Susan Collins

Eliminating Inequities in Retirement Benefits - April 1, 2005

Susan Collins
April 01, 2005
Weekly Column
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Individuals should receive the retirement benefits that they have earned. This belief has led me to work with Senator Diane Feinstein of California in introducing the Social Security Fairness Act. Our bill repeals two sections of current law—the windfall elimination provision (WEP) and the government pension offset (GPO)—that unfairly reduce earned Social Security benefits for many Maine school teachers and other public employees. Individuals affected by 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 the private sector or that of their spouses. While the two provisions were intended to equalize Social Security’s treatment of workers, I am concerned that they instead 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 Maine’s teachers, police officers, firefighters, and other public employees as well. Despite their challenging, difficult, and sometimes dangerous jobs, these invaluable public servants often receive lower salaries than private sector employees. It is therefore doubly unfair to penalize them when it comes to their Social Security 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 would otherwise 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, where the state retirement systems do not include a Social Security component. Nationwide, more than one-third of teachers and other public 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 these unfair regulations in the future. Moreover, at a time when we should be doing all that we can to attract qualified people to public service, a 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 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 Social Security checks based on 90 percent of their first $612 average monthly career earnings, government pension checks are based on 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—often for many years. What troubles me most 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 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. Many Maine teachers have talked with me about this issue. They love their jobs and the children they teach, but they worry about the future and about their financial security in retirement. Patricia Dupont of Orland, Maine, wrote me 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. These provisions also penalize private sector employees who leave their jobs to become public school teachers. A teacher from Otisfield, Maine, wrote to me: “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.” In September of 2003, I chaired a Governmental Affairs Committee hearing to examine the effect that the GPO and the WEP have had on public employees and retirees. We heard compelling testimony from 73-year old Julia Worcester of Columbia, Maine, who told us about her work in both 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. Mrs. Worcester worked for more than 20 years as a waitress and in factory jobs before deciding, at the age of 49, to go back to school to pursue her life-long dream of becoming a teacher. She began teaching at the age of 52 and taught full-time for 15 years before retiring at the age of 68. Since she was only in the Maine State Retirement System for 15 years, Mrs. Worcester does not receive a full State pension. Yet she is still subject to the full penalties under the GPO and WEP. As a consequence, she receives just $107 a month in Social Security benefits, even though she worked hard and paid into the Social Security system for more than 20 years. After paying for her health insurance, she receives less than $500 a month in pension income. After a lifetime of hard work, Mrs. Worcester, is still substitute teaching at 75, just to make ends meet. This simply is not fair. Individuals who have devoted many years to public service should not be penalized when it comes to their retirement benefits. I will continue to work to remedy this inequity.