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Statement to Congress on Social Security offsets

Submitted by NEA to the Ways and Means Subcommittee on Social Security, U.S. House of Representatives

February 26, 2004

Chairman Shaw 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 Social Security Administration's Service Delivery Budget Plan. 

We will limit our comments to one provision in the Administration's plan — the proposal to increase employer reporting requirements in an effort to identify additional individuals who should be subject to the Government Pension Offset (GPO) and Windfall Elimination Provision (WEP). In short, we are deeply disappointed that the Administration has chosen to focus on subjecting more retirees to the GPO and WEP instead of seeking to eliminate these unfair and often devastating offsets.

The Administration's plan: The wrong focus

The Administration proposes allowing the Internal Revenue Service to notify the Social Security system about individuals who should be subject to the GPO and WEP but whose benefits are not currently offset. Specifically, the proposal would require state and local governments paying pensions to indicate on their form 1099R report whether the pension is based in whole or in part on earnings not covered by Social Security.  

The proposal would increase the number of employees subject to the GPO and WEP. In addition, and perhaps even more disturbing, the Administration would seek to collect so-called "overpayments" from individuals who should have been subject to the offsets but instead have received full benefits. 

The Congressional Budget Office has estimated that the Administration's "enforcement" proposal would generate $2.2 billion over 10 years in additional federal government revenue. Unfortunately, this revenue will come at the expense of retired public employees struggling to make ends meet, many of whom will face significant poverty if forced to repay earned benefits. In fact, some retirees living on fixed incomes could be liable for overpayments of as much as $20,000 — an amount few, if any, would be able to repay without significant hardship.

In addition, the Administration's proposal would be administratively burdensome, while providing little additional assistance to the Social Security Administration. Information on earnings that have or have not been subject to Social Security taxation is already provided to the Internal Revenue Service by public employers, as is information on whether the employee is covered by an employer pension plan. Pension-paying entities, on the other hand, generally do not have payroll tax information on employees working in the many, in some cases thousands, of agencies and jurisdictions covered by the retirement system. Requiring state and local government pension systems to undergo potentially substantial and costly data collection efforts for information that has already been provided to the federal government (and may be impossible for a pension plan to retroactively collect on retirees that have been out of the workforce for years) is unreasonable and unnecessary.

Rather than seek to subject additional individuals to the GPO and WEP, Congress and the Administration should focus on alleviating the harsh impacts of these offsets on employees who have dedicated their lives to public service.

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. 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. 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, NEA member Delona from Ohio reports:

"On Christmas Eve, 2002, my husband passed away at the age of 66.  He had worked for 43 years. After applying for widow's benefits, I was told I would start receiving a check for $1,032 around April 2003….On June 14, 2003, I retired after working 30 years for the Canton City Schools. On September 30, 2003 [I was informed] that my husband's benefits would be reduced from $1,032 to $77 a month, and that I should not spend the $1,032 that had already been deposited by Social Security into my bank account for September because they would be removing that money."

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.

Like the GPO, the WEP can have a devastating impact on educators' retirement security.  For example:

An NEA member in Texas writes:

"As a single teacher, I have had to work second jobs just to afford a home and make ends meet. My pension will never be enough to retire…  If I have been willing to work 15-18-hour days to make ends meet, I should get the same Social Security benefits that those who worked beside me will be getting. It seems that the harder I work, the more I am penalized for it." 

Another NEA member writes:

"It seems only fair to me that if I have enough gumption to work multiple jobs I should receive the benefits from that hard work. The sacrifices in time, energy and effort should not be punished. If I choose to work 24/7, no one has the right to say I cannot receive the pay and benefits from that work. I have raised three children by myself…. At one time I taught school, drove a school bus, worked in a greenhouse and had a small truck farm…I have qualified for welfare several times but never took any. I just got another job or worked harder. Please don't punish me."

The GPO/WEP solution: Total repeal

NEA is pleased that the Chair has committed to moving legislation this year addressing the GPO and WEP.  We urge the Chair to move quickly on this important issue and look forward to working with the Subcommittee. 

NEA strongly supports the Social Security Fairness Act, sponsored by Representatives McKeon (R-CA) and Berman (D-CA). This bipartisan legislation, which would completely repeal both the GPO and WEP, boasts the support of 287 Members of the House of Representatives. This broad support reflects the deep concern on both sides of the aisle about the impacts of the GPO and WEP on vulnerable retirees and recognition of the need to act quickly to address the situation.


NEA strongly urges the Subcommittee to reject Administration efforts to subject more individuals to the GPO and WEP and, instead, to fix the underlying issue by moving legislation addressing these unfair offsets.

We thank you for your consideration of these comments.