Pension and Retirement Benefits for Government Workers

Opening Statement of Susan M. Collins Chairwoman
Committee on Senate Governmental Affairs

Today, the Committee on Governmental Affairs is holding a hearing to examine the effect that the Social Security government pension offset (GPO) and the windfall elimination provision (WEP) have on public employees and retirees.
Individuals affected by both the GPO and the WEP are those who are eligible for federal, state or local pensions from work that was not covered by Social Security, but who also qualify for Social Security benefits based on their own work in covered employment or that of their spouses. While the two provisions were intended to equalize Social Security`s treatment of workers, many of us are concerned that they unfairly penalize individuals for holding jobs in public service when the time comes for them to retire.

These two provisions have enormous financial implications not just for federal employees, but for our teachers, police officers, firefighters and other public employees as well. Despite their challenging, difficult, and sometimes dangerous jobs, these invaluable public servants often receive far lower salaries than private sector employees. It is therefore doubly unfair to penalize them when it comes to their Social Security retirement benefits. These public servants-or their spouses-have all paid taxes into the Social Security system. So have their employers. Yet, because of these two provisions, they are unable to collect all of the Social Security benefits to which they otherwise would be entitled.

While the GPO and WEP affect public employees and retirees in virtually every state, their impact is most acute in 15 states, including Maine. Nationwide, more than one-third of teachers and education employees, and more than one-fifth of other public employees, are affected by the GPO and/or the WEP.

Almost one million retired government workers across the country have already been adversely affected by these provisions. Millions more stand to be affected by them in the future.

Moreover, at a time when we should be doing all that we can to attract qualified people to public service, this reduction in Social Security benefits makes it even more difficult for our federal, state and local governments to recruit and retain the teachers, police officers, firefighters and other public servants who are so critical to the safety and well-being of our families.

The Social Security windfall elimination provision reduces Social Security benefits for retirees who paid into Social Security and who also receive a government pension from work not covered under Social Security, such as pensions from the Maine State Retirement Fund. While private sector retirees receive monthly Social Security checks equal to 90 percent of their first $606 in average monthly career earnings, government pensioners are only allowed to receive 40 percent-a harsh penalty of more than $300 per month.

The government pension offset reduces an individual`s survivor benefit under Social Security by two-thirds of the amount of his or her public pension. It is estimated that nine out of ten public employees affected by the GPO lose their entire spousal benefit, even though their deceased spouses paid Social Security taxes for many years.

What is most troubling is that this offset is most harsh for those who can least afford the loss-lower-income women. In fact, of those affected by the GPO, 73 percent are women. According to the Congressional Budget Office, the GPO reduces benefits for more than 200,000 of these individuals by more than $3,600 a year- an amount that can make the difference between a comfortable retirement and poverty.

Our teachers and other public employees face difficult enough challenges in their day-to-day work. Individuals who have devoted their lives to public service should not have the added burden of worrying about their retirement. This is an issue that I have heard about at the grocery store, at my church, and even at my 30th high school class reunion from my many friends who have entered the teaching profession and who are committed to living and working in Maine. They love their jobs and the children they teach, but they worry about the future and about their financial security in retirement.

I also hear a lot about this issue in my constituent mail. Patricia Dupont, for example, of Orland, Maine, wrote that, because she taught for 15 years under Social Security in New Hampshire, she is living on a retirement income of less than $13,000 after 45 years in education. Since she also lost survivors` benefits from her husband`s Social Security, she calculates that a repeal of the WEP and the GPO would double her current retirement income.

Moreover, these provisions penalize private sector employees who leave their jobs to become public school teachers. Ruth Wilson, a teacher from Otisfield, Maine, wrote:

``I entered the teaching profession two years ago, partly in response to the nationwide pleas for educators. As the current pool of educators near retirement in the next few years, our schools face a crisis. Low wages and long hard hours are not great selling points to young students when selecting a career.

``I love teaching and only regretted my decision when I found out about the penalties I will unfairly suffer. In my former life as a well-paid systems manager at State Street Bank in Boston, I contributed the maximum to Social Security each year.
When I decided to become an educator, I figured that because of my many years of maximum Social Security contributions,
I would still have a livable retirement `wage.` I was unaware that I would be penalized as an educator in your State.``
Maine, like many states, is currently facing a shortage of teachers, and I just don`t think that we can afford to discourage people from pursuing important careers in public service in this way. That is why I joined Senator Dianne Feinstein in introducing the Social Security Fairness Act earlier this year to repeal these two provisions.

Today`s hearing will examine why the GPO and WEP were enacted, how they work, what their effect has been on public employees and retirees, and options for their modification or repeal.

We will hear first from Senator Dianne Feinstein, who is a leader in the effort to repeal these provisions. We will hear next from the Social Security Commissioner, Jo Anne Barnhart, who will discuss the history and reasons underlying the GPO and WEP, as well as the impact that proposals to repeal or modify these two provisions would have on Social Security retirement and disability funds.

Finally, we will hear from a panel representing public employees and retirees, including Mrs. Julia Worcester, who has traveled all the way from Columbia, Maine, to tell us about her work both in Social Security-covered employment and as a Maine teacher, and about the effect that the GPO and WEP have had on her income in retirement.

My hope is that this oversight hearing will prompt the Finance Committee to act on this important issue.