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

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June 27, 2000, Tuesday

SECTION: PREPARED TESTIMONY

LENGTH: 950 words

HEADLINE: PREPARED TESTIMONY OF NATIONAL EDUCATION ASSOCIATION

BEFORE THE HOUSE COMMITTEE ON WAYS AND MEANS SOCIAL SECURITY SUBCOMMITTEE

SUBJECT - THE GOVERNMENT PENSION OFFSET

BODY:
Mr. Chairman and Members of the Subcommittee:

On behalf of the National Education Association's (NEA) 2.5 million members, we would like to thank you for the opportunity to submit our comments on the issue of the Social Security government pension offset.

NEA members strongly support elimination of the government pension offset. This discriminatory offset unfairly reduces the spousal survivor Social Security benefits of retired public employees who receive pension benefits from another retirement system but are not themselves covered by Social Security. While retired public employees have an amount equal to two-thirds of their pension benefits deducted from any Social Security survivor benefits, nonpublic employees with private pensions get to keep their entire pension and receive their full Social Security survivor benefits. The offset thus severely and unfairly limits the retirement benefits of public employees. Background

The original Social Security system, established in 1935, excluded state and local government employees from coverage. In the 1960s, however, state and local employees were given the opportunity to elect to participate in the Social Security system. As a result, public sector employees in 36 states opted to enroll in Social Security in the 1960s and 1970s. The remaining 13 states and a number of local governments in two others chose instead to maintain and enhance their existing retirement systems.

In 1977, Congress enacted legislation requiring a dollar-for-dollar reduction of Social Security spousal benefits to public employees and retired public employees receiving earned benefits from a federal, state, or local retirement system. In response to significant calls for repeal of this dollar-for-dollar reduction, Congress and the President agreed in 1983 to limit the spousal benefits reduction to two-thirds of a public employee's retirement system benefits. This remedial step, however, falls well short of addressing the continuing inequity between public and private employees.

Impact of the Offset

The government pension offset affects government employees and retirees in virtually every state, but its impact is most acute in 15 states: Alaska, California, Colorado, Connecticut, Georgia (certain local governments), Illinois, Louisiana, Kentucky (certain local governments), Maine, Massachusetts, Missouri, Nevada, Ohio, Rhode Island, and Texas. Nationwide, more than one-third of teachers and education employees, and more than one-fifth of other public employees, are not covered by Social Security. Approximately 243,000 retired federal, state, and local government employees have already been affected by the Social Security Government Pension Offset (GPO). Thousands more stand to be affected in the future.

Estimates indicate that 9 out of 10 public employees affected by the offset lose their entire spousal benefit, even though their deceased spouse paid Social Security taxes for many years. Moreover, these estimates do not include those public employees or retirees who never applied for spousal benefits because they were informed they were ineligible.The offset has the harshest impact on those who can least afford the loss: lower-income women. According to the Congressional Budget Office, the government pension offset reduces benefits for some 200,000 individuals by more than $3,600 a year. Ironically, the loss of these benefits may make these women and men eligible for more costly assistance, such as food stamps.

Because the offset applies only to persons receiving public pensions, not those receiving private pensions, it creates a tremendous inequity in the distribution of Social Security benefits. The standard for this narrow class of individuals - retired public employees who are surviving spouses of retirees covered by Social Security - is inconsistent with the overall Social Security Act. This imbalance seems particularly unfair given that Congress, through ERISA standards and tax code provisions, has more direct influence over private employers than public employers.

Examples of the Impact of the Offset

The government pension offset has a significant impact on the benefits of retired public employees. For example: A disabled former school employee and widow who retired in 1986 receives $403 a month from her school pension. That income totally offsets a $216 per month Social Security survivor's benefit. Her total income is about 70 percent of the federal poverty level. A retired widow who worked as a school cook receives $233 a month from her school pension. Her Social Security widow's benefit is reduced by $155 because of the automatic offset. Her combined total income is about 76 percent of the federal poverty level.

Conclusions and Recommendations

NEA policy calls for the complete repeal of the government pension offset. In the short-term, however, NEA does support legislation (H.R. 1217) sponsored by Representative William Jefferson (D-LA) that would limit the government pension offset and provide a guaranteed minimum benefit. A bipartisan majority of Representatives have already cosponsored the Jefferson bill.

NEA believes it is unconscionable that those who survive their spouses should see their retirement incomes reduced by thousands of dollars just because they are public employees. Teachers and other public employees who have devoted their working life to children and public service should not have to worry about the security of their retirement plans. We call on Congress to stop punishing people whose only transgression is a life spent serving the public and to take action this year to address the pension offset.

END

LOAD-DATE: June 28, 2000

Document 3 of 26.


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