posted
On another thread, I was asked why my husband wouldn't receive social security benefits even though he pays into the system through his self-employment income.
The answer is the Government Pension Offset and Windfall Elimination Provision, passed by Congress to prevent rich people from receiving an economic windfall when they retire.
Rich people like public school teachers, firefighters, and police officers.
Unfortunately, many people aren't aware of it, and that can be really, really dangerous when you are counting on some portion of your social security benefits to help fund your retirement. If, for example, you take the cute little sheet the government sends you around your birthday and figure that the amount of monthly benefit on there is something you'll actually receive. We've known several firefighters who retired without any knowledge that the sheet didn't tell the whole story - they weren't eligible to receive those benefits, and the benefits were either cut drastically or eliminated altogether.
Here are some points listed by the Massachusetts Teacher's Association:
quote:Nine out of ten public employees affected by the GPO lose their entire spousal benefit, even though their spouse paid Social Security taxes for many years.
The WEP causes hard-working people to lose up to sixty percent of the benefits they earned themselves.
Many workers rely on misleading Social Security Administration statements that fail to take into account the GPO and WEP when projecting benefits.
This is a national problem -- there are affected people in all states.
The impact of the GPO and the WEP is not just felt in 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.
The loss of income forces some people into poverty.
Some 300,000 individuals lose an average of $3,600 a year due to the GPO -- an amount that can make the difference between self-sufficiency and poverty. Impacted people 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.
We have a national teacher shortage, but the GPO and WEP discourage people from entering/staying in the profession.
Individuals who worked in other careers are less likely to want to become teachers if doing so will mean a loss of earned Social Security benefits. The GPO and WEP are also causing current educators to leave the profession, and students to choose courses of study other than education.
Non-Social Security states are going to find it increasingly difficult to attract quality educators as more folks learn about the GPO and WEP.
The GPO and WEP don't only impact educators-other public employees like police officers and firefighters are hurt.
We should respect, not penalize public service.
So this is why the social security thing makes me angry. Especially because I lose my benefits, too, for all the years I've worked. I made all my quarters and was qualified for benefits before I quit to stay home with the kids, but I will never see any of the contribution.
It's darn frustrating. And really sad for people who don't know about it and get a nasty surprise when they retire. At least, my husband and I can plan ahead.
Posts: 14428 | Registered: Aug 2001
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quote:Current law provides that if you work for an employer who does not withhold Social Security taxes, the pension you receive based on that employment will reduce your Social Security benefits from any other employment. The Windfall Elimination Provision applies to Foreign Service Retirement System (FSRDS) annuitants who were not eligible for a government annuity until after 1985. The WEP reduction can reduce a retiree's earned Social Security benefit by as much as 60 percent.
A related law, the Government Pension Offset , prevents FSRDS annuitants (who were first eligible to retire in December 1982 and later) from collecting both a government annuity that was not covered by Social Security and Social Security benefits that are based on the work record of their spouses. The effect of the GPO is that two thirds of an annuity will offset any Social Security benefits that would be payable to the retired government worker as a spouse.
Legislation to eliminate both the Windfall Elimination Provision and the Government Pension Offset has been introduced in the House (H.R. 594) and in the Senate (as companion bill S. 349.) The Senate Committee on Governmental Affairs held the first ever hearing on WEP and GPO on September 24.
A new bill to modify the WEP, but not the GPO, was introduced by Rep. Kevin Brady on May 19, 2004. H.R. 4391 proposes a calculation of benefits based on a worker's actual work history and contributions. According to the Congressional Research Service, H.R. 4391 would provide an increased benefit for low and medium wage earners, but a decreased benefit for most high wage earners. 10/27/04
posted
Public employees like the ones you mentioned are excluded from recieving social security because they recieve a pension from the state instead.
What I don't know is if those public employees pay into the pension fund from their paycheck. Do they?
Posts: 26077 | Registered: Mar 2000
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posted
It doesn't seem fair that a spouse loses her/his benefits because they are married to a public servant, though.
Posts: 21182 | Registered: Sep 2004
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posted
But remember Coccinelle, no one is arguing they should get social security even though they don't pay into it. They are arguing that even when they do pay into it at another job they lose it - and the spousal benefits too.
It doesn't "even out" It may for that one job - like my husband's firefighter job - but it doesn't even out when you take into consideration all the social security he's paid into for the years before he became a firefighter and all the years that he has been self employed.
I find it strange that with different programs the government is trying to encourage people to retire from one career and go into public teaching - but then discourages that practice by taking away the benefits they earned at their previous job.
Posts: 14428 | Registered: Aug 2001
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posted
However, my retirement income will also be substantially higher than Social Security- if I work for Texas as a teacher for 20ish years, when I retire I'll be paid 80% of my highest salaried year. If I work 30 years, it's 90%.
Posts: 862 | Registered: Oct 2003
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posted
Also, Belle, things may not be as bad as you think.
First, the GPO seems to only affect your benefits from SSA as a spouse (or surviving spouse) - benefits earned by yourself do not seem to be affected. So the amount you would receive of your husband's SSN earnings is cut (by up to 2/3 his pension amount, so probably it will be cut 100%). But what you earned under SSN by your own work does not seem to be affected:
quote:The GPO will reduce the amount of your Social Security spouse's, widow's or widower's benefits by two-thirds of the amount of your government pension. For example, if you receive a monthly civil service pension of $600, two-thirds of that, or $400, must be used to offset your Social Security spouse's, widow's or widower's benefits. If you are eligible for a $500 spouse's benefit, you will receive $100 per month from Social Security ($500 - $400 = $100). source
I'm pretty sure this means benefits based on your earnings aren't reduced by the GPO:
quote:The amount in #3 (above) is your estimated spouse’s, widow's or widower’s benefit after GPO is applied. Add that figure to the estimated amount of your retirement benefit to find your total estimated monthly benefit.
Still sucks, but you should get something for the earnings you contributed with.
I can't tell for sure the total effect on the WEP side of things, but that definitely only affects the SS benefits based on your husband's SS contributions, not yours. I think his can be reduced at most to one third what he would get otherwise, but the instructions aren't clear enough for me to say for sure.
quote:However, my retirement income will also be substantially higher than Social Security- if I work for Texas as a teacher for 20ish years, when I retire I'll be paid 80% of my highest salaried year. If I work 30 years, it's 90%.
But if you hadn't decided to go into teaching until you were, say 45, that amount would end up being considerably less, right? And if benefits you'd earned before were taken away...
posted
But imagine if you worked two jobs - See, we don't support our family on a firefighter income. We support it on two incomes - one from the fire department and one from our business.
Even if we retired with 90% of our firefighter pay (which we won't, 66.67% is the highest level) it wouldn't be enough. Plus, if your spouse has been paying into social security (like I have) you would receive nothing from social security for them.
A good pension plan is nice, but I don't plan to rely on just the firefighter pension when we retire.
Posts: 14428 | Registered: Aug 2001
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posted
There are reductions in the amount taken away depending on how many years he's earned a certain amount of money (~16k in 2004) on which he's paid SS contributions. Hopefully that will help reduce the effects as well.
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