Originally published at Forbes.com on February 13, 2020.

 

Here’s what Elizabeth Warren promises, if elected president, with respect to public sector workers whose employers have opted out of Social Security:

“if you work in state or local government and earn a pension, two provisions called the Windfall Elimination Provision and Government Pension Offset can reduce your Social Security benefits. WEP slashes Social Security benefits for nearly 1.9 million former public-sector workers and their families, while GPO reduces –– and in most cases, eliminates –– spousal and survivor Social Security benefits for 700,000 people, 83% of whom are women.

“My plan repeals these two provisions, immediately increasing benefits for more than two million former public-sector workers and their families, and ensuring that every current state and local government employee will get the full Social Security benefits they’ve earned.” 

Here’s Joe Biden:

“Current rules penalize teachers and other public sector workers who either switch jobs or who have earned retirement benefits from various sources. The Biden Plan would eliminate these penalties by ensuring that teachers not eligible for Social Security will begin receiving benefits sooner – rather than the current ten-year period for many teachers. The Biden Plan will also get rid of the benefit cuts for workers and surviving beneficiaries who happen to be covered by both Social Security and another pension. These workers deserve the benefits they earned.”

To start with an incidental observation, the Biden promise to get rid of the 10 year delay is poorly worded but appears to be a promise to restrict public plans’ ability to use long vesting schedules as a way of reducing benefits for short-service workers in favor of full-career employees, and has nothing in particular to do with federal Social Security rules.

But both of these candidates promise to get rid of the Windfall Elimination Provision (WEP) and the Government Pension Offset — in Warren’s case, characterizing these as unfairly “slashing” benefits.

Yet these provisions are entirely fair, and intended to ensure that these workers don’t double-dip and take advantage of provisions that were intended to help the poor, rather than middle-class workers.

Consider the structure of the Social Security benefit formula: regardless of how many years one has worked, Social Security averages only the highest 35 years (after wage indexation). Then the benefit formula sums up the total of

 

  • 90% of the first $960 in average indexed monthly earnings (AIME), plus
  • 32% of the AIME between $960 and $5,785, and
  • 15% of the AIME over $5,785.

 

(See the Social Security site for more details.)

These two design element are meant to help the poor. The limit of 35 years in the averaging period, even though one might work considerably longer — as many as 47 years, that is, from age 18 to 65 — is not meant as a signal that 35 years of work are sufficient to have “earned” the full benefit rate; Social Security is meant to be accrued over one’s entire working lifetime. Rather, the shorter averaging period benefits those who have spells of unemployment, time spent caregiving or in school, etc. And the 90% benefit level for the lowest income tranche boosts benefits to a relatively higher percent of pay, for those otherwise at risk of below poverty benefits — whether their AIME is low because of many zeros in their work history or a lifetime of low-income work.

Without an adjustment to their benefit, teachers unfairly benefit from these provisions. Teachers who spend part of their working lifetime teaching in a state which opts out of Social Security, and the remainder elsewhere, or working in the private sector during the summer, or moonlighting after-hours, or by working for part of their career in private-sector, Social Security-contributing jobs such as parochial school-teaching, appear “on paper” to have low wages and benefit from the imbalanced 90% tranche meant to aid the genuinely poor. In addition, they are “double-dipping” when they collect benefits from a system that’s designed for people paying into the Social Security system during one’s entire working lifetime, while simultaneously collecting additional benefits earned without paying into the system.

The WEP attempts to remedy this and remove the teachers’ unfair extra benefits. The method is rudimentary and simply says that if you have a pension benefit due to you due to participation in a public pension plan that opts out of Social Security, then you don’t get the benefit of that 90% factor on the first $960 in monthly earnings, because the Social Security benefit is treated as supplementary to the primary public plan benefit. The WEP is not applied if you have 30 or more years of “substantial earnings” (about $25,000 in 2020), which would mean that the income from which you paid Social Security contributions is your “primary” income and your public employment was secondary, and between 20 and 30 years there’s a gradual phase-out. The reduction of the WEP is also capped at half the level of the pension due to Social Security opt-out income (which, among other things, means that schoolteachers who were never vested, never have a WEP applied to them).

(See the Social Security Administration publication “Windfall Elimination Provision” for more information.)

Now, one can argue easily enough that this is not the right way to solve the problem, that this crude calculation doesn’t really work as it should. And indeed, the original formula was based purely on the ultimate Social Security opt-out pension benefit due to limitations in data availability at the time the law was implemented, and a proposed reform which would adjust benefits in proportion to private vs. public sector income, the “Equal Treatment of Public Servants Act of 2019” has been introduced repeatedly, most recently this past summer by Rep. Kevin Brady (R-Texas), with 44 cosponsors, all but 3 of them Republican.

Specifically, since data is now available on noncovered as well as covered wages, the Social Security Administration would calculate a new preliminary PIA (or baseline Social Security benefit) based on a workers’ total lifetime compensation. Then the ratio of the covered earnings to total earnings would be calculated, and this ratio would be applied to the preliminary Social Security PIA. This calculation would be called the PSF, or Public Servant Fairness formula. (See “Reforming the Social Security WEP Exposes Weaknesses in State and Local Pensions,” by Chantel Boyens, Erald Kolasi, and Jack Smalligen athe Urban Institute, for a comprehensive explanation.)

But here’s an interesting wrinkle to that proposal: it would help lower-income earners, by giving them more of the benefit of that initial 90% than they have at present. But there are other workers who would be disadvantaged by this change, because it reduces their Social Security benefits in proportion to their non-covered income without regard for whether that non-covered income actually produced the same level of benefits as Social Security.

And, yes, I yammer on incessantly about the Illinois Tier 2 teachers’ benefits, and the raw deal those teachers are getting. Teachers who leave without accruing 10 years of service will receive no benefit at all. (Yes, Social Security also requires 10 years of work history, but this can be from among multiple jobs.) Teachers who work moderately longer will receive a benefit that’s still lower than Social Security, not so much due to the benefit formula, as because the benefits are frozen at the time of termination, in contrast to Social Security’s indexation (adjusting for wage inflation) of each year’s earnings up to the time of the calculation at retirement.

In fact, as the Teacher Pensions Blog points out, Elizabeth Warren’s home state of Massachusetts is similarly egregious, with a 10 year vesting requirement and a benefit accural structure that means that a new 25-year-old teacher would have to teach for 22 consecutive years before their public pension plan benefits are as generous as Social Security — all to keep the cost of the system in check while keeping benefits (overly-)generous for full-career teachers.

Hence, the title of the Urban Institute report: this appealingly simple WEP reform exposes the weaknesses that these state and local pensions are a raw deal for short- and even medium-service workers.

But that doesn’t mean that the answer is to eliminate the WEP, as Warren and Biden promise. It’s to fix the inequities in the state and local systems or, better yet, to include all workers in Social Security, rather than permitting opt-outs in the first place. (And, incidentally, the GPO works similarly to prevent double-dipping, but the finer points of that program are a story for another day.) As it is, the call to eliminate the Windfall Elimination Provision sounds like a nice way to help teachers, but it’s nothing other than pandering.

And yes, as a final reminder, my “basic retirement income” Social Security plan eliminates these issues entirely.

 

December 2024 Author’s note: the terms of my affiliation with Forbes enable me to republish materials on other sites, so I am updating my personal website by duplicating a selected portion of my Forbes writing here.

23 thoughts on “Forbes post, “Biden And Warren Want To Eliminate The Windfall Elimination Provision. Here’s Why They’re Wrong.”

  1. Yes..all public employees should be able to pay into Social Security! I’m currently trying to decide if I should leave public service so I can increase my substantial earning years. However the GPO seems much more puniative than the WEP, hopefully you’ll write about that too.

  2. I read your article on the WEP provision and why it is wrong to have this law repealed. I disagree with you.
    When a worker pays their FULL Social Security taxes and meets the 40 quarter requirement, they should
    receive their Full Social Security monthly benefit and not be penalized by WEP.

    There are over 1.9 million retired workers affected by WEP even though they paid their FICA taxes.
    Lets go after the people who payed NO FICA taxes and receive Social Security and Medicare benefits.
    There are spouses that NEVER worked nor paid into Social Security and they receive 1/2 of their
    spouse’s benefit. This is wrong and is another reason why the Social Security funds are going to run out.

  3. I think this is simple, don’t be a teacher, firemen or government worker! If you do, you are supporting capitalistic freeloaders living off the services you provide, but complain about the retirement benefits which you paid for.

    Remember, you paid 100% during the time you were required to pay Social Security. So, if they only want to give you 50% of the benefits that you paid for, then they should give you the 50% back that you overpaid. Simply put, if you qualify for Social Security benefits which WEP cuts in half, they are cutting what you paid for. No one is giving you anything, instead they are stealing what you paid for, nothing more, nothing less. And, while doing so, putting a cap on the maximum limit rich people have to pay into the system. This is social justice?

    Let me tell you something about teaching and government service. My sister taught elementary school until she retired. She now qualifies for welfare to supplement her retirement benefits. Anyone who thinks teachers will get to much money in retirement, is too stupid to teach, even if they have the education to do so!

    My brother was thrown out of the military in a reduction of force process after serving 17 years in the Military, which left him months short of the sanctuary zone of 18 years. The government needed to save money!

    I am a retired USAF officer, who paid 23 years into the Social Security system, but lost 50% to WEP.

    My mother had 8 children, 3 are military retirees. We all have convinced our children and anyone who will listen to us, not to go into government service of any kind. This is not appreciated, and WEP shows this better than any law I can imagine.

    So, if you want to support American capitalistic freeloaders, who have never even thought about helping other people or their country, do so. But, please leave your children out of this equation, because they do not deserve the rudeness that these financial, greedy freeloaders expound, because most of them have served nobody but themselves!

  4. i totally disagree with you ..since your not affected yourself and maybe nobody you know is? its so easy to say keep it as it is…but if your a law enforcement officer…teacher…fireman etc that devotes there life to public service often at great risk..and if your government employer without your consent goes off Social Security your suffer a great penalty for all the years you did put into Social Security
    I agree with eliminating the windfall tax provision..which has by the way bi partisan support in the Senate and House…With President Biden in office in January we can soon see this happening..

  5. Jane, you are completely wrong on this. If I paid into social security for the required quarters just like someone else did, I shouldn’t be penalized. For one thing, if I worked that many years in the private sector, my state pension is likely to be very small since I wouldn’t have worked as many years for the state government. Having experience in both types of employment sectors enhances your knowledge and ability to do your job – no reason to penalize people. It’s not double dipping…your state pension is based on years of service and those years won’t be so long because of spending so many years working in the private sector. You are outright wrong.

  6. You are not well informed or you’re ignoring other facets about the WEP. People who are, for example only, auto workers or iron workers receive well earned pensions upon retiring. They also get rightfully earned social security because they paid into the system for the requisite amount of time. Yet a postal worker, just for example, under the civil service system, paid into the CSRS system and rightfully earns a CSRS pension upon retirement. However, that postal worker may also have worked in private employment and paid social security taxes on substantial earnings quarters for many years and those benefits are unfairly slashed at unbelievable rates. If that household has 2 postal workers under those same circumstances, they’re hit with the double whammy of the GPO, which means neither can claim social security survivor death benefits. All that money they paid into social security during private employment reverts back to the government. Our leaders always preach to us that hard work is rewarded, yet this is a gross example of hard work penalizing honest, motivated, career workers. These are 2 extremely unjust laws. As for the part about social security being designed to primarily help the poor, then why do the very wealthy receive SS benefits when they pay far less, percentage wise, into the system? Again, unfair and unjust. These laws do little except attack the middle class worker and should be repealed with bipartisan support.

  7. I am a retired federal CSRS and have a SS WEP penalty. After federal retirement I worked another 10 years in a SS covered job, for a total of 62 credits. I do not have a total of 35 years of SS wages, so a lot of zeroes are factored in to my AIME. That is fair. I did not pay in to the SS trust fund, so I do not expect to receive benefits for those years. Yet I have an additional reduction because I chose government as a career. It is a penalty for public service.
    Had I not worked in government, and instead quit working after 62 credits and drew welfare, I would receive a benefit double what I have now. All I request is to be receive the same SS as anyone else with similar SS salary history. Private sector pensioned workers do not have their SS benefits reduced for having a pension. Fairness is treating a government pension the same way.

  8. Jane, it is obvious that your background and experience has not given you enough information to determine that the WEP is wrong. I paid into Social Security for 35 years, but of this only 28 was considered by Social Security to be substantial earnings. Then I worked for 5 years as a teacher in a state that did not pay into Social Security so now I am getting penalized. This is my money pure and simple and I expect the retirement to be fair and equitable. In addition, if you are putting your money into a retirement account in addition to Social Security,Jane, I think when your retirement is close, you should be penalized for having different accounts and “double dipping” as you state in your article. Do you then think that would be fair and equitable if done to you? I think not.

  9. My colleagues worked 30 years. They get 80% as well as 2% more for ‘retirement plus’. I am not eligible for retirement plus unless I put 25 years in the teacher retirement. So now I have worked the same amount of years as my colleague just not all as a teacher. Based off of 80,000.00 she receives 65,280.00 for a yearly pension benefit. I too worked 30 years. I was going to receive 600.00 a month ss benefits. But now I will receive 200.00 per month(SS takes 60% not 50%), based on 11 years of credit. 20 years in the teacher retirement = 46% or 35,200. So I receive a total of 37,400 per year while my colleague receives 65, 280.00. Even if I received my full ss benefits, I still wouldn’t get any where near my colleagues pension…I am trying to understand where the double dipping is…

  10. I have been punished for working 2 jobs most of my adult life.
    After working 25 years at UIC and earning free health care upon my retirement. I found out that I was enrolled in medicare after taking a promotion so that meant I had free health care for 10 years after retirement. at 65 I was forced to take medicare and to pay for part B. That was not in my budget. I also had to pay a penalty for part B because of the pre-2 year salary so every one was paying 121.00 I had to pay 187.50 for a year. also I lost 2/3rds of my SS benefit. After 5 years of getting SS I don’t even have a net check of 450.00. It would be better if you rolled over my SS contributions to my pension plan than strip me of my earned SS. I contributed twice as much as my two brothers who get 1400.00 and 1800.00 a month it is just not fair!! Plus the medicare plans available to me are terrible–the prescriptions are too expensive and the co-pays too high !

  11. How can you let UIC make a deal to move their employees to medicare at age 65??
    Then change their earned free health care to one that is more expensive than the one I had when I was working?? You say Medicare and SS are not related but you take the payment for medicare out of my SS–to me that is double dipping!

  12. I retired at age 55 with healthcare free for life. At age 65 I was forced to move to medicare this was a nightmare! I don’t think it is fair to make me pay 3 times more for SS than most but get 4 times less benefit than most! iF YOU CAN MAKE A DEAL TO MOVE FEDERAL EMPLOYEES TO MEDICARE AT AGE 65 YOU CAN ALSO MAKE A DEAL TO MOVE THEIR SS CONTRIBUTIONS TO THEIR PENSION OR THERE PENSION TO SS**

  13. I think you are wrong. If you believe what you say wealthy should not receive ss. I worked as a firefighter for 31 years and did not pay ss. All my time on the fire department I worked a part time job, and paid ss also paid in the military. I did not pay a reduced rate, so why should I receive a reduced rate?

  14. I worked 23 years as a police officer. I also worked other jobs prior to my police career, during my police career and after my police career contributing into social security. Upon reaching retirement age my social security benefit was slashed significantly because of WEP. Yes I get a pension from the city I served but I also had enough quarters worked and paid into social security earning the right to collect that benefit. I believe cutting that benefit is unfair just because I get a pension that I also worked for by risking my life every day. It is not as is termed “double dipping” if you worked for both benefits. This WEP program should be repealed or at the very least reformed. You are welcome for my service.

  15. In Theory the penalties make sense, but this is not the reality. I worked a few years as a teacher in a school system where I paid SS, literally 40 years ago and my salary was 9,000. I stopped working to raise children. My husband was a teacher in a system where he got both a pension and SS. Then I returned to be a school social worker in DC, no SS. I am near retirement. My husband is older and in poor health and I will likely outlive him. I will not have much SS or pension income, and to loose the benefits of the spousal income is an unfair hardship. I have worked hard as a public servant and so has he. We worked as a team. We are not talking about people double dipping , but just trying to have a retirement that will provide a modest income. I am being penalized for raising my children and for moving to a school system. This is a reflection on the low value that our society has for teachers and civil servants. It is time to support those of us who choose these jobs because we are motivated to help others and are willing to have lower pay. None of us are sitting on big fat pensions or living high on the hog. This penalty is a stingy testimony to the lack of regard and even willingness to listen or fully comprehend the impact this is having. It is not a formula on a page, it is creating herdship.

  16. I retired from the government put in my forty quarters payed in SS and because I received a retirement from the government my SS benefits were reduced by 60% if I payed it in I should be able to draw what I earned

  17. Before my 25+ years in federal law enforcement under CSRS, I had 37 quarters (credits) for social security. I have been “retired” 13 years and have worked the entire time in my own business, paying both sides of social security. Not being an actuary, what I understand is this: if taxes are raised any higher, and I continue to pay into social security without getting any/much benefit, I will stop working. If enough of us stop working…

  18. Get rid of Windfall Elimination Taxes. Try raising a family and buy a house on a teacher’s salary in the Boston area today. You will not survive. With the Covid crisis, this is why we will have a massive teacher shortage soon.

  19. I paid into social security for over twenty years because I had another job before I became a teacher for most 20 years. Now, as a retired teacher, I make only 1700 from the teacher retirement system and only 400 from social security after the windfall elimination reductions. After taking out medicare and supplemental insurance payments, I have less than 1800 a month to live on. That means I will work till I die. It is unfair that I cannot have the social security benefits that I paid in and credits I earned from my work previous to becoming a teacher. I am being punished unfairly.

  20. You say teachers “appear “on paper” to have low wages.” Perhaps you don’t truly understand how WEP applies to all groups affected by it, in particular part-time teachers.

    Consider a person who earned the reverse of what you discuss. In other words, someone who earned a significant amount of their lifetime income form SS work and a small amount from non-SS jobs. An example might be someone who worked in the business world (SS) and also as a substitute teacher (non-SS). This person will get a small non-SS pension for teaching, only to have a significant amount of it taken away by WEP. That isn’t/wasn’t the intention of WEP the way I understand it, in fact it is exactly the opposite.

    Here’s a real-life example:

    43 years of SS earnings totaling $1.75 million ($40,700/year avg) – monthly SS benefit of $2,031

    20 years part time work as a substitute teacher with non-SS earnings totaling $132,000 ($6,600/year avg) – monthly pension of $470.

    This person does not have “low wages,” yet will lose 50% of their pension due to WEP ($235/month).

    If you are going to write on a subject, you should cover all aspects of it, not just those that fit your agenda or that you understand.

  21. She is one of the senseless but educated bean counters. 3 years later there are still bills with over 300 House and 53 Senate “supposed” supporters. Ways and Means Committee and the leadership of both houses are still keeping their feet on the neck of people who have been robbed. They still talk about the spirit of SS and fairness. It’s all about prepping up the SS TRUST FUND that has been poorly managed for 50 years. WEP/GPO was a convenient means of propping up some of that neglect for the past 40 years! Stealing from helpless workers because they are powerless.

Leave a Reply

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