Senate Committee Looks at Provisions of Social Security Law that Pinch Pensions

The Senate Finance subcommittee conducted hearings yesterday regarding provisions of the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO). Both reduce the Social Security benefits of retirees who also receive a government pension that is not part of the Social Security system.

About a fourth of public employees do not pay into Social Security because they are in government-sponsored pension plans. That category includes federal employees hired before 1984, when Congress created a new federal retirement system and made Social Security part of it.

Many public sector retirees think they are unfairly penalized by the WEP and GPO, and a half-dozen bills have been introduced in Congress to repeal or modify the two provisions. One introduced by Sens. Susan Collins and Dianne Feinstein came up at the hearing yesterday.

The GPO "is most harsh for those who can least afford the loss, and that is lower-income women," Collins testified yesterday. The offset reduces benefits by more than $3,600 a year for more than 200,000 retirees, "an amount that can make the difference between a comfortable retirement and poverty," Collins said.

Efforts to repeal the two provisions have stalled, in large part because of the cost -- billions of dollars over the next decade. Some proposals would extend Social Security coverage to all state and local government employees, but that transition might be difficult to pull off, since many public pension funds rely on stock market investments for income.