Howdy, Stranger!

It looks like you're new here. If you want to get involved, click one of these buttons!

In this Discussion

Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.

    Support MFO

  • Donate through PayPal

Social Security WEP & GPO

Many federal & state employees don’t participate in Social Security due to historical exemptions, but may qualify for spousal benefits based on the work records of their spouses. If some of your previous job(s) weren't covered by Social Security (i.e. you didn't have to pay the FICA payroll tax), then your benefit payments may be reduced due to the WEP (Windfall Elimination Provision). Another, GPO (Government Pension Offset), may reduce your spousal benefit payments. Spousal benefit for Medicare (if not eligible on own) is not affected by these offsets. These WEP & GPO offsets are harsh & there are proposals to reduce or eliminate them in some cases.

Proposals to eliminate WEP & GPO are moving through the Congress.
https://www.cnbc.com/2024/09/19/bill-to-eliminate-social-security-gpo-wep-rules-gets-closer-to-a-vote.html

Comments

  • +1.
    I recall applying for SS and being told I'd be receiving reduced benefits. Because I had "non-covered" jobs for a lotta years. But I'd ALWAYS paid in. I had to go to the local office in person. Then they fixed their mistake. Stupid system, when they can say that to a guy like me.
  • This has been going on a long time, especially ramped up at election time. In 2003, for example, Diamond and Orzag, made a sensible proposal that fit better into the information age:
    Reforming the GPO and WEP
    In Social Security

    This proposal focuses, not on the years and money paid in, but, while giving credit for this, it also focuses on the years and money not paid in that could used for an alternate pension system or could be saved. The main goal is simple - put the state or non-profit worker into the proper bend point in the regular calculation.

    This more recent discussion is pretty good:
    Article by Kathleen Romig:
    Repealing Social Security’s WEP and GPO Rules Would Be Misguided

    I studied this myself years ago when, in my ignorance, I thought people were being treated unfairly. I discovered that, whereas the Greenspan crew did their best to bring fairness to an unfair reward for non-pay-in, the lack of computers of the era with the double problem of inadequate records of salaries made their solution rather broad but, perhaps, necessary. In today's world, it is simply not necessary to keep the current method of determining the GPO/WEB. We have computers and the data to do a fairer calculation.
  • @Anna translate, please?
  • edited September 21
    @Crash - not sure what you want translated. What are you looking for from a discussion of GPO/WEP? GPO is the most controversial, in my opinion, of the two since the entitlement of a widow who was a stay-at-home spouse is straight forward and not adjusted down. Not so for a working but not paying-in spouse who gets adjusted down based on an amount of other funding derived or partially derived from the money denied the SS system. But this question will probably never be addressed since a non-working widow still needs money. So, anything I say past "the winner is the non-working widow" will ignore this. Besides, it is becoming mute as most women must work today. Also, I am sure SS experts would take issue with any attempt a novice like me made to explain the calculations. I think, whatever the explanation, you must remember that this was instituted when the Greenspan Commission was trying to get SS through the Boomer years so anything saving money that also seemed equitable (like GPO/WEP) was a winner. My GPO conclusion I shared with an Actuary friend of mine (cut paste from my email) in 2007 was "I cannot see that widows that held government jobs that didn't pay into social security are treated any differently as widows who paid into social security. They both end up with the higher of their own or their spouse's social security benefit whether their own is earned from social security or non-social security plans." And the pay-in person would be offended by my conclusion since it feels like a penalty for working based on need.

    That said, when Bush was pushing privatization schemes, I downloaded the AnyPIA program from SSA. It calculates entitled benefits. I only calculated benefits for a rather rudimentary design of varying pay-in patterns. Looking at dates on my emails to an actuary friend the time frame of these calculations was between 2003 and 2008. Most my GPO/WEP calculations were done, not from a point of view of the after-reduction amounts but were a what-if there was no reduction point of view. So it was, bottom-line, sufficient for my purposes but not exhaustive. That is why I recommend reading experts on the subject. I thought the two publications I selected were a good broad brush of the "why" story.

    What I found was the salaries and salary patterns played a huge impact. For example, imagine the difference in pay-in of A and B, both working early in life at minimum wage paying SS taxes for the same 10 years, then, engineering degree in hand, B working for a utility company for 35 years and A working for a non-SS state government for 35 at the same identical salary each year as B. In the SS calculation A becomes a low wage worker with a return on investment based on minimum wage for 10 years. B becomes a high wage worker with a return on investment based on a high wage for 35 years. A is in the highest return on investment bend point for the SS calculation and B's position on the bend points would put him at a lower return on investment. This appeared to be the major source of the windfall that is spoken of. So, you end up with a Greenspan Commitee recommendation to bring "fairness" to the paid-in worker, which, when handed to the math geeks, ended up with WEP which, I think, has more built-in protection for the low wage worker.

    Whereas I am clueless about fixing GPO inequity, it seems to me that, in today's information age that, if an equitable result was sought for WEP, it would be easy to generate an algorithm that took actual wage and wage pattern and combined it with a record of years paid in and years not paid in and come up with equal return on investment numbers for A and B.

    Edit: I had to edit this because, after defining A and B, I proceeded to profile them backwards, so I just edited to make B the pay-in and A the non-pay-in.
  • Crash said:

    +1.
    I recall applying for SS and being told I'd be receiving reduced benefits. Because I had "non-covered" jobs for a lotta years. But I'd ALWAYS paid in. I had to go to the local office in person. Then they fixed their mistake. Stupid system, when they can say that to a guy like me.

    I do not get why the SS office employees are trying to not give people their legitimate earned benefits. Who are they serving with their behavior? I do not understand their motives.
  • edited September 21
    BaluBalu said:

    Crash said:

    +1.
    I recall applying for SS and being told I'd be receiving reduced benefits. Because I had "non-covered" jobs for a lotta years. But I'd ALWAYS paid in. I had to go to the local office in person. Then they fixed their mistake. Stupid system, when they can say that to a guy like me.

    I do not get why the SS office employees are trying to not give people their legitimate earned benefits. Who are they serving with their behavior? I do not understand their motives.
    Ya, I was pissed. What they could not see (or misidentified?) was all of my payments into "self-employment tax" due to the fact that I worked for a church as a clergyman for many years. I could have chosen to opt out of SS, but that would have been extremely stupid. And the opt-out choice = declaring that I have a religious or ethical problem with SS. That's just not true for me. So, I did NOT opt-out. Glad I didn't. The Superv. at the local SS office looked at my previous 2 tax returns, and then my listed benefit jumped up by $500/month. But they treated me with contempt along the way. I was dealt with as if I were a liar. Liars exist on the bottom of the ocean, with the whale shit. He said he was sorry for that, "but we have to deal with lots of people trying to cheat."

    For SS purposes, clergy are self-employed. For federal tax purposes, clergy are employees. Ridiculous, silly, crazy, stupid and nuts.

  • @Crash
    But they treated me with contempt along the way. I was dealt with as if I were a liar. Liars exist on the bottom of the ocean, with the whale shit. He said he was sorry for that, "but we have to deal with lots of people trying to cheat."
    So, the SS folks see and discover all types of scammers; and yet this person stated they were sorry (for a mix up they were not part of) and yet you want to slam his head into the desktop !!! You do realize that this person is legally responsible for his actions to the folks he works for, eh? Did you say, "Thank you" when the interview was finished???

    Your 'grace' is underwhelming.
  • edited September 23
    @catch22. Too much to expect systems which SERVE people, eh? Your undeserved gratuitous editorial is noted. And what if I had just accepted their initial verdict? The Superv. himself was making a personal judgment call on my behalf, since the System doesn't bother to take into account my own (or anyone's) self-employment tax payments, when it comes time to start collecting SS. That's the way that picture added-up. I wonder how many others have been shortchanged? It's also possible to weed out the liars and cheaters without dealing with us all with such contempt. Did I leave there with some rancor? Sure. Did I throw a tantrum? No. Was I rude to him? No. But it would have been appropriate, if given the chance, for someone to be on the receiving end of what was on my mind. Of course, I never was given that opportunity. Those individuals are not themselves personally responsible for the buggy, unresponsive, ridiculously complicated system. But those people represent the system to people like me. So, "who (else) ya gonna call?" Ghostbusters?

  • edited November 8
    Until today, I had not read this thread after the first two posts.

    When I discovered my mother does not receive the higher spousal benefit, I took my parents to my local SS office (when they retired, they moved States to live with me) and apply for the higher benefit. My parents said they had originally applied for the spousal benefit and they presumed to be getting that. They came out of the office and said the SS office employee said the benefits can not be changed after they started and sent them away. That was 15 years ago. So, for past 20 years, my mother has been cheated out of some of her benefit, I am not sure for whose benefit.

    I know people who did not receive unemployment benefits when they lost jobs while they paid unemployment insurance when employed.

    If you are a Govt employee, there are no consequences for screwing citizens.

    @Crash’s subsequent posts makes me nervous about my benefits when I apply because I was self employed 1/3rd of my working life.

    Laws are man made stuff. I do not quibble about their fairness or unfairness but I quibble about their implementation. If we do not have a rules based society, what do we have? Politicians make laws and if you do not like their behavior, you can fire them (vote them out) but you can not vote out a Govt employee.
Sign In or Register to comment.