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Search Terms: Government Pension Offset, House or Senate or Joint

Document 6 of 26.

June 27, 2000, Tuesday

SECTION: PREPARED TESTIMONY

LENGTH: 1482 words

HEADLINE: PREPARED TESTIMONY OF JOHN KEANE ADMINISTRATOR POLICE AND FIRE PENSION FUND

BEFORE THE HOUSE COMMITTEE ON WAYS AND MEANS SUBCOMMITTEE ON SOCIAL SECURITY

SUBJECT - SOCIAL SECURITY "GOVERNMENT PENSION OFFSET"

BODY:
THERE'S NO RIGHT WAY TO DO THE WRONG THING

Chairman Shaw and Members of the Subcommittee, thank you for this opportunity to testify on the subject of the Social Security Government Pension Offset.

I am John Keane, the Administrator of the Jacksonville, Florida Police and Fire Pension Fund. While I am a member of the Executive Committee of the National Conference on Public Employees Retirement Systems and a committee member of the International Foundation of Employee Benefit Plans, I am testifying here today on behalf of our membership and beneficiaries which include police officers, firefighters, retirees, and spouses that either retired from or currently work for the Jacksonville Sheriff's Office or the Fire Rescue Department. We represent approximately 4,500 citizens. I have come here today to address a question of fundamental fairness. The Government Pension Offset is punitive and hurts most public servants who worked not only as police officers and firefighters, but as secretaries, school cafeteria workers, teachers' aides, and others who generally receive lower pension benefits. Moderate and low-income retirees were never the intended targets of the Government Pension Offset. The rule is unjust and inequitable and places an unconscionable financial burden on certain individuals solely because they happen to have been in public service. This inflicts suffering on some of the country's most valuable citizens based solely on the fact they chose public service careers. Although members of the Police and Fire Pension Fund do not pay into Social Security, many of our members have done so through other employment before, during, and after their service with the City of Jacksonville. Many of their spouses have also paid into the Social Security system. The Government Pension Offset has unintentionally harmed a large number of moderate to low income state and local government retirees, mainly women. Approximately 300,000 retired federal, state, and local government employees have already been affected by the Government Pension Offset. For many, the Government Pension Offset totally eliminates the Social Security spouse/widow benefit. The rest experience a dramatic benefit reduction. Thousands more will be affected in the future.

Under the Government Pension Offset, these retirees have their Social Security spousal benefits reduced by two-thirds of the amount of their public pension check. Social Security benefits of spouses or surviving spouses receiving government pensions are essentially reduced by $2 for every $3 earned. In 1993, the Congressional Budget Office estimated that the offset reduces the benefits of 180,000 former public employees by an average of $214 a month. They also estimated that about 90 percent of these retirees lose all their spousal benefits. Not only does it reduce the spousal benefit, it also reduces the widow or widower social security benefits.

The private sector is allowed to earn pensions, secure matching 401-K contributions, enjoy the benefits of stock options and an array of unimaginable forms of entrepreneurial compensation that is unheard of in the public sector. In addition, private sector employers frequently match the voluntary 401-K savings programs of their employees, who enjoy the full value of Social Security entitlements which are largely received on a tax-free basis to the recipient. At the same time, such private sector employees and employers make Social Security contributions without fear of"windfall eliminations" and "offsets". Such concerns are reserved solely for a relatively small number of government employees as in the case of our members.

The current law also fails to consider that the average employee pays an average of 8% into their pension plan plus the average 13% the employer pays. This is a combined contribution rate of 21%-much higher than the combined employee/employer contribution of 12.4% under Social Security. In the private sector, most pension plans require no employee contribution. The employer generally underwrites the full cost of the plan. As a result, workers covered by Social Security and a private pension can claim both benefits, with no offset, at a lower contribution than public employees, who must, because they receive a government pension, suffer the Government Pension Offset.

The Government Pension Offset law is unfair to many women, especially widows, who often lose all of the Social Security protection their husbands had provided for them. The Coalition to Assure Retirement Equity estimates that 54 percent of those affected by the current Government Pension Offset rules are women, because women tend to have the lowest pensions and also the longest life expectancy. Under current law, a Social Security widow's benefit is reduced or eliminated if the widow is eligible for a pension based on a local, state, or federal job that was not covered by Social Security. The end result has been that many thousands of women are unfairly punished by the Government Pension Offset, dropping substantial numbers below the poverty line in their retirement years.

The remittance of Social Security contributions represent Trust Fund dollars, not general tax revenues. As such, they take on a special character of assets that are intended to be held in trust for the stewardship responsibility of making future distribution for the benefit of the individual making the remittance .... not for re- distribution to others. Such re-distribution mechanisms may be appropriate for the application of fiscal policy for income tax revenues, but not for trust fund revenues held for the benefit of the retirement needs of individuals.

Our 4,500 members feel that the "Government Pension Offset" should be issued an honorable discharge. These provisions violate fundamental standards of fairness and communicate a message to governmental employees that their dedicated call to public service will require severe financial sacrifices not only during their working careers, but also in retirement.I support a reform bill that would repeal the Government Pension Offset for public pension retirees whose combined public pension and Social Security payment is less than $1,200 pen.month. This is a targeted reform, designed to help the most serious victims of the Government Pension Offset those with the lowest public pensions, primarily women. I trust that bi-partisan support can be found to advance these legislative attempts for the long overdue benefit of our members.

This is a matter of fairness and the Government Pension Offset currently in place penalizes those least able to afford it. Not only that, we find that people are often unaware of the Government Pension Offset until they look into retirement at which time they are shocked and not prepared financially for these cuts. The Social Security estimates that are sent to individuals often do not include the Government Pension Offset. The worst time to learn how the Government Pension Offset can undercut plans for financial stability is immediately following the death of a life companion. The Government Pension Offset most drastically affects low-income widows.

Those who have worked diligently their entire lives should be entitled to reap the fruits of their labor after retirement. This bill would help restore fairness and security to the most vulnerable public pensioners at a relatively modest cost. The Government Pension Offset has just the opposite effect. It punishes widows and widowers-who are usually counting on their Social Security spousal pension to help them in their retirement years-merely because they worked in the public sector. Individuals whose working years included federal, state, or local service deserve the same consideration for the value of their work as the private sector retirees. The people that Government Pension Offset is harming are your teachers, police officers, firefighters, and civil servants. People who often chose to accept less reward in order to serve or educate the public. Is it fair to ask them to retire on even less? Please, stop the Government Pension Offset from sending more retirees into poverty.

The penalties imposed upon our members are wrong. The whole mindset of offsets, penalties and eliminations in this area needs to be abandoned. Various ideas have been presented to you that would attempt to minimize or mitigate some of these wrongs. However, no matter how many attempts are made to provide partial relief, "there is no right way to do the wrong thing". The fundamental shortcomings of bad public policy endures no matter how much garnish and seasoning is applied to it.

I thank you for affording me the opportunity to share our thoughts and concerns with you today and I look forward to following your debate on this issue of great importance in the coming months.

END

LOAD-DATE: June 28, 2000

Document 6 of 26.


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