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NEA Statement on GPO/WEP and Mandatory Social Security Coverage

June 09, 2005

Mr. Chairman and Members of the Subcommittee:


On behalf of the National Education Association's (NEA) 2.7 million members, we would like to thank you for the opportunity to submit comments on the Government Pension Offset (GPO) and Windfall Elimination Provision (WEP), and on the issue of mandatory Social Security coverage. We commend the Subcommittee for holding this important hearing on a matter of great concern to educators and other public employees.

NEA strongly supports complete repeal of the Government Pension Offset and the Windfall Elimination Provision, which unfairly reduce the Social Security and Social Security survivor benefits certain public employees may receive. We oppose requiring public employees to participate in Social Security. Our testimony will cover both of these issues.

The Government Pension Offset: A Devastating Loss of Benefits for Widows and Widowers

The Government Pension Offset reduces Social Security spousal or survivor benefits by two-thirds of the individual's public pension. Thus, a teacher who receives a public pension for a job not covered by Social Security will lose much or all of any spousal survivor benefits she would expect to collect based on her husband's private-sector earnings.

Congress and the President agreed in 1983 to reduce the spousal benefits reduction from a dollar-for-dollar reduction to a reduction based on two-thirds of a public employee's retirement system benefits. This remedial step, however, falls well short of addressing the continuing devastating impact of the GPO.

The GPO penalizes individuals who have dedicated their lives to public service. Nationwide, more than one-third of teachers and education employees, and more than one-fifth of other public employees, are not covered by Social Security and are, therefore, subject to the Government Pension Offset.

Estimates indicate that nine out of 10 public employees affected by the GPO lose their entire spousal benefit, even though their deceased spouse paid Social Security taxes for many years. Moreover, these estimates do not include those public employees or retirees who never applied for spousal benefits because they were informed they were ineligible. The offset has the harshest impact on those who can least afford the loss: lower-income women. Ironically, those impacted have less money to spend in their local economy, and sometimes have to turn to expensive government programs like food stamps to make ends meet.

NEA receives hundreds of phone calls and letters each month from educators impacted by the GPO. Many are struggling to survive on incomes close to poverty, fearing they will be unable to cover their housing, medical, and food expenses on their meager incomes. For example, consider the following stories:

From NEA member Frances in Louisiana:

"My husband, a Baptist minister, passed away [in 2001] after paying Social Security for 42 years. At times we had to take a second loan on our home to pay the Social Security. Now, I had to pay back the loan, but discovered that I will not get benefits because I receive a small teacher retirement"

From NEA member Stella in Colorado:

"I am a 72-year-old widow…. I was happily married to the same man for 39 1/2 years. My husband was a World War II disabled veteran who worked and paid into Social Security for 50 years…. He passed away 11 years ago thinking I would be able to receive his Social Security and Veterans Widow pension…. But now I'm living in poverty."

The Windfall Elimination Provision: A Shocking Loss of Earned Benefits

The Windfall Elimination Provision reduces the earned Social Security benefits of an individual who also receives a public pension from a job not covered by Social Security. Congress enacted the WEP ostensibly to remove an advantage for short-term, higher-paid workers under the original Social Security formula. Yet, instead of protecting low-earning retirees, the WEP has unfairly impacted lower-paid retirees such as educators.

The WEP penalizes individuals who move into teaching from private-sector employment, or who seek to supplement their often insufficient public wages by working part-time or in the summer months in jobs covered by Social Security. Educators enter the profession often at considerable financial sacrifice because of their commitment to our nation's children and their belief in the importance of ensuring every child the opportunity to excel. Yet, many of these dedicated individuals are unaware that their choice to educate America's children comes at a price -- the loss of benefits they earned in other jobs.

While the amount of reduction depends on when the person retires and how many years of earnings he or she has accumulated, many public employees can lose a significant portion of the Social Security benefits they earned in other jobs. Like the GPO, the WEP can have a devastating impact on educators' retirement security. For example:

From NEA member Carolyn in Kentucky:

"I started a direct sales business from my home at nights and weekends to supplement my teacher retirement. I earned my necessary quarters, reached my 62nd birthday, and then learned of the Windfall Elimination Provision. I was told that I was eligible to receive approximately $158 monthly; however, because of the WEP, this would be reduced to $78 a month. By the age of 65, my payments had risen to $84, but after paying $66 for Part B of Medicare, I now have $18 to deposit. I have been forced because of the economics of the day to return to the classroom to substitute teach for a paltry sum of $61 a day…. This is certainly not the American dream I had in 1956 to become a teacher!"

The “Double Whammy”: Educators Impacted by Both the GPO and WEP

Many NEA members report that they are subject to double penalties -- losing both their own benefits and spousal benefits due to the combined impact of the GPO and WEP. For example NEA member Martha from Texas reports:

"By 1978, when I started my teaching career, I had already earned my 40 quarters of Social Security and over the years depended on these benefits as part of my retirement. I should be entitled to $415 a month at the age of 62. However, because of the Windfall Elimination Provision, I will now be entitled to $206 a month, and this reduction in my earned retirement is a big loss. [In addition], according to the Social Security Administration, I should be entitled to approximately $970 a month for widow's benefits. However, because of the Government Pension Offset, I can only receive $21 a month. Both the Government Pension Offset and Windfall Elimination Provision are devastating to teacher retirees and me.”

The National Impact of the GPO and WEP: Undermining Teacher Recruitment Efforts

The GPO and WEP have an impact far beyond those states in which public employees like educators are not covered by Social Security. Because people move from state to state, there are affected individuals everywhere. The number of people impacted across the country is growing every day as more and more people reach retirement age.

Perhaps most alarming, the GPO and WEP are impacting the recruitment of quality teachers to meet urgent national shortages. Record enrollments in public schools and the projected retirements of thousands of veteran teachers are driving an urgent need for teacher recruitment. Estimates for the number of new teachers needed range from 2.2 million to 2.7 million by 2009.

At the same time that policymakers are encouraging experienced people to change careers and enter the teaching profession, individuals who have worked in other careers are less likely to want to become teachers if doing so will mean a loss of Social Security benefits they have earned. Some states seeking to entice retired teachers to return to the classroom have found them reluctant to return to teaching because of the impact of the GPO and WEP. In addition, current teachers are increasingly likely to leave the profession to reduce the penalty they will incur upon retirement, and students are likely to choose other courses of study and avoid the teaching profession.

The GPO and WEP also impact other critical public services fields, including police and firefighters. Our nation can ill-afford to allow the very real fear of poverty in retirement to force talented, dedicated individuals out of these professions.

The GPO/WEP Solution: Total Repeal

Representatives McKeon (R-CA) and Berman (D-CA) have introduced the Social Security Fairness Act of 2005 (H.R.147). This bipartisan legislation, which already has over 260 cosponsors, would eliminate the GPO and WEP, thereby allowing public employees, like all other employees, to collect the benefits they earned and need. NEA urges the Subcommittee, and the entire House of Representatives, to take immediate steps toward passage of the McKeon-Berman Bill.

Mandatory Coverage: An Unwise and Unnecessary Approach

NEA's position on repeal of the Government Pension Offset and Windfall Elimination Provision should not in any way be interpreted as support for requiring public employees to participate in Social Security. NEA strongly opposes mandatory coverage. Instead, NEA simply believes that educators should be able to receive the benefits they or their spouse earned by working in covered employment, without jeopardizing their public pension.

Many existing public employee programs are tailored to meet the needs of specific employee groups. Forcing educators into Social Security would jeopardize these state and local plans. In addition, Social Security trust funds can be invested only in U.S. Treasury bonds. State and local governments permit a greater diversity of investment options, thereby potentially achieving a greater rate of return.

Mandatory coverage of educators would also increase the tax burden on public-sector employers. Ultimately, these increased tax obligations would lead to difficult choices, including reducing the number of new hires, limiting employee wage increases, reducing cost-of-living increases for retirees, and reducing other benefits such as health care.

Finally, mandating coverage of educators will not solve the Social Security system's financial difficulties. The amount of money gained by mandating coverage would be relatively small and would not solve the long-term Social Security crisis. Requiring new state and local employees to pay into Social Security would enable the federal government to continue borrowing money from Social Security trust funds, and, therefore, could exacerbate financing problems.

We thank you for your consideration of these comments.