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seabeedeb  
#1 Posted : Friday, January 23, 2009 3:32:41 PM(UTC)
seabeedeb

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The CSRS folks don't seem to realize that they would be getting an unfair advantage without the WEP and GPO. The Social Security website explains it pretty well, so I've copied the pertinent sections here, with my comments at the end of each section.


WEP Explanation from Social Security

Why a different formula is used

Social Security benefits are intended to replace only a percentage of a worker’s pre-retirement earnings. The way Social Security benefit amounts are figured, lower-paid workers get a higher return than highly paid workers. For example, lower-paid workers could get a Social Security benefit that equals about 55 percent of their pre-retirement earnings. The average replacement rate for highly paid workers is about 25 percent.

Before 1983, people who worked mainly in a job not covered by Social Security had their Social Security benefits calculated as if they were long-term, low-wage workers. They had the advantage of receiving a Social Security benefit representing a higher percentage of their earnings, plus a pension from a job where they did not pay Social Security taxes. Congress passed the Windfall Elimination Provision to remove that advantage.
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So without the WEP, CSRS folks who made good money as government employees could get their Social Security benefits calculated as if they had been low-wage earners their entire life, resulting in a much higher benefit for them. For an example, let’s compare highly paid federal employees with the same amount in lifetime earnings: The CSRS person who paid Social Security taxes on 10 years of wages would get 55% of their earnings in benefits, while the FERS person who paid Social Security taxes on 30 years of wages would get only 25% of their earnings in benefits. I don’t understand why the CSRS folks think they should get more than double the percentage in benefits for paying less in taxes over a shorter period of time.

C'mon CSRS folks, do you really think your Social Security benefits should be calculated at a false income level that is substantially less than your actual lifetime earnings? The amount you see on your Social Security statement is NOT the amount YOU have earned, it is the amount a person who has paid Social Security taxes on all of their wages has earned. You haven't earned the benefit on your Social Security statement unless you have paid all of the taxes to support it, which you have not.



GPO Explanation from Social Security

Why will my Social Security benefits be reduced?

Benefits we pay to wives, husbands, widows and widowers are “dependent’s” benefits. These benefits were established in the 1930s to compensate spouses who stayed home to raise a family and who were financially dependent on the working spouse. But as it has become more common for both spouses in a married couple to work, each earned his or her own Social Security retirement benefit. The law has always required that a person’s benefit as a spouse, widow, or widower be offset dollar for dollar by the amount of his or her own retirement benefit.

In other words, if a woman worked and earned her own $800 monthly Social Security retirement benefit, but she was also due a $500 wife’s benefit on her husband’s Social Security record, we could not pay that wife’s benefit because her own Social Security benefit offset it. But, before enactment of the Government Pension Offset provision if that same woman was a government employee who did not pay into Social Security, and who earned an $800 government pension, there was no offset and we were required to pay her a full wife’s benefit in addition to her government pension.

If this government employee’s work had instead been subject to Social Security taxes, any Social Security benefit payable as a spouse, widow or widower would have been reduced by the person’s own Social Security retirement benefit. In enacting the Government Pension Offset provision, Congress intended to ensure that when determining the amount of spousal benefit, government employees who do not pay Social Security taxes would be treated in a similar manner to those who work in the private sector and do pay Social Security taxes.
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So it appears the folks who are against the GPO want special benefits that no one else gets. Even though they haven't paid any Social Security taxes on their wages, they want to receive benefits that are denied to spouses who have paid Social Security taxes on all of their wages. How is that fair?

So that’s how I see it. What do you think?

Deb
mtg2005  
#2 Posted : Friday, January 23, 2009 10:27:32 PM(UTC)
mtg2005

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quote:
How is that fair?

So that’s how I see it. What do you think?



I think the people that are affected don't care if it is fair. Your words have been linked and discussed many times on this and other websites. Here are the most recent discussions of WEP:

WEP "Substantial Earnings"

Social Security Windfall provision
ejm604  
#3 Posted : Saturday, January 24, 2009 12:21:56 AM(UTC)
ejm604

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If everyone is not treated the same, for like contributions. Then those contributions should be returned, as an option. Take it or leave it!
mtg2005  
#4 Posted : Saturday, January 24, 2009 1:08:42 AM(UTC)
mtg2005

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I think that is the point of the original post. You ARE treated about the same as your wage cohort with a SS contribution job.
seabeedeb  
#5 Posted : Saturday, January 24, 2009 6:10:19 AM(UTC)
seabeedeb

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Good point about the affected people maybe not caring if it's fair or not. It makes me sad that some of the affected folks may not care if it's unfair for everyone else, as long as that unfairness works to their personal advantage, but such is life sometimes. I have followed the WEP/GPO discussions off and on, and I had missed your most recent posts, so thanks for the links - I really appreciate all the detail you provide. I was also trying to give a more detailed explanation, hopefully from a different perspective that some people haven't considered before, to show why the WEP and GPO really are fair.

Many of the comments against the WEP/GPO sound like the person hasn't followed the links to the SS web site, so I thought it might be helpful to copy the information here to make it easier for people to read it. I have also seen comments in older posts saying the person just wanted the benefits they had earned, referring to the amount on their SS statement, so some folks aren't aware that the amount on the SS statement shows what the future benefit would be for a person who paid SS taxes on all of their wages and worked until age 62. If I missed previous explanations for this, I apologize for repeating it.

After reading your posts, mtg2005, it sounds to me like the WEP needs to be revised but not eliminated. If there are ways to make it more fair, then I think it would be easier to get changes made to the law rather than eliminating it. But I don't think I agree with proposals to eliminate the WEP under certain low income levels because then it is really just a form of welfare for only one category of public employees. What do you think?

Deb
mtg2005  
#6 Posted : Saturday, January 24, 2009 7:38:05 AM(UTC)
mtg2005

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quote:
But I don't think I agree with proposals to eliminate the WEP under certain low income levels because then it is really just a form of welfare for only one category of public employees. What do you think?



There already was a consideration of low pensions. I couldn't investigate it when I ran the scenarios because I couldn't see that changing the pension amount affected the results I got. It could be that I didn't try the right combination of data. But the current policy is:

quote:
... and a guarantee
If you get a relatively low pension, you are protected. The reduction in your Social Security benefit cannot be more than one-half of the amount of your pension that is based on earnings after 1956 on which you did not pay Social Security taxes.



I don't know about the changes that you are referring to but I wouldn't like to see a person that worked all their life end up without shelter and food just because they are old and sickly. But yes, starting with putting a lot of bills that previously were covered by Medicaid into the Medicare column, it does seem that they are constantly moving traditional welfare budget cases onto the SS and Medicare budgets. I don't know the actuarial effect of this. I even wondered if the new proposed bailout money for retirees ($300 per retiree) was coming from a diverting of trust fund money to current retirees. If so, it is a terrible precedence if you ask me.

I admit to being curious as to how low a pension some of the lower skilled workers in non-SS pensions get. But what about that worker's pals that didn't spend 10 years in SS and still get a pension too low to live on? Is that in the bill? Are they trying to eliminate the substantial years rule too for poor pensioners that never paid in? It seems to me that if a state is giving grossly inadequate pensions, there is probably little difference in two janitor's pensions except for a year multiplier perhaps.

So, no I don't think SS should be used to reduce welfare payments in the general budget. I think it should be what it was intended to be. Poor workers get substantially more than middle income workers as a percent of wages. It already has enough of a wealth transfer right now. But, alas, my opinion isn't worth the electrons in this post, so I won't second guess critters. Both ilk of critters drool over how to recharacterize SS funds to get votes without losing votes of those workers who lose from such recharacterizations. Like taxes, they think if everything gets more confusing, no one will know or care. (Look at the change in SS taxes based on income and the unintended impact that had on seniors with deferred savings.)

[This message was edited by mtg2005 on January 24, 2009 at 07:02 PM.]
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