August 6, 2004 |
2004-R-0613 | |
STATUS OF FEDERAL EFFORTS TO REPEAL THE GOVERNMENT PENSION SOCIAL SECURITY OFFSET | ||
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By: John Moran, Associate Analyst | ||
You asked for the status of Congressional efforts to repeal the Social Security reductions for people who receive government pensions for employment that was not part of the Social Security system and a brief summary of these reductions.
In the current Congressional session (108th), members of both houses introduced bills to eliminate these two forms of Social Security benefit reductions (one is known as the government pension offset, which applies to surviving spouse benefits, and the other is the windfall elimination, which applies when a person has two pensions but only one job paid into Social Security). Ultimately several of the bills were rolled into a broader Social Security bill (HR 743), but the provisions to repeal either reduction were eliminated from the final version. HR 743 ultimately became the Social Security Protection Act of 2004 (Public Law 108-203).
These federally mandated reductions of Social Security old age benefits affect people whose government job does not pay into the Social Security system. In Connecticut, this most commonly affects teachers because the Teachers’ Retirement System is independent from, and does not pay into, Social Security.
The reductions, or offsets, are an attempt to treat government employees whose jobs do pay into Social Security the same as those whose government jobs do not. By law, if a person receives a Social Security pension and survives a spouse and is eligible for spousal benefits, then his own benefits offset what he would otherwise be eligible for in spousal benefits.
The offset for a surviving spouse whose own work was not part of Social Security makes the same type of reduction. Spousal benefits were originally instituted decades ago when one spouse stayed home to raise children and had no opportunity to earn her own retirement benefits. But as it became more common for both spouses to work, the offset was created to take into account other sources of government retirement income. A more detailed description of how the offsets work is in OLR Report 2001-R-0907.
P. L. 108-203 modified the offsets, but they remain fundamentally unchanged.
1. The law closes a loophole that allowed some non-Social Security member employees to become exempt from the government pension offset provision by working a day or two in a job that contributes Social Security payroll taxes. The new law requires a non-Social Security government employee to work in a job that contributes to the system for at least five years before he can be exempt from the offset.
2. It requires government employers to notify non-covered employees hired on or after January 1, 2005 of the potential effect of non-covered work on their Social Security benefits. In Connecticut, this could apply to a person who goes into teaching after previously working at a job that contributed to Social Security. Under the new law, the new non-contributing employer is required to warn the employee that their new position could result in a reduction in Social Security benefits.
JM: ro