A bill that would change Social Security benefits for pensioners is set to see a final vote by the Senate in coming days.
The Social Security Fairness Act, which passed through the House of Representatives in November by an overwhelming 327 to 75 majority and with rare bipartisan support, would remove rules that limit Social Security benefits for 2.8 million workers who receive a public pension.
These rules include the Windfall Elimination Provision (WEP), and the Government Pension Offset (GPO). The WEP, enacted in 1983, reduces Social Security benefits for those who earn income from noncovered pensions, while the GPO, established in 1977, regulates spousal benefits for workers with noncovered pensions. Both rules aim to provide beneficiaries with a fair reimbursement for their contributions to the program.
Supporters of the bill say the WEP and GPO unfairly targets public pensioners by reducing their earned Social Security benefits for jobs they take outside of non-covered employment, and for spouses entitled to benefits from state, local, and federal government employees like teachers and police officers.
Both laws “penalize families across the country who worked a public service job for part of their career with a separate pension,” said Sen. Bill Cassidy (R-LA) earlier this week. When these pensioners “have second jobs, second careers or get married, they receive less from Social Security than if they had never worked in public service at all. That’s not right.”
The WEP currently affects just over 2 million individuals, or 3.1% of all Social Security beneficiaries, and the GPO applies to nearly 735,000 beneficiaries, according to the Social Security Administration (SSA).
The bill, reintroduced in January 2023 by Reps. Abigail Spanberger (D-VA) and Garret Graves (R-LA), has seen support from both sides of the political aisle, many who say the act could restore benefits for millions of pensioners. With the House having already passed the bill, the Senate will now need to take action by Dec. 20, the end of Congress’ session, in order for it to reach President Joe Biden’s desk.
Senate Majority Leader Chuck Schumer (D-NY), a supporter of the bill, promised pensioners last week that he would “line up” Democrat lawmakers to back the proposed legislation. “I am here to tell you the Senate is going to take action,” he pledged to pensioners in a rally on Capitol Hill. “What’s happening to you is unfair, un-American. I will fight it all the way,” he added.
Unfair advantages
Yet, the act has been met with skepticism from industry and policy experts, who argue that if both rules are removed, pensioners who have not paid taxes to Social Security could receive a higher income replacement than those who have contributed to the program since the start of their careers.
Removal of the programs could also rush Social Security’s insolvency, argued Maya MacGuineas, president of the Committee for a Responsible Federal Budget, in a statement following the announcement of Senator Schumer’s support. If the bill is passed, the Congressional Budget Office estimates it would cost the U.S. $196 billion over the next 10 years. Social Security’s trust fund is already anticipated to be depleted by 2033.
“Hastening Social Security’s insolvency will only make its consequences worse; benefits will be cut by an additional 1 percent while reducing lifetime benefits for a typical couple by $25,000,” said MacGuineas in a statement. “We should be talking about how to prevent this cut, not make it bigger and happen sooner.”
Andrew Biggs, a senior fellow at the American Enterprise Institute (AEI) and the former principal deputy commissioner of the Social Security Administration, worries that without the rules, government employees could potentially “double dip” on Social Security benefits and receive an unearned advantage.
In a post to Substack, Biggs contends that the WEP and GPO were created during a time when the SSA did not have available data on non-retirees’ earnings from non-covered employment. However, the agency does have enough information today to reform the rules without creating windfalls, he argues.
“But that’s not what the Social Security Fairness Act does,” Biggs says. “It simply repeals the WEP and GPO rules and restores Social Security windfalls to public employees who don’t participate in the program. That’s unfair and it’s costly and most of the windfalls would go to higher-income retirees anyway.”
Initial passing
On Wednesday, the Senate advanced the measure with an unofficial 73-27 vote, according to a webcast on the floor of the chamber. It is now headed towards a final vote by the Senate.
“We will vote on taking up the Social Security Fairness Act to repeal flawed policies that eat away at the benefits of those who’ve worked as teachers, firefighters, postal workers, or public sector workers,” Sen. Schumer said on X before the procedural vote. “Retirees deprived of their hard-earned benefits will be watching closely.”
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Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.
