The Windfall Elimination Provision (WEP)
The Windfall Elimination Provision (WEP) is a federal law that applies to individuals who receive a pension from a public-service job that is not covered by Social Security. If the public pensioner also worked in a Social Security-covered job for at least 10 years, the WEP creates a public pension offset that can greatly reduce that person’s Social Security benefit.
The WEP was created by Congress in 1983 so that Social Security could distinguish between two types of workers: 1) those who earn pensions from primary jobs in non-covered employment, but whose low-wages or short work records in secondary jobs make them appear to be low-wage careerists to Social Security; and 2) workers who actually spent their entire work lives in low-wage jobs.
Congress felt the first group was unfairly benefiting from a Social Security formula that’s designed to give low-wage workers an advantage. In order to give low-wage earners a decent Social Security benefit, the normal benefit formula is weighted so they get a higher replacement rate on their earnings than higher-wage workers receive. Low-wage workers receive nearly 60% of their previous earnings in Social Security retirement benefits; moderate-wage workers get about 42%; and high-wage workers get about 25%.
Because the public employee’s primary earnings aren’t covered by Social Security, the benefit formula is applied only to wages earned on the secondary job. As a result, the normal benefit formula would treat the public employee as a lower-income worker and would calculate benefits to achieve a 60% replacement rate. This could occur even though the public employee’s total lifetime earnings — including the earnings from a public-sector job — actually would be much higher than the earnings of someone who has earned low-wages in covered employment throughout their work life.
For those public retirees who come under the WEP, there’s a modified formula for determining the Social Security benefit. The WEP is described in a Fact Sheet provided by the Social Security Administration.
Neal and Brady Pursue Different Routes to Windfall Elimination Provision (WEP) Reform
Ways & Means Chairman Richard Neal (D-MA) and the Committee’s Ranking Member Kevin Brady (R-TX) have slightly different approaches to resolve the unfairness of the Social Security Windfall Elimination Provision (WEP).
Chairman Neal has reintroduced the Public Servants Protection and Fairness Act of 2021. The legislation establishes a new, fairer formula that will pay Social Security benefits in proportion to the share of a worker’s earnings that were covered for Social Security purposes. This provision is coupled with a benefit guarantee ensuring no benefit cuts relative to current law for all current and future retirees. Current WEP retirees will receive $150 a month in relief payments.
In the last Congress, Ranking Member Brady introduced the Equal Treatment of Public Servants Act of 2019. Brady reforms the Social Security Act by replacing an unfair WEP formula for calculating benefits with a new, fairer formula that treats teachers, police officers, firefighters, and other public servants like the rest of America’s workers. Mr. Brady has yet to reintroduce his legislation in the current Congress.
In addition to Chairman Neal’s WEP reform bill, there is a House bill (H.R. 82) that would fully repeal both the WEP and the Government Pension Offset (GPO).
More information is available about each of the bills at WEP/GPO Legislation (117th Congress)