How (and why) GPO and WEP can eat up your pension.
By Mary Ellen Flannery and Alain Jehlen
In 1968, Lois Grenfell’s husband died at the age of 31. Her children were seven and 11. “Our family was devastated emotionally and financially. I had no savings, very little life insurance, and no job,” she recalls. Grenfell, who lives in Grand Junction, Colorado, returned to college part-time while supporting her family, earned a teaching degree, and began teaching in 1976. She was rebuilding her life—but there was more bad news to come.
“I soon learned that I would never receive one penny of my Social Security widow’s benefits after I retired, even though my husband had worked continually from the time he was 16 until his untimely death,” she wrote to This Active Life. What happened to her widow’s pension? The Government Pension Offset and Windfall Elimination Provision (GPO/WEP).
David Stephenson is a retired educator from Rhode Island, where teachers have a state pension and do not participate in Social Security. But he did pay into Social Security through part-time jobs and a small business. Even so, he’ll get only half as much from Social Security as he expected. “I don’t think I will be poor,” he says. “I don’t think I will go hungry. But I do believe that I should be able to receive the Social Security benefit that I have earned.”
These are two of many angry members who answered our call for GPO and WEP stories. “I understand that [WEP] is the law, but I do not understand why,” wrote David Fish of Nipomo, California. “People who give years to government service should be rewarded, not penalized.”
WEP or GPO may cut your benefits if your employer contributes to a state pension system but does not pay into Social Security. Or if your spouse is in that situation. Or if you or your spouse were once in that situation. Or if you ever are in the future. In broad strokes, here’s how WEP and GPO work (visit the Social Security Administration Web site for details).
The Windfall Elimination Provision (WEP)
Social Security is more than a pension plan. It’s also a safety net designed to keep the elderly and the disabled from falling into poverty. It is intended to provide extra help for those with very low incomes.
The Social Security Administration says the pension for workers earning $65,000 a year before retirement is a little more than a third of their salaries. Low-income workers get a higher percentage, because if they only received a third of their incomes in retirement, they might starve.
The pension benefit formula involves income brackets, a little like the brackets of the income tax. You get a 90 percent pension for income in the first bracket, 32 percent in the second bracket, and 15 percent in the third.
In 2009, the 90 percent bracket covered income up to $8,928 a year; the 32 percent bracket was for income up to $44,868; and the 15 percent bracket for income above that (up to a limit educators probably don’t have to worry about).
Let’s say you retire from a job covered by Social Security that pays $65,000 a year. To keep things simple, let’s say that was your income—adjusted for inflation—for the past 35 years (Social Security uses 35 years of income to figure your pension).
|90 percent of the first $8,928, or||$8,035|
|32 percent of the next $44,868, or||$14,358|
|15 percent of the remaining $11,204, or||$1,681|
|Your total Social Security pension: $8,035 + 14,358 + $1,681 =||$24,074|
(The actual calculation also includes how old you are when you apply for benefits and other complications. The Social Security Web site has all the details.)
But what if you work for 10 years at a job that’s covered by Social Security, and then you get a teaching job that doesn’t pay into Social Security because it offers a state pension instead? Your 35-year average Social Security income will be very low because for many of those years, you may have no Social Security income at all.
So, should your Social Security pension reflect the high percentage that the system gives low-income earners? In 1983, Congress said no, arguing that you also have your state pension. Instead of the 90 percent pension on your first $8,928, you only get 40 percent. That’s why your Social Security check may be a lot smaller than you expected.
The Government Pension Offset (GPO)
This affects spouse and survivor benefits.
GPO was supposed to make Social Security fairer, but in practice, it slashes benefits for many educators and others eligible for state pensions and outside Social Security.
Say Alice worked under a state pension plan and did not pay into Social Security. Now retired, she is receiving a state pension of $6,000. Her husband, John, receives $4,000 from Social Security.
Tragedy strikes and John is killed in a car accident. Instead of transferring the $4,000 pension to Alice, Social Security first subtracts 2/3 of Alice’s $6,000 state pension—which leaves her with no survivor benefit at all. We set up this example to keep the arithmetic simple, but it’s very common for the 2/3 GPO rule to completely wipe out the Social Security survivor’s benefit.
How could anyone call that fair? Well, it turns out Alice is not being treated worse than if she were in Social Security herself. If Alice and John were both in Social Security when John died, she would get the larger of the two pensions, not both added together. That’s a 100 percent offset—compared to the 2/3 offset for someone on a state pension outside Social Security.
But here’s why the GPO really isn’t fair to Alice: We left out a crucial part of the story—Alice’s state pension is her only employer-funded pension. If she were in Social Security, her employer would probably provide a second pension, which would not be subtracted from John’s Social Security in figuring out her survivor benefit.
The bottom line: Alice with her state pension probably fares worse than she would if she had Social Security plus an employer-funded pension.
Many other NEA-Retired members came forward with their GPO/WEP stories. Each was a little different, but the retirees all share a conviction that they are wrongly penalized for their public service under these laws. Here are their accounts.
Betty Porrazzo, Venice, Florida
In 1967, Betty Porrazzo lost her husband when Lt. Louis Porrazzo, an Army helicopter
|Widow, retired teacher, victim of GPO/WEP -- Betty Porrazzo is still fighting for her survivor benefit.|
PHOTO: CHERYL ZIEMKE
“I don’t want to say I’m angry, but I am disappointed in my government because I don’t think they take such great care of survivors. Left out in the cold are the people left behind,” said Porrazzo, whose son was just six months old when his father died.
Porrazzo, a retired Massachusetts teacher, knows that she is owed almost a thousand dollars a month. She has a pamphlet, published by Social Security decades ago, that promises an exemption to the offsets for those receiving benefits before 1977, like she did. She knows of another war widow who appealed and received her rightful share.
But still, Social Security rejected her once, twice, and now has taken nearly a year to schedule an appeal before an arbitrator. While waiting for that final chance to prove her case, Porrazzo has contacted her senator in Florida, where she lives comfortably, she said, and she promises not to give up.
In the meantime, what does the loss of that monthly $1,000 mean? It means Porrazzo can’t afford to buy an airplane ticket to Boston for the rededication of the Louis Porrazzo ice skating rink. It falls to her son, now a New Hampshire teacher, to pay the way.
“I guess I am a little bitter about it. My husband gave his life for this country.”
Lynn Brooks Hunt, Bangor, Maine
From her vantage point behind the desk of the Hilton Garden Inn in Bangor, Lynn Brooks Hunt gets to see a lot of people coming and going. But travel isn’t exactly in the cards for her—not on an income of $25,000 a year.
Retirement means not working, right? Then why must Hunt, who retired after 30 years in Maine classrooms, work two jobs now? In addition to manning the hotel desk, she also keeps the books for her condominium association.
Hunt was 45 when her husband died at age 53. Fifteen years later at age 60, the earliest age that survivor benefits can be collected, she went to the Social Security office to inquire. The helpful employee took out a pencil and did some calculations on a sheet of paper. Voila! She should receive around $1,700 a month.
|PHOTO: KEVIN BRUSIE|
Ohhh, wait a second. You’re a teacher?
Then it’s actually $188 a month.
“If I knew there was $1,000 more a month, or $1,500, that’d be incredible!” Hunt exclaims. She thinks about the rising costs of dental and health insurance, and her IRA, recently decimated by the recession.
Like others, Hunt has written to her legislators and also to financial news columnists. Too many policymakers are unaware of the unfairness perpetrated on public employees, she believes.
“I told both of my kids, ‘Don’t go into teaching.’”
Cecil Moreno, Anchorage, Alaska
Cecil Moreno began contributing to Social Security as a 14-year-old grocery store bagger. Add in 20 years of service as a United States Air Force officer, plus the countless jobs he worked to pay for his college degree in education, and that adds up to a lot of money invested in the federal retirement system.
Too bad he’s not getting it back.
Based on his Air Force income and contributions, Moreno expected to receive about $1,300 a month from Social Security. “I was fat, dumb, and happy, and figured I wasn’t going to have worry about steady income.” In reality? He gets little more than $700 a month after taxes.
Moreno isn’t starving. He shops at the local military base’s commissary and saves a good chunk on his groceries there. “How do people on the outside swing it?” he wonders. But he’s also still driving his 1985 Honda and worrying about what he’ll do when the engine finally quits. “As long as it’s running, I’m fine.”
In the meantime, Moreno is an advocate for GPO/WEP repeal. He writes to his Congressional representatives and encourages others to do the same. What’s needed, he believes, is a coalition of public employees who won’t relent until reform is realized.
David Fish, Nipomo, California
David Fish has served his country—first in the Army, which he joined at age 17, and then in the Peace Corps, where he served two years in Chile. He paid into Social Security during those years, and then for almost 10 years as a construction worker who toiled hard to pay for college.
In an ideal world, this service would be rewarded, he figures. And yes, hard work has its own rewards. But how about his own money that he invested in Social Security? “Those of us who weren’t fortunate enough to have parents pay for our college educations are being punished for our hard work!” he says.
Fish figures he’s entitled to $1,000 a month, but will lose $400 of that to the vagaries of the Social Security system. (Although he’s retired after more than 20 years of teaching, he is waiting until age 66 to collect Social Security.) “It isn’t devastating, but it does feel unfair,” he said.
“If I work for something and it’s taken away because of a poorly written law, it just feels so unfair—especially when the people who write the laws are double- or triple-dipping.”
So many teachers are career-changers, hoping to make a difference in the lives of children. Although Fish says he’s going to be okay, he wonders about all of them. “When they find out they’re losing 40 percent of their Social Security, it’s just traumatic.”
What You Can Do
Easy as 1-2-3.
1. Go to http://www.nea.org/gpo. Check whether your Senators and Representatives are in favor of repealing GPO and WEP.
2. Sign NEA’s electronic petition to Congress. If you are or will be personally affected by GPO or WEP, add your story to the pre-written text. If your elected officials have taken a position for repeal, thank them. It’s important that they know it matters to you.
3. Call the Capitol switchboard at (202) 224-3121, ask for your Representative and Senators by name, and tell them to repeal GPO and WEP.
Got a little more time?
Write a letter to your local newspaper explaining why GPO and WEP should go.
Penalties for Public Service
See for yourself how unfair laws threaten the retirement security of educators. Women are disproportionately impacted. Tell Congress to support the Social Security Fairness Act and repeal laws that discourage qualified educators from the profession.