compelling stories, and educate members of Congress on the problem itself April’s subcommittee hearing was designed to hear from policy experts. In the hearing announcement, the subcommittee stated that the purpose of the hearing was “to examine Social Security’s Windfall Elimination Provision and Government Pension Offset, their intended purpose, shortcomings, and alternatives.” The hearing did not focus on any specific bill or proposed fix, nor was it intended to.

The House Ways and Means Committee, which has full oversight over all issues related to Social Security and all federal spending in general, is currently Chaired by Congressman Jason Smith (R-Missouri). Massachusetts Congressman Richard Neal is the Committee’s ranking Democrat member. The Social Security Subcommittee is Chaired by Drew Ferguson (R-GA), with John Larson of Connecticut serving as the ranking Democrat.

Per Congressional rules, the majority party sets the agenda, schedules hearings, and determines which legislative proposals advance (marked up) beyond the committee. As is relatively standard procedure for these types of hearings, the Subcommittee called four witnesses – three from the Majority (Republican) and one called by the Minority (Democrat). By Congressional rules, the majority party calls most witnesses.

Jason Fichtner, Ph.D., Chief Economist for the Bipartisan Policy Center, while stating, that WEP/GPO are unfair, began his testimony by stating “The original public policy intent of the WEP and GPO was to ensure fair treatment between workers whose only earnings are covered by Social Security and workers with earnings that are not covered by Social Security. It is important to maintain equity between covered and non-covered workers. But repealing the WEP and GPO would violate the principles of fairness and equity that these provisions were intended to protect.”

While opposing full repeal, on the grounds that it would result in public retirees receiving larger Social Security benefits than what they earned, Fichtner does support WEP/ GPO reform. Specifically addressing reform, he said “This change would allow for the use of one benefit formula for all Social Security beneficiaries, would be simple to understand, and would be fairer than the current system, while maintaining the original intent of fairness and equity of the WEP and GPO provisions.”

Rachel Greszler, Visiting Fellow in Workforce, Economic Policy Innovation Center, expressed that eliminating both provisions is not good public policy, explaining that the estimated cost of repeal is $183 billion. Greszler added, “Policymakers should implement a fair and accurate fix.” She explained that the GPO was put into place in the late 1930s, a time when most women did not participate in the workforce. Eliminating the GPO would violate the intent of the spousal benefit, which is to provide retirement benefits to spouses with limited work outside of the home. She also focused much of her testimony on the pending insolvency of Social Security in 2034, stating that a full repeal of WEP/GPO would serve to hasten the problem.

Nancy Altman, President of Social Security Works, supports full repeal of the WEP and GPO, and believes Social Security benefits “should be increased across the board.” Altman included the repeal of WEP/GPO within her broad testimony calling for an overall reform of Social Security – for which the overall benefit structure has not changed in more than 50 years.

Altman proposes paying for repeal, as well benefit enhancements, through higher federal payroll taxes on the wealthy stating the following: “One of Social Security’s strengths is that it is totally selffunded. It can only pay benefits if it has enough dedicated revenue to cover all costs. It has no borrowing authority, and therefore, by law, cannot add even a penny to the deficit. This is true of not only the cost of its benefits but all related administrative costs. Unless Congress plans to radically depart from this fundamental feature, it must, at some point, cover the cost of repealing the WEP/ GPO and other proposed benefit expansions, if it is not to make all working families, public and private sector, worse off. Importantly, there is a right way and a wrong way to cover that cost.

“The right way is by requiring millionaires and billionaires to pay their fair share.”

Charles Blahous, Ph.D., J. Fish and Lillian F. Smith Chair and Senior Research Strategist, Mercatus Center at George Mason University, explained that for workers who split their careers between jobs where they pay into Social Security and do not pay in, the issue is very complicated. In a detailed overview of why WEP/GPO were created, Blahous states “An important aspect of Social Security that gives rise to both the WEP and the GPO is that Social Security does not consider employment earnings outside of Social Security coverage when computing benefits. Your Social Security benefits, as well as those of your survivors or a nonworking spouse, are a mathematical function of the earnings on which you have paid Social Security taxes. “

Another relevant feature of Social Security is that it provides ancillary benefits such as survivor benefits and nonworking spouse benefits, and observes “dual entitlement” rules in determining the amounts of these benefits.”

In addition, Blahous echoed the testimony of Fichtner and Greszler by opposing full repeal of WEP/ GPO on the grounds that it would result in those retirees receiving pensions from employment not covered by Social Security gaining a larger Social Security benefit than what they earned. However, like his colleagues, Blahous endorses the notion of reform.

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