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Social Security Payouts May Be Lowered For Public Employees

Social Security Payouts
Social Security Payouts; Source-CNBC

The Windfall Elimination Provision (WEP) and Government Pension Offset (GPO) rules, which lower benefits for workers in positions that did not pay Social Security taxes also known as noncovered earnings have been endorsed by the American Postal Workers Union as part of the Social Security Fairness Act, a bill that has been proposed in Congress.

Social Security Payouts

Social Security Payouts; Source-CNET

Other groups that represent public employees, such as teachers, firefighters, and police, support the measure. Despite the political division in the House of Representatives, the bill enjoys the overwhelming support of 300 cosponsors from both parties. Members of the House Ways and Means Committee were recently motivated to request a hearing in a letter by this support. Additionally, 49 leaders from both parties have endorsed the Social Security Fairness Act, which was presented in the Senate. However, according to other experts, changing the rules alone might not be the best method to improve system fairness.

Worker Earned Benefits Plan

If an individual receives a life insurance or disability benefit from an employer that did not deduct Social Security taxes and is eligible for benefits from work in other occupations where they did pay into the program, the Worker Earned Benefits Plan (WEP) applies to the calculation of retirement or disability benefits. The basic benefit amount for a worker is determined by a formula after taking into account their average adjusted monthly earnings for Social Security purposes. A portion of the average adjusted monthly earnings replacement rate is reduced from 90% to 40% for workers impacted by the Worker Earnings Protection Act (WEP).

In the meantime, benefits for wives and widows or widowers of people receiving retirement or disability pensions from municipal, state, or federal governments are cut by the GPO. Tens of thousands, perhaps even millions, of public employees who contributed to Social Security are impacted by this and are effectively being penalized for their employment status. Social Security payouts are decreased under the GPO by a majority of the federal pension. If the government pension exceeds the Social Security benefit by two-thirds, the Social Security payment might be zero.

Public Workers Who Pay Social Security Taxes

Workers who contribute Social Security taxes throughout their careers should be treated equally to those who do not, according to the WEP and GPO guidelines. According to the Bipartisan Policy Center, however, some beneficiaries receive smaller payments under the current regulations than they would have if they had contributed to Social Security throughout their careers, whereas others receive larger benefits. That being said, eliminating the GPO and WEP regulations would leave noncovered workers with excessively high Social Security payouts. Social Security payouts are progressive, which means that they replace a bigger portion of poorer earners’ income in part. This could contribute to that advantage.

 

 

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