Social Security reform for CSRS feds hits a roadblock

Increases in Social Security benefits for some federal employees under the Civil Service Retirement System are in limbo as House lawmakers debate changes to a complicated provision under a 33-year-old law.

Federal employee groups and some members of Congress thought they had reached a deal that would have dulled the Social Security penalty for federal employees and retirees under CSRS by way of the Equal Treatment of Public Servants Act, which was first introduced 12 years ago.

The bill would have addressed the Windfall Elimination Provision, which Congress enacted in 1983. The goal was to prevent what members of Congress often called “double-dipping.” Before 1983, federal employees and retirees, whose employers did not withhold Social Security taxes, received a Social Security benefit that represented a higher percentage of their earnings, as well as a government pension.

Essentially, their benefits were calculated as if they were long-term, low-wage workers.

The WEP reduces a factor in the formula used to calculate federal employees’ Social Security benefits from 90 percent to as low as 40 percent — for other jobs they take that are covered by Social Security.

“Under the provision, we reduce the 90 percent factor in our formula and phase it in for workers who reached age 62 or became disabled between 1986 and 1989,” the Social Security Administration said in its fact sheet on WEP.

For example, if a federal employee under CSRS retires at age 55 and then takes a job in the private sector for 10 years, Social Security would only use those 10 years of earnings to calculate benefits.

The WEP does not apply to members of the Federal Employees’ Retirement System (FERS), because employees under this system already pay into Social Security.

The changes under the Equal Treatment of Public Servants Act weren’t perfect, said Jessica Klement, legislative director for NARFE. But it would have reduced the current WEP penalty by no more than 50 percent for any federal employee or retiree who turned age 62 by 2017, according to the original version of the bill.

Individuals who turn 62 on or after 2017 would still see a WEP penalty on their Social Security benefits, but the new bill’s formula would have reduced it, meaning the retirees’ Social Security benefit would’ve increased.

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But based on new data estimates from the Social Security actuary, the bill’s sponsor, Rep. Kevin Brady (R-Texas), substituted the old language with a substitute amendment and released a new version the day prior to the July 13 markup before the House Ways and Means Committee.

The changes in the new version are based on updated information from the SSA actuary, a  Ways and Means spokesperson said, meaning affected federal employees would get a 14.7 percent rebate of the WEP penalty rather than 50 percent.

“The substitute removed all the enforcement provisions, which sharply decreases the amount of money our members would get back through the formula laid out in the original bill, basically leaving our members with very little relief from the WEP penalty,” Klement said.

NARFE made its position on the new version of the bill clear to the committee.

“This relief has been a long time coming,” NARFE National President Richard Thissen wrote in a July 13 letter to the House Ways and Means Committee. “Under the substitute, relief for those currently affected is substantially reduced until 2026. While some relief is better than none, the substitute bill is a huge step backwards and NARFE cannot support it.”

But ultimately, the committee decided it would not consider the Equal Treatment of Public Servants Act in its current form.

“It’s become clear over the past several days that public servants are not in agreement about this legislation,” said Brady, the committee chairman, at the markup. “We need the community to come together on what they can all support, or the consequences unfortunately are to see the current WEP harm people on a daily basis.”

Members of the committee seemed to agree that there are faults with Windfall Elimination Provision in its current form.

“It never seemed fair to me that public servants who earn a pension at work and also in Social Security whether it was a second job, summer job or second career, that they should be docked in their Social Security benefits,” Brady said.

NARFE said it would prefer to see the provision eliminated entirely but recognized that members of Congress won’t like that argument.

Still, it’s unclear where the WEP will go next, considering lawmakers largely agreed they’d like to see it change but couldn’t yet agree on the details.

“Clearly, we need an effort by those who are to benefit, or might benefit to come together and offer a proposal that might move us forward in this task,” Rep. Richard Neal (D-Mass.) said at the markup. “It is a complicated issue, but not to miss the point that if you paid into Social Security based upon the same proscribed formula that everybody else did, you should be able to draw down the benefit.”

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Dec 07, 2021 Close Change YTD*
L Income 23.3889 0.114 4.32%
L 2025 12.1624 0.1129 7.70%
L 2030 43.1805 0.5434 9.58%
L 2035 12.9956 0.1791 10.38%
L 2040 49.2803 0.7383 11.19%
L 2045 13.5228 0.2165 11.85%
L 2050 29.6775 0.5061 12.55%
L 2055 14.6766 0.3038 15.21%
L 2060 14.6765 0.3038 15.21%
L 2065 14.6764 0.3038 15.20%
G Fund 16.7204 0.0006 1.26%
F Fund 20.9201 -0.0404 -1.14%
C Fund 70.6894 1.4348 23.16%
S Fund 83.9657 2.0886 11.80%
I Fund 38.7597 0.7792 6.04%
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* YTD data is updated on the last day of the month.