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June 27, 2000, Tuesday

SECTION: CAPITOL HILL HEARING

LENGTH: 17078 words

HEADLINE: HEARING OF THE SOCIAL SECURITY SUBCOMMITTEE OF THE HOUSE WAYS AND MEANS COMMITTEE

SUBJECT: THE SOCIAL SECURITY GOVERNMENT PENSION OFFSET

CHAIRED BY: REPRESENTATIVE E. CLAY SHAW JR. (R-FL)

LOCATION: 318 RAYBURN HOUSE OFFICE BUILDING, WASHINGTON, D.C.

TIME: 10:00 AM. EDT DATE: TUESDAY, JUNE 27, 2000

WITNESSES:

REP. WILLIAM J. JEFFERSON (D-LA);

JANE L. ROSS, DEPUTY COMMISSIONER FOR POLICY, SOCIAL SECURITY ADMINISTRATION;

PAUL R. CULLINAN, UNIT CHIEF FOR THE HUMAN RESOURCES COST ESTIMATE UNIT, BUDGET ANALYSIS DIVISION, CONGRESSIONAL BUDGET OFFICE;

VINCENT R. SOMBROTTO, PRESIDENT, NATIONAL ASSOCIATION OF LETTER CARRIERS;

JOHN KEANE, ADMINISTRATOR, JACKSONVILLE POLICE AND FIRE PENSION FUND;

DAVID JOHN, SENIOR POLICY ANALYST, SOCIAL SECURITY, HERITAGE FOUNDATION;

FRANK G. ATWATER, NATIONAL PRESIDENT AND CEO, NATIONAL ASSOCIATION OF RETIRED FEDERAL EMPLOYEES, ON BEHALF OF COALITION TO ASSURE RETIREMENT EQUITY:

RUTH PICKARD, MEMBER, NATIONAL ASSOCIATION OF RETIRED FEDERAL EMPLOYEES;

BODY:
REP. E. CLAY SHAW, JR. (R-FL): Good morning and welcome to today's hearing about government pension offset in the Social Security program.

Many government workers do not pay into the Social Security system; however, they may be entitled to spousal benefits from Social Security if their husband or wife dies and has paid into the system. When planning for retirement, many of these workers count on their government pension and their full Social Security spousal benefits. Some are shocked when they apply for Social Security benefits only to learn that their checks may be reduced or even eliminated because of a provision in the Social Security program referred to as the "government pension offset," or "GPO."

Many people wonder how such a provision ever made it into the law. The reason is because Social Security spousal benefits were created in 1939 to help homemakers who didn't have pensions of their own. In essence, spousal benefits are designed to help people who are financially dependent upon their husbands or their wives. As a result, married people who work in Social Security jobs do not receive under present law the full spousal benefits. Instead, their spousal benefits are offset dollar for dollar by the amount of their Social Security retirement benefit. In contrast, before the GPO government workers would receive full spousal benefits even though they also receive pensions from their government jobs. The GPO was created in 1977 to try to level the playing field. Although the goal of the GPO is to equalize the way different workers are treated under Social Security, many people believe that the provision is unfair and is arbitrary. Moreover, many people don't even know about the GPO until they retire and apply for benefits. I've had some people in my office telling me that. Then they suddenly realize that they must retire on less income than they were expecting.

In response to these concerns, several proposals to modify the GPO have been put forward. Today, we will take an in-depth look at the GPO and the various proposals to modify the way benefits are determined. We are constantly looking for ways to improve the fairness of the Social Security system, and I hope we can take another step in that direction today.

Bob?

REP. ROBERT T. MATSUI (D-CA): Thank you, Mr. Chairman. I have no comment to make. I would like to submit my statement for the record in the interest of time. I welcome Mr. Jefferson, who is the lead sponsor on a bill that I think has over 200 cosponsors at this time of which I'm one. Obviously, this is an issue that many people have been very concerned about over the years. On the other hand, with a major overhaul of Social Security in the works, the issue is do we do it now, or do we do it at the time when we really deal with this issues comprehensively, and I think that's something that we as a committee, the subcommittee and full committee, will have to take a look at. But, again, I welcome this hearing.

REP. SHAW: Thank you, Bob.

And I would like to introduce our first witness, who certainly needs no introduction to this Committee, William J. Jefferson. I'll say about Jeff before he starts to testify, you know, many people up here, and you find it happening all the time, will file a bill to get somebody out of their office and then not worry about it. Jeff has been working on this bill. He has talked to me about it many, many times. I know he has also talked to Mr. Matsui about it. It's something that he has been working very diligently with, and the amount of co-sponsorship that's been on here is not only a signal of the amount of work that he has been doing, but it also shows the respect that members of Congress have for Mr. Jefferson.

You may proceed as you see fit. Your full statement will be put into the record without objection.

REP. WILLIAM J. JEFFERSON (D-LA): Thank you, Mr. Chairman. I appreciate your kind remarks, your generous remarks, and I thank you for giving me a chance to speak to this Committee and to Mr. Matsui, a ranking member. I thank you also for your help with this bill and for your support in so many other ways and to the other members of the Committee. Rob is here. It's good to see you this morning.

Mr. Chairman, this discussion has been a long time coming in this forum. I, of course, would like, as would you, to see a comprehensive reform of Social Security, as Mr. Matsui mentioned a minute ago, and God only knows when that might happen or if it will. We do know, however, that we have an outstanding problem here that many members of Congress are now turning attention to, and that we have taken up one issue, as you know, in the system that was an egregious problem this year that was far more expensive than this one, and I think it's time to turn our attention to this in earnest.

I introduced the government pension offset reform legislation in the last Congress and in this one, and in this one now have 244 cosponsors, more than enough to pass the bill, work it up for passage, and we are adding cosponsors every day.

I think the pension offset reform is needed because existing offset law continues to destroy the retirement security of many retired, federal workers and workers who aren't federal workers, who are working for state and local governments by in many cases wiping out their spousal and survivor benefits.

Ending this injustice is a top priority for many of us. And I think, Mr. Chairman, the time to reform the harsh and unfair pension offset law is now.

The pension offset was originally enacted in 1977. It is important to note it wasn't a part of the original Social Security system. On the other hand, the dual-entitlement rule has been in the law since 1939, almost as long as the system has been around, and was a part of the original confection of it early in the 1930s. But this pension offset is an outgrowth of a Supreme Court decision, the Goldfarb decision, as you well know, which eliminated the unequal treatment of men and women with respect to Social Security payment benefits and required that either spouse, without regard to dependency, be able to receive the benefits of the other.

Now, after Goldfarb there became a great deal of concern on the part of law makers here that because men were working in high-salary jobs that there would be a huge impact on the Social Security system, so there was a need in the mind of many to do something about it. And it's curious. If you look at this thing historically, what happened here, the first deal was to have a one-for-one offset, as you know, and there was so much public outcry about it until it was adjusted downward. The House actually passed a one-third offset bill, and the Senate passed nothing, so when they started talking about it in conference they just compromised that two-thirds. It was completely arbitrary and imprecise and had no rationale other than let's get it done and get out of town, I suppose. But nonetheless, I want you to understand and note that the House passed a one-third offset back in 1983 and ended up with a compromise of two-thirds.

The major concern that I have here and that others have is that many workers, low-income workers, lower-salary workers, like teachers, secretaries, school cafeteria workers, library workers, cafeteria workers, many others, receive lower pension benefits because they received lower salaries on their jobs, and they are unable to survive solely on their lower salaries, and they have no retirement security.

To illustrate the harsh impact of the pension offset, consider a widow who retired from the federal government and receives a civil service annuity of $600 monthly and is otherwise entitled to a full, widow-survivor benefit of $400. The current pension offset law reduces the widow-survivor benefit to zero. Two-thirds of the $600 civil service annuity is $400, which is then subtracted from the $400 widow-survivor benefit, leaving zero. The widow receives $600 instead of $1,000. The pension offset law, therefore, decimates this widow's retirement security and forces her to live out her remaining years in poverty. This is a result which I think none of us are proud of. My office has received numerous calls, mostly all of them from widows who are just getting by and who desperately need some relief from the pension offset.

The legislation does not completely repeal the pension offset, I should note also, but provides a modification to complete repeal. It will allow pensioners and widows affected by the pension offset provision to receive a minimum $1,200 per month, indexed to inflation, before offset provisions could be imposed.

Mr. Chairman, the pension offset legislation is good economic, social, and public policy. Limiting the exclusion to $1,200 of combined benefits allows us to protect our teachers and other lower- wage government workers from poverty while still allowing us to prevent the abuses by high-pension workers targeted by the government pension offset. Best of all, it provides needed security without threatening the long-term viability and solvency of the Social Security system.

Proponents of the pension offset claim that the offset is justified because it treats widows who worked in employment not covered with Social Security in the same way as those who worked in covered employment. However, this fairness argument is dubious and, I think, misses the mark. First, it presumes that there is some fairness in the dual-entitlement rule. That's questionable, but I think it leaves poor seniors in any case in a terrible position, and so no benefit rule that forces already poor seniors further into poverty could be deemed fair and justified on the basis that it's happening in some other instance.

Our legislation simply allows these poor women, in most cases women, to keep $1,200 a month in combined benefits before an offset is applied.

Second, it is unfair to reduce survivors' benefits of noncovered workers because unlike covered workers under Social Security, noncovered workers are not double-dipping. Pension benefits are paid out of the state retirement funds, not out of the Social Security trust fund. Thus, the perceived threat to Social Security solvency is less, especially for low-income individuals.

Third, despite proponents' claim to the contrary, widows affected by the pension offset have not had sufficient notice to make alternative plans for retirement. As you have noted, people are surprised by this provision all the time.

And, fourthly, extending the pension offset to government employees creates an inequity between public and private pension recipients. While Social Security benefits of surviving spouses earning government pensions are reduced by the pension offset, Social Security benefits of surviving spouses earning private pensions are not subject to offset at all. So if a teacher is in a private-school setting, that teacher's retirement pension is not offset against -- the survivor benefit is not offset by the pension that a teacher receives. So are we are only penalizing people who are in the public sector and not those who are in private work as teachers or clerks or whatever.

Mr. Chairman, I ask you, if retirees' own private pensions do not have Social Security benefits subject to offset, why should retirees who work in public service have their pensions so offset?

The pension offset has created a problem that cries out for reform. Inequity in the pension offset was not fixed in 1983 whether the offset was reduced from one-to-one to two-thirds. In fact, most of the benefits in treating one-third of the government pension as a private pension went to high-pensioned workers. The government pension offset as applied to low-income pension recipients will cost tens of thousands of retired government employees, including many teachers, custodians, or lunchroom workers, to live their retirement years at or near the poverty level.

I urge this Committee to support this vital piece of legislation and assist me and so many others now who have joined in this effort in moving it through the legislative process. The time to reform the pension offset is now, Mr. Chairman. We owe it to our teachers. We owe it to our other workers. We owe it to our seniors. We owe it to the American people. Thank you, Mr. Chairman.

REP. SHAW: Thank you.

Mr. Matsui?

REP. MATSUI: I don't have any questions. I would like to thank Jeff for his testimony.

REP. SHAW: Mr. Portman?

REP. ROB PORTMAN (R-OH): Thank you, Mr. Chairman, and I also want to thank Mr. Jefferson for his testimony this morning and for his diligence in this effort. He is my neighbor down the hall, and it may be because of that, but I don't think that's true, we've had opportunity to talk about this a lot, and he is a real advocate for making change. Plus I think this is a very responsible approach, and I think that ought to be noted, that when I'm back home in my town meetings and this issue comes up, often it's a lot easier just to say, you know, forget any limitations on this.

We should just open it up, that, frankly, the people that care the most about this are folks that are directly affected and often are widows who are in a very difficult situation and deserve our attention. And you have come up with something that I think is reasonable and practical, and it doesn't bankrupt the system.

My question to you, I guess, would be, how many people are affected by your approach? Use the $1,200 index to inflation as your cap.

REP. JEFFERSON: There are about 305,000 or so people who last year or so were affected by the government pension offset provisions. So I would expect that it will be some number like that.

REP. PORTMAN: What percentage of those folks would be assisted by your legislation in the sense of seeing a boost in their benefits? Do you have any sense of that? CBO has a 25-percent number out there, I guess, 20-percent number for a boost in benefits.

Is that roughly where you come out, do you know?

REP. JEFFERSON: That may be right. Essentially, anyone who is receiving who would be affected --

REP. PORTMAN: Less than $1,200.

REP. JEFFERSON: -- that's right -- would be subject to the help here. I don't know exactly what the number is, Robert. There is an estimate that is made in order to get to a number as to what the bill costs --

REP. PORTMAN: Right.

REP. JEFFERSON: -- and so it's something like what you're saying.

REP. PORTMAN: Okay. In Ohio, as you know, I think we have an exemption. Ninety-two percent of our public employees in Ohio are exempted from Social Security. We are one of the states -- I guess there are eight -- that have significant numbers of nonSocial Security-covered employees, and so this is clearly a big issue back in Ohio, not just with the federal employees, but, of course, the state and local employees. So, again, I appreciate your leadership on this issue and look forward to working with you on it going forward.

REP. JEFFERSON: Thank you. There is no way to get past the fact that we have in the system an allowance for states like yours and like mine and others where employees can opt out of the system. When they do, then we say, well, maybe they shouldn't have, and we want to treat them a different way. I don't think that's fair or right. And when people spend their lives working in public service, they ought not be penalized because they didn't make the decision to work in the private sector. I think we ought to actually support them more for the reason that they are involved in public service. And usually the public- service jobs, particularly in the case of women, pay less, and so you have the dual problems cropping into this thing.

You will hear today a lot of talk about from the Social Security people, who will, I guess, be measured in their comments, but nonetheless they will be critical of this approach and of any reform in this area, and who will say that we don't have enough low-income people. We have some other folks who are not as bad off as some of the people we seem to want emphasize here.

But the fact of it is, I mean, how do you deal with this whole issue of dependency, and is $1,200, you know, a lot of money today or not? And our provision, they will say, is not well targeted enough; it needs to be better targeted. On the other hand, they will say we ought to means test, which we don't try to do here.

So it will be a little confusing as it goes on, but you can expect it not to be supportive. I think overall the system that we're going to have set up here, we can't have rules that allow people to work and not be in the Social Security system and then penalize them for not having gotten into it down the line.

REP. PORTMAN: Bill, just one comment quickly. I was just handed some testimony that's going to come up later, just to clarify the record. The numbers I have for CBO are different than the numbers we're going to get from SSA, and you should know that. SSA will testify that based on the written testimony 50 percent of the beneficiaries now affected by GPO would have their benefits increased under the bill, including 29 percent who would come out of offset, so we may have a difference between CBO and SSA. Maybe we'll get into that later --

REP. JEFFERSON: Yeah.

REP. PORTMAN: -- after we have the opportunity to hear from other witnesses.

REP. JEFFERSON: Yeah. I have that testimony here. There are many people who are supporting this who want all of the people who are affected to have their benefits increased. The bill, because as you point out, it has a $1,200 limitation on it, doesn't go that far. It only reaches half of the people who are involved.

They will also say that they will admit that of the women with increased benefits, 64 percent would be wives, and 36 percent would be widows, and 90 percent of those who receive the benefit have income above the poverty level. Well, it isn't our design here to relegate workers to the poverty-level pension receipts. I hope we will do better than that. I hardly see it as a criticism. But in any event, thank you for your comments and questions.

REP. SHAW: Mr. McCrery?

REP. JIM McCRERY (R-LA): Thank you, Mr. Chairman. I want to congratulate my colleague from Louisiana on his work in this matter. This is a very complicated matter that not many people understand, and I commend him for digging into it and trying to come up with a proposal that makes a lot of sense, and I'm certainly willing to work with the other members of this subcommittee in trying to determine whether there is something workable that is fair and doesn't add too much of a burden to the system.

But I'm troubled by the current law. I do hear this complaint from a number of folks back in my district, and on the face of it it does seem to be somewhat unfair, and so, again, I want to commend the gentleman. It's a pleasure to work with him and other members of this subcommittee to try to discover maybe some modification that will make the system a little bit more fair on the face of it, at least. So thank you, Mr. Jefferson.

I just want to ask one question, and I'm sorry I got here a few minutes into your testimony. You may have covered this, but on the mechanics of your bill, how do you determine the $1,200? Evidently, based on the statement that Rob Portman just made from Social Security, where only 50 percent of beneficiaries would be affected, 50 percent of those in the category that you mentioned would be affected, evidently you don't give everybody a $1,200 exemption from the application of this rule, but how does it work? How do you determine that $1,200?

REP. JEFFERSON: You actually do give it to everyone, except that some people have pensions which are larger than that, and those people will not be -- I tell you how it works.

REP. McCRERY: Yeah.

REP. JEFFERSON: It just ends up falling out that way, that depending upon how much a person's pension is and how much the survivor benefit is, is going to determine what the level is. Assume if a widow, let's just say, has a $600 pension that she has earned in her own employment and would therefore have a right to receive it, and her husband has left a $900 survivor benefit, let's just say, which otherwise she would have a right to get, so add nine and six, $1,500. What would happen is we would take two-thirds of her $600, which would be $400, and subtract it from his $900, leaving $500 that she could apply to her benefit. Then if we go back and add $500 to her $600, she would have $1,100 in the benefit. So she would therefore be under the cap, and she would not -- and if anybody's calculations ended up

REP. McCRERY: So what would happen to her under your bill? Would she get another $100?

REP. JEFFERSON: Under our bill she could get another $100 up to $1,200. In other words, the offset would take place, but she would get whatever the difference was between how those numbers added up, in this case $1,100 to 12, and she would get the $1,200 benefit. She would then be cut off.

REP. McCRERY: Okay. So if the offset -- when you applied the offset if the total of her benefit was over $1,200, she wouldn't be affected by your legislation.

REP. JEFFERSON: That's right. That's right.

REP. McCRERY: Okay. Thank you.

REP. JEFFERSON: And if she had only $500 survivor benefit and her husband had only $800 coming -- I'm sorry -- if she had $500 of her own pension and he had $800 in survivor benefit, you would have the makeup would be larger to get the $1,200.

I would ask that my full statement be part of the record, and I'll summarize just because much of what's in my testimony has already been brought up.

One thing that we have to remember is the context under which the GPO was established. Back in 1977, the Supreme Court decision overturned the dependency test for men -- there had been no dependency test for women -- and there had to be a mechanism set up to try to deal with what was perceived to be an inequity. Unfortunately, what that did in some ways was to extend, in essence, a dependency test for a group of beneficiaries who had not previously experienced it, many women who had had service in noncovered government employment.

When the original statutes were set up for wives and widows, this really hadn't been much of a problem. Married women were not participating very much in the work force at that time, and government employment hadn't expanded as we've seen in the past six years. It is those two things that, in essence, have created the need for the government pension offset.

The Congress went and enacted a gender-neutral provision, but this nevertheless caused a great deal of problems for some people who had been anticipating much more in retirement than they subsequently became eligible for. So since that time, since 1977, the GPO has existed but has had many detractors and many of the affected beneficiaries have come in seeking some relief from that.

One point I want to make, though, is that the government pension offset isn't the only provision that affects persons with noncovered pensions. The windfall elimination provision also affects beneficiaries. That was enacted as part of the '83 amendments as well, and there are many people who are confused about which provision they actually are having their benefits reduced under.

According to Social Security data right at the moment, the GPO affects directly about 305,000 recipients or potential recipients, and the windfall elimination affects about a half a million. So there is a great deal to be done with regard to educating individuals who have some noncovered service about what those offset provisions are and how they might be affected.

Let me go on to look at some of the potential options for the GPO. One of those is, of course, we could get rid of the GPO. That would be a relatively expensive proposition. Our estimate is that it would cost over $21 billion over the next 10 years. That is a very low estimate for repeal. There are many people who do not, in fact, apply for spousal benefits under Social Security because they know that they will not get a benefit from their spouse's service. So one has to be very cautious about these numbers. They are low.

The other is, of course, Mr. Jefferson's bill, and that's been discussed some here today. Our numbers aren't that different from the administration. Our estimates, which are based upon a 1-percent sample rather than the entire population, as the Social Security Administration can do, basically has our estimate for H.R. 1217 increasing benefits for about 45 percent of the people who are affected by the GPO. There is a distinction between those who would be completely out from under the offset and those who would be partially out, and the figure referred to earlier was only one of those components.

One other option that we've heard mentioned is that we could reduce the maximum reduction amount to one-half rather than two- thirds. That would be a much more inexpensive proposition than either of the other two alternatives. We estimate that would cost about $2 billion over the next 10 years.

Let me summarize by the following statement. The government pension offset is a blunt instrument designed to mitigate some of the effects of having a Social Security program without universal coverage. Some people with government pensions believe they are being treated unfairly under the current system. Options to change the GPO from completely repeal to more limited modifications, such as reducing the maximum percentage of the offset, are available obviously as alternatives.

Each alternative entails new inequities or additional costs to the Social Security program, which already is facing a substantial shortfall in its finances. Any reform of the government pension offset thus requires careful consideration of the trade-offs. Thank you.

REP. SHAW: Thank you, Dr. Cullinan.

Mr. Matsui.

REP. MATSUI: Thank you, Mr. Chairman.

Dr. Ross, if we eliminate or make a major alteration in the GPO, would you expect, and I guess I'm asking you a political question, that then we would be asked to deal with a dual-entitlement provision situation in order to try to equalize those that receive -- both the spouses receiving Social Security benefits? Is that the fear that the Social Security Administration has?

MS. ROSS: I don't think that we have tended to think about it like that. We think, starting with the dual-entitlement benefit, there were certainly at the beginning of the system reasons to have dependents' benefits, but there was also a very sensible rationale for not having one person have a full worker's benefit and a full dependent's benefit because clearly they weren't entitled.

I think it's for the Congress to decide if they think that rationale still holds. I certainly do. And we certainly support the GPO as a way to apply that same kind of rationale. So I assume that as people think about this carefully, they will decide that they want to be able to measure people's dependency in some way and treat both of these groups fairly. So I don't anticipate that either one would go down and certainly not that the dual entitlement is under threat.

REP. MATSUI: I think I asked you an unfair question because you're supposed to give us the factual information. I appreciate it. It was really a political question I asked you. I share your concerns, and that's why I think your comment at the end, that we need to deal with this issue comprehensively, or should deal with this issue comprehensively, perhaps make sense because the next thing we'll do is we'll hear from where you have one of the spouses receiving Social Security benefits, and then the spouse's benefits have been cut back, and that person then will say, well, my neighbor across the street, who worked for state government, the State of California, and is not in Social Security, gets everything, and I don't.

And so we'll hear from more people perhaps, and I am concerned about that because we are singling out one group over another, and I know that the GPO was originally -- I wasn't aware of this a month ago, but now I understand it's originally been set up to try to equalize benefits where you don't have both parties in the Social Security system. And so I share your concerns there, but it's very difficult to explain that, I'm afraid.

MS. ROSS: It is difficult, and let me just say that I think there is a very legitimate concern about certain groups within the retiree population who have low incomes. For example, widows overall have a poverty rate of 20 percent or more. That's something we are worried about, but restricting our concern to the subgroup that is in the government pension offset doesn't seem like a very target- efficient way to work on this poverty reduction. I think there are more effective ways to deal with the really serious concerns about poverty in the elderly population.

REP. MATSUI: One other problem, too, I see is that those states in which the state and local entities do not have Social Security but their own private government pension systems, there will be pressure to put them within Social Security if we give them this additional benefit, I would think, and so it puts more pressure on them, to some extent, to go into the system in terms of how we're going to find revenues in order to shore up this .89 percent deficit.

I know you can't comment on that either. That's just a comment made by me, because I can see a political discussion about that in the future if that should happen.

I appreciate both your testimonies.

MS. ROSS: Thank you.

REP. SHAW: Mr. McCrery?

REP. McCRERY: Ms. Ross, maybe I heard you wrong, but I thought you said that the five-year cost of the Jefferson bill would be two- something billion.

MS. ROSS: Two-point-three billion.

REP. McCRERY: Two-point-three billion, but the long-term costs were negligible?

MS. ROSS: That's right. Negligible doesn't mean that they are nothing. That means that they are less than .005 percent of payroll. So that's what those costs, $2.3 billion over the five years, add up to over the 75-year period. It's less than .005 percent of payroll.

REP. McCRERY: Oh, okay. Well, now, the 10-year costs, I noticed, that are estimated by CBO are more than double the 2.3 five- year costs the Social Security Administration estimates, so can you give us some idea of the long-term -- the nominal costs? Is it arithmetic, or does it just double every five years, you know?

MS. ROSS: Well, our own 10-year estimates are that it moves to almost $6 billion over 10 years, so as there are more people receiving benefits and becoming eligible for this, the number goes up, but I don't have a progression beyond the five-year, then the 10-year, and then the long term.

REP. McCRERY: Do you have any estimates of what the costs would be if we were to treat the dual-entitlement status the same as the GPO under Jefferson's bill?

MS. ROSS: I don't have an estimate of that, but I do want to tell you that -- I do have an estimate of that, as a matter of fact, and it would be $100 billion over five years. The thing to keep in mind is that right now 5.7 million women are dually entitled, that is, receiving both a worker's and a spouse's benefit, so the numbers of people you're talking about are extraordinarily larger.

REP. McCRERY: Okay. Would you like, either of you or both, like to comment on the policy rationale for treating the GPO recipients different from the dual-entitlement recipients? Is there a policy rationale, or in your opinion, is there a sound rationale for keeping them treated as they are today or keeping them treated equally?

MS. ROSS: What Social Security's opinion is on this is that we think the GPO works pretty well as an approximate measure to do the same thing that dual entitlement does. It's not a fine-tuned measure. If you could do exactly what would be ideal, you would have every single worker's total wage history from covered to noncovered employment, and you could make a perfect calculation on what they would receive if they were dually entitled and offset it that way. We don't have those kinds of records. We can't do it this way.

As Paul Cullinan said, the GPO is somewhat of a blunt instrument, but there have been two studies that have been conducted, one on federal workers and one on state and local teacher workers, where we did have wages for people's whole lifetimes, and we calculated what people's Social Security benefits would have been if they had received them. And certainly we've concluded that the two-thirds is not a perfect figure, but it's a rough approximation for what people ought to get who have kind of an average wage level and an average earnings history in noncovered employment.

So we're certainly not telling you that it's perfect, but we're saying we think it's a good approximation.

REP. McCRERY: Anything you would like to add, Dr. Cullinan?

MR. CULLINAN: No, thank you.

REP. McCRERY: Okay. Thank you, Mr. Chairman.

REP. SHAW: Thank you.

Mr. Cardin.

REP. BENJAMIN L. CARDIN (D-MD): Thank you, Mr. Chairman. Whenever we do rough approximations we get ourselves into trouble because two of my constituents will come up to me in similar circumstances, and they are treated differently, and they don't quite understand why.

So I really do appreciate what Mr. Jefferson is trying to do because I've heard from a lot of my constituents. On the other hand, I'm concerned that we don't create another notch type of an issue for us that never seems to go away. And I just would hope that as we go through the panels today that we'll hear more of how we can correct this issue without creating a continuing problem for us with our constituents.

I think the issue that you raised, Dr. Ross, at least in your response to Mr. McCrery, that we don't have the wage records that we could make a perfect match, I appreciate that. It would be too complicated and expensive to do that.

Those that are in the GPO are a much smaller number than those that would be dual entitlement, but it seems to me that we're going to have to be able to address the issues of all of our constituents to make sure they are being treated fairly. And I would hope that we would try to come up with a solution that will be respected by our constituents and not create the wherewithal that we're going to have a lot of new groups formed sending letters to our seniors requesting donations in order to fight Congress to change the law. That really worries me because I don't think our seniors having well served on the notch issue over the years, and I don't want to see that happen with this issue as we move forward.

So I think this is an extremely important hearing, and I appreciate both of your testimonies, and I hope that we can come up with a solution. We are dealing with very low-income people who are very vulnerable, and we should do what we can to correct the situation.

REP. SHAW: Mr. Hulshof.

REP. KENNY C. HULSHOF (R-MO): Thank you, Mr. Chairman. Let me say, back in Missouri that I have a very active chapter of federal retirees and look forward to the next panel as well, and, Mr. Jefferson, you are very well thought of in my district, and I'm glad you don't live there.

(Laughter.)

REP. HULSHOF: What I want to ask you, Dr. Ross, is that in your testimony on Mr. Jefferson's bill you indicate it's not well targeted at low-income, elderly beneficiaries, especially widows, and this is pretty important because I know Mr. Jefferson designed this bill specifically to shield low-income workers from the GPO, so can you kind of explain to me why you believe that Mr. Jefferson's bill doesn't achieve that goal?

MS. ROSS: Well, basically what Mr. Jefferson's bill does is look at the combined retirement income that people would be receiving from Social Security and the noncovered pension. We had an opportunity to look at people who were covered by the government pension offset and look at their entire income, so we had a better measure of their need and whether they were in poverty or what their level of income was. And by having a more complete look at the family income, it suggests that looking at those two sources of income doesn't target the benefit very well, so that, as I said before, 90 percent of the money would be going to people who are above poverty. I certainly agree with Mr. Jefferson that poverty is not the goal, but it's an indication of how target-effective you're being.

REP. HULSHOF: Dr. Cullinan, let me ask you that, I think, anticipating our next panel, our witnesses on the next panel will say that the two-thirds offset in the GPO calculation is somewhat arbitrary, and I know Mr. McCrery asked Dr. Ross about that a little bit, about the rationale. And then, again, going back to Mr. Jefferson's bill, which has attracted a lot of attention back home, eliminating the GPO for retirees whose combined government pension and spousal benefit is less than $1,200; what's your thought about having that threshold, that $1,200 income threshold?

MR. CULLINAN: Well, I'm not sure I can characterize it in the sense that I don't know exactly what the logic was for coming up with $1,200. It certainly does a job at paring down the population who are affected by the GPO who would get some relief from Mr. Jefferson's bill. It's about a half of the people would get some benefit on this and has about perhaps a quarter of the cost of repealing GPO, so it's a way of targeting it.

I'm not sure whether the $1,200 is as appropriate in some cases as it is in others.

You might think that for the purposes of spouse's benefits as opposed to surviving spouse's benefits that you might have different thresholds. If you think about the example that Dr. Ross presented earlier, we had this woman who was going to get, in essence, $1,200 as a spouse out of her combined pension and Social Security benefits, but she had a spouse who is alive who had a $1,400 Social Security benefit. You might view that a little differently than a surviving spouse who solely had $1,200 to deal with. So I think that there are some potential issues there.

REP. HULSHOF: Well, on that point, a couple of different approaches to modifying the government pension- offset, either reducing or eliminating the GPO for people whose combined pension income falls below a certain threshold-income amount, which we've talked about. But another alternative is actually to lower the size of the offset from two-thirds to some other lower percentage. Pros and cons to that approach, Dr. Cullinan?

MR. CULLINAN: I think that I'd go back a little bit to what Dr. Ross said, is that in their study roughly one-third or two-thirds reduction seemed like an appropriate number, but individual circumstances are so different when you get mixed careers. The Congressional Research Service almost 10 years ago did a study looking at a set of prototypical civil service annuitants, and the appropriate reduction or the proportion of the civil service benefit that might approximate what Social Security would be ranged from, I think, 127 percent of the civil service benefit to something like -- I think it may have been as low as 20 percent.

So the problem is that we've got blunt instruments, and it's very difficult in a near-universal program to be able to construct these instruments so that in every case you think, "that's roughly fair".

REP. PORTMAN: Mr. Hayworth, would you like to inquire of this panel?

REP. J.D. HAYWORTH (R-AZ): Yes, sir, I would. I'm running a little bit late. Thank you for coming. I apologize for being late. I guess cloning would work on Capitol Hill. We could all be in several different places at once. Some folks, especially my political opponents, I think, actually advocate vivisection for me, but that's beside the point.

As I understand it, your testimony highlights some of SSA's efforts to educate government workers about the GPO, but despite these efforts many government workers are not aware of the GPO until they retire and apply for benefits. Is SSA taking any steps to help improve the education process?

MS. ROSS: Well, the Social Security Administration is doing several things. One, in the new Social Security benefits statement, which started to be produced in October of this year, every single statement alerts people, if they read it carefully, it alerts them that they may have this offset if they have had work in noncovered employment.

We have a couple of really good pamphlets which are now on our Web site that should help. We also work very closely with people from the Office of Personnel Management with regard to federal retirees so the information is conveyed. We work with the unions at the state and local level, especially AFSCME. And so we are trying to get this information, which is on a piece of legislation that's been out there for 23 years. We're trying very hard, but I also understand that people are caught by surprise, so we haven't done as well as we could have.

MR. HAYWORTH: In terms of the pamphlets and written communication, Dr. Ross, is there anything that sets that off? Is the terminology emboldened or in capital letters to make people aware of this? Would that type of script and font change perhaps highlight this?

MS. ROSS: You know, if you have suggestions, we're willing to look at them because we really want people to be alerted to this.

MR. HAYWORTH: Well, great. If it's okay, and if your folks could send over the communications that exist on this, --

MS. ROSS: Absolutely.

MR. HAYWORTH: -- maybe there is something that we could tweak a little bit to give it the prominence it needs to make sure it's out there --

MS. ROSS: Okay.

MR. HAYWORTH: -- and highlight it. I'd be very happy to work with you on that. Thank you.

MS. ROSS: Perfect.

MR. HAYWORTH: Thank you, Mr. Chairman.

REP. PORTMAN: Mr. Levin, would you like to inquire of this panel?

REP. SANDER M. LEVIN (D-MI): Just catching up here. Thanks. As we've looked this over, I just wanted to ask you one question that often comes up is, what's the basis for the two-thirds in the first place? Do you want to comment on that?

MS. ROSS: I'd be glad to. In the original legislation in 1977 the offset was dollar-for-dollar, so it was 100 percent. The issue was rediscussed in the Congress, and as I understand it, the House said one-third, the Senate said nothing, and the compromise was two- thirds, which would suggest that it, you know, possibly wasn't exactly the perfect measure.

But we do have two pieces of information since that time. We've done a study, or the Congressional Research did a study, of federal workers. We've done a study of state workers. And while, as Dr. Cullinan said, the appropriate measure is a very different for each individual, two-thirds is a relatively good, rough approximation if you have to have one proportion by which you are offsetting benefits.

So we came to it in a legislative context, but having done some analytic work, it seems okay.

REP. LEVIN: So while there may not have been an analytical basis for it -- there isn't always when we strike compromises -- do you think that the data you've looked at would indicate that if one has to use a figure that applies to everybody, that that is a somewhat appropriate figure? Is that how --

MS. ROSS: Since you have to pick one figure, we think it's an appropriate figure. Probably, I didn't do your question justice before. When you're trying to think about what two-thirds represents, I should just say that what you're trying to measure there is what proportion of a government pension is an approximation for the Social Security benefit as contrasted with the private pension. So what we were trying to do was figure out what people's Social Security benefits would be if they had earned all of this money under covered employment.

So what we tried to figure out was what proportion would be the Social Security benefit, and that's where we came up with the roughly two-thirds for a person, kind of an average government wage for a 20- year-type person.

REP. LEVIN: Uh-huh. Thank you.

REP. PORTMAN: Dr. Ross, if I could follow up on a couple of these questions, first is, following up on Mr. Hayworth's question about notice, I think one of the things that this panel would agree on, and I think all of our panelists will today, is that there is a problem with regard to notifying people as to what their retirement- security situation is going to be based on this offset. People are not aware of it, and you indicate that, your statements have the information, you said in response to Mr. Hayworth, if they read it carefully, and Mr. Hayworth talked about maybe putting it in bold print and so on.

We've got testimony coming up from Mr. Keane, I saw, who is the administrator of the Jacksonville, Florida, Police and Fire Pension Fund, where he says that the Social Security estimate sent to individuals often does not include the GPO. And I guess, first of all, my question is, is that accurate? Do statements sometimes go out without the GPO information included?

MS. ROSS: There is language in the Social Security statement that tells people that they may have this offset. We do not for any individual calculate their benefit with the offset because we don't have in our possession the information that would allow us to know if people are going to be subject to the government-pension offset. Again, in an ideal world, if we had all the information, we could do that, but we don't have the information to provide an individual with that calculation.

MR. PORTMAN: Because you don't have the spousal benefit?

MS. ROSS: Because we don't have their earnings under noncovered employment.

MR. PORTMAN: It just seems to me this is one area where this is a very complex, difficult area to deal with, and we came up with a solution of two-thirds back in '77 and modified in '83 to try to make this more equal between those who are covered by the Social Security dual-entitlement provision and those who weren't, but at the very least, we've got to do a better job of providing notice. And any recommendations you have in that regard to the subcommittee would be much appreciated in terms of legislation. At a minimum, we ought to do a better job in that category so people can plan for their retirement.

MS. ROSS: Right.

MR. PORTMAN: The other question I have, I guess, would just be a general one as to which way we ought to go on this. Dr. Cullinan talked about the possibility of going to one-half rather than two- thirds, which would, again, be relatively arbitrary, but some sense of justice maybe for people who are particularly hard hit by this. You indicated it would be about a $2 billion cost, Dr. Cullinan, over -- is that a five-year period?

MR. CULLINAN: No. That was a 10-year period.

MR. PORTMAN: Ten-year, $2 billion. Is it more targeted?

MR. CULLINAN: I'm not sure exactly what you mean by "targeted." As opposed to Mr. Jefferson's bill that has some sort of income dimension, changing the maximum reduction is not as direct as that. It's not clear whether that would be in some sense a fairer way than Mr. Jefferson's or not, and we did not go in and detail it.

MR. PORTMAN: I heard what you said earlier that indicated you thought maybe that would be more targeted than a $1,200 threshold, and I wondered -- MR. CULLINAN: Well, targeted in the sense of cost, I think, is what I meant, --

MR. PORTMAN: Okay.

MR. CULLINAN: -- not targeted in the sense of relief to numbers of individuals or people who you might want to have directed additional --

MR. PORTMAN: What's the equivalent Jefferson number for that $2 billion figure?

MR. CULLINAN: It's almost $5 billion.

MR. PORTMAN: Okay. Although Jefferson is 25 percent of total repeal?

MR. CULLINAN: Uh-huh. That's correct.

MR. PORTMAN: The total repeal would be much more than that. But understanding that the $1,200 perhaps targets those folks who need it the most, which would be low-income spouses.

MR. CULLINAN: Well, it at least has that dimension in it. Unfortunately, that particular dimension isn't family income; it's income from two sources relevant to the individual, not even to the family.

MR. PORTMAN: Right. It doesn't take into account savings or income.

MR. CULLINAN: So there is some imprecision in terms of if you want to target it to low income, it doesn't have all of the information you would want to do that.

MR. PORTMAN: The information you have, Dr. Ross, it says that the Jefferson bill is not that targeted in the sense that you say 90 percent of those who would benefit are above the poverty line.

MS. ROSS: Yes.

MR. PORTMAN: How can you come up with that information, that data, without knowing all of the various sources of income? And just as we can't come up with a more targeted way to determine total income, how can you come up with that 90 percent figure?

MS. ROSS: Well, we gather that data -- we used a national survey, so we don't have this data for the entire population, but we have it from a nationally representative survey for which we could gather all of these pieces of information. And because it's nationally representative, we can tell you what it would be for the population at large.

MR. PORTMAN: These were survey results that the Social Security Administration used from a private firm, or did you all do it yourselves?

MS. ROSS: It's a Census Bureau survey, to which we have linked all of our own administrative data.

MR. PORTMAN: A small margin of error because you have such a large sample?

MS. ROSS: There is certainly some error in it.

MR. PORTMAN: Okay. I was just interested in that. I didn't see it in your testimony, and I wondered, because that's our great difficulty, I think, is how to target this. To the extent we can come up with a way to figure out total income, I guess it could be targeted more fair in the end and would have less of an impact on the Social Security trust fund and on our budget generally, but it's impossible to do, I guess. Correct? In other words, to come up with total family income, administratively would that be too difficult to do?

MR. CULLINAN: I think we would definitely need to have some changes in law to get all of the pieces together that we would need to do that type of comprehensive approach.

If I might point out one thing about the GPO, here in Washington very often we get focused on federal employees, and they are a minority of those currently affected by the GPO. And over time, since we've changed the retirement system for federal employees, in the long run it will not be a civil service issue; it will be a state and local issue on the GPO. And the types of pension plans that are out there are very diverse, and what we're looking at now might not be exactly the same situation we should be thinking about if we're going to be changing the GPO for beneficiaries in the future.

MR. PORTMAN: Well, I appreciate that. Again, as someone representing a state that has a lot of noncovered state and local employees, most of my input actually doesn't come from the federal workers; it comes more from our state- and local-covered workers, and it comes from low-income workers, mostly widows who may have a spousal benefit that's reduced significantly.

In one case I know this woman has a $300 pension, and because of the two-thirds offset she ends up with about $34 in Social Security from the spouse, and, you know, that's not enough to live on. And so that's a situation that, I think, a lot of us from California, Ohio, and other places are hearing from, and that will continue, from what you've said, despite some changes in civil service at the federal level.

But I do appreciate your testimony. One other, I guess, option to throw out there: Is there a way to move the $1,200 down to reduce the cost and make it more targeted, knowing, again, that there is some arbitrary aspect to this because we don't know what family income is? But what if you moved it from $1,200 to $1,000?

MR. CULLINAN: We haven't looked at that. We could look at that, if you would like, and get back to you on that.

MR. PORTMAN: I think it might be helpful to have that in the potential solutions to this problem because it seems like all the other ones create the same kind of problems that Mr. Cardin mentioned earlier that we're dealing with now on other Social Security changes that have been made over the years, because they are relatively arbitrary, and at some point there is a cliff. The "notch babies" is the example he used. But we ought to look at that option as well, I think.

MS. ROSS: We would certainly also happy to work with you or with Mr. Jefferson on other ways to do this, but I would say again that another way to frame this is to look at the particular groups of people, whether it's low-earner women or whether it's widows, and not be so -- you would get away from some of the problems of your GPO dual-entitlement conflict if you look at a particular target group that itself has low income, and we would be glad to help you look at that as well.

MR. PORTMAN: I appreciate it. Mr. Chairman, do you have any questions?

Mr. Matsui.

REP. MATSUI: Thank you. Dr. Ross, I want to just follow up on that last comment that you made. You're suggesting that rather than make the differentiation between a couple that are both under Social Security and a couple in which one has Social Security and the other one has a non-Social Security pension, you're suggesting we not make that differentiation and instead make the differentiation based upon income levels. Is that what you're saying?

MS. ROSS: Yes. What I'm saying is that there are people about whom I know you're concerned who are in this government-pension-offset position, but there are equally poor women or individuals, and actually quite a few more of them in the dually-entitled category. So if you're trying to address the poverty issue or a low-income issue, there are ways to do it where we don't treat one of those two groups differently than the other.

MR. PORTMAN: If I may, Mr. Chairman, one of my concerns is -- not with your testimony -- but one of my concerns with this issue is that if we treat those that fall within the GPO in a certain way, then I think we have an obligation to treat those that receive two Social Security benefits the same way. It's all the same in terms of income levels, and, you know, we have a lot of widows right now that are, you know, really at the threshold, and to put money in one area and not the other seems to me somewhat -- we need to look at this.

I mean, I just think we need to look at it in a comprehensive way, and it's somewhat troubling to me that we would handle one and not the other. I appreciate your testimony because you really through this graph really vividly raised the problem here. It's, again, as Mr. Cardin suggested, perhaps a notch-baby situation where one party feels rightfully, you know, that he or she has been treated inequitably, but then if you deal with that issue, you create another inequity in another area, and I think we need to really look at this in a comprehensive way. And I am a cosponsor of Mr. Jefferson's legislation, but I think he has a legitimate issue that he has raised here, but on the other hand, I think others as well, so I appreciate this.

REP. SHAW: It's, indeed, a difficult issue. I thank you both very much, and, Dr. Ross, again thank you for helping us out with our time limitations.

The next panel -- and the final panel: Vincent Sombrotto is the president of the National Association of Letter Carriers; John Keane, who is the administrator for the Jacksonville Police and Fire Pension Fund from Jacksonville, Florida; David John is a senior policy analyst from the Social Security Heritage Foundation; Frank Atwater, national president and chief executive officer of the National Association of Retired Federal Employees on behalf of the Coalition to Assure Retirement Equity; and Ruth Pickard, who is a member of the National Association of Retired Federal Employees.

Thank you all for being here. We've got your full testimony which will be made a part of the record. And you may proceed as you see fit.

Mr. Sombrotto?

MR. VINCENT R. SOMBROTTO: Thank you, Mr. Chairman, for the opportunity to appear before you today. If I may, I'd like to submit my full statement for the record.

REP. SHAW: Without objection, all statements will be made a part of the record.

MR. SOMBROTTO: Thank you. My name is Vincent Sombrotto. And I'm president of the National Association of Letter Carriers. I represent a union of 320,000 members of which 90,000 are retirees. I'm also here in the capacity as chairman of the fund for assuring an independent retirement, FAIR.

FAIR is a coalition of more than 20 organizations representing more than nine million federal and postal employees, both active and retired. Needless to say, the government pension offset is a major issue to the people that I represent.

I would like to thank you, Chairman Shaw, for recognizing the challenge that the government pension offset presents to members of the federal community. There are no issues that generate more passion among my members than those associated with the reduced Social Security benefits, either through the GPO or the windfall elimination provision.

We thank Congressman Barney Frank from Massachusetts for his bill addressing the windfall elimination provision. I also want to thank Congressman Jefferson for his extraordinary efforts on the government pension offset.

The FAIR coalition has endorsed Congressman Jefferson's bill and is the latest in a long line of bills that have both bipartisan and bicameral. However, we also recognize, Mr. Chairman, that you have some concern about this bill.

And we look forward to working with you to craft a solution to a serious problem of the government pension offset. I often speak to retired members of my union, people who have spent decades on the street delivering mail who should be enjoying the fruits of their labor and their retirement years.

Instead, they must go to work each day, because they receive little or no Social Security spousal benefit due to government pension offset. These stories are only going to become more common as more and more retirees will be from dual-income families.

As the core of the issue -- at the core of the issue is the question of what portion of the civil service retirement system annuity is comparable to Social Security benefits for the purpose of applying the dual-entitlement rule.

In some ways, CSRS benefit is more like a private sector pension than a Social Security benefit. Yet, public sector annuity is also designed to incorporate the equivalent of Social Security benefits. These questions become even more difficult because of the differences in the way Social Security and CSRS benefits are calculated.

The key is to determine which comparison will apply for the purpose of providing federal retirees with the benefits that they have earned and deserve. Even if we were able to accurately make this calculation, we must take a second look at the formula used to calculate the government pension offset.

The current two-third offset is an arbitrary figure, arising out of the 1983 compromise. The idea is that one-third of the CSRS annuity that is not subject to the offset calculation is analogous to a pension in the private sector. However, I would contend that one- third greatly underestimates the value of such a pension.

For example, the United States postal service is the single largest public civilian employer with more than 800,000, and I might add is now 900,000, employees. If we were a private company, it would rank in the top ten of the Fortune 500. It would be inaccurate to equate the size of the pensions offered by these Fortune 500 companies with the one-third of a civil service annuity.

Another concern that arises out of the debate over the government pension offset is that it highlights some of the other benefit reductions that only public sector retirees are forced to live with. One example is the situation when a person is subject to both the government pension offset and the windfall elimination provision, which reduces an annuitant's own Social Security benefits.

Another area is where civil service retirement annuitants receive different private sector retirees in the public pensions that are treated differently from Social Security benefits for tax purposes. A person whose Social Security benefits are reduced under the dual- entitlement rule do not have to suffer the adverse types of consequences, as well. Only CSRS annuitants do.

I have no doubt that we can come up with a solution to this problem. We would like to eliminate the GPO altogether. However, we're willing to talk about other avenues to diminish the impact on our retirees. Now, I heard one of the other witnesses say this is a blunt instrument.

I associate myself with that remark. Our retirees keep getting hit with that blunt instrument. For example, we may want to consent in a change in the formula either on a percentage basis or by looking at the actual dollar amounts.

Also, attempts to mitigate the impact of those affected by both the windfall elimination provision and the government pension offset may hopefully relieve some of the financial burden placed on our retirees.

There are no easy answers to this solution. But the national association of letter carriers and the FAIR coalition look forward to working with you. Your involvement in this process is crucial if we are to make changes to this current system.

REP. SHAW: Thank you. Mr. Keane?

MR. JOHN KEANE: Thank you, Chairman Shaw and members of the subcommittee. My name is John Keane. I'm the administrator of the Jacksonville, Florida, Police and Fire Pension Fund. I've come here today to address a question of fundamental fairness.

The government pension offset is punitive and hurts most public servants who work not only as police officers and firefighters, but as secretaries, school cafeteria workers, teachers aides, and others who generally receive lower pension benefits.

Since you're going to put the testimony in the record, I'm not going to be repetitious and also in the interest of time, I'd like to speed along and just to point out that we believe that the remittance of Social Security contributions represents 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 of benefits to individual retirees, not redistribution to others.

The penalties imposed on our members are wrong. The whole mind set 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's no right way to do the wrong thing.

The fundamental shortcomings of bad public policy endures no matter how much garnish or seasoning is applied to it. I thank you for affording me the opportunity to share our thoughts with you and concerns today and look forward to working with you as this debate continues. Thank you, Mr. Chairman and members of the committee.

REP. SHAW: And thank you, Mr. Keane, for your brevity. We do have your whole testimony which will be put into the record.

Mr. John?

MR. DAVID JOHN: Thank you, Mr. Chairman, for inviting me to testify on this issue. It's my pleasure to be a part of this panel. Social security is one of this government's most popular programs, yet few Americans know very much about how it operates or why certain policies are implemented.

GPO is an excellent example of this confusion. To the four percent of the workforce whose benefits could be altered by GPO, it is patently unfair and reduces the benefits they or their spouses have paid for with hard-earned money.

To them, the seemingly arbitrary cut in their spousal is made even worse by the fact that many only learn of the provision after they don't receive retirement benefits they had counted on. Those who support eliminating GPO make an emotional case. But there's also another side to this issue.

While GPO's formula is arbitrary, it is also, on the average, fair. For government workers who are not covered by Social Security, GPO is the equivalent of the due-entitlement rule that affects the other 96 percent of American workers. Without it, government workers would have an unfair advantage over those who are part of Social Security for their entire working life.

Proponents of changing or eliminating GPO correctly state the private pensions have no effect on the amount of survival or spousal benefits that an individual can receive under Social Security. However, the comparison between private pensions and non-Social Security government pensions misses the point.

Those who receive private pensions are also part of Social Security. And they are, therefore, subject to the dual-entitlement rule. This is also true for those who have no retirement income other than Social Security and those government workers who also participate in Social Security. It is simply not fair to the remaining 96 percent of the work force to give some government workers special treatment.

Most government workers, and especially teachers, perform valuable service to society. I'm the son of a teacher. However, this along should not justify eliminating the GPO for them while still retaining the dual-entitlement rule that affects everyone else.

If this subcommittee decides to eliminate or limit GPO, it should also give the same treatment to those who are affected by the dual- entitlement rule. Doing both would be fair, but it would also be quite expensive. For that reason, I am not advocating such a step.

This is not a minimize the shock that the individual, and especially recently bereaved spouse, faces when they receive a much smaller retirement check than they anticipated. However, GPO has been part of the Social Security program since 1977.

While I would not blame any individual for not understanding the provision, I would also not excuse any non-Social Security government retirement program that does not vigorously work to inform workers that they could be subject to it.

Today's retirees may have been caught unaware, but there is no reason for those who are still working to face such an unpleasant surprise. I am also not making any case that $1,200 a month, much less a lower figure, is sufficient for a comfortable retirement. Clearly, it is not.

As the son of a teacher, it is truly shock to me that anyone that anyone has to show for a lifetime of public service has memories in a very tiny check. However, GPO is not the main reason for those -- that those pensions are so low.

It may be a contributing factor that further lowers an extremely low pension. But it is no more than that. For that reason, altering GPO does little than make a bad situation slightly better. The real reason why individuals have such low pensions is the subject of another debate.

Reforming Social Security and increasing opportunities for individuals to save for retirement, this subcommittee and its members have taken a leading role in that debate. And I look forward to continuing to work with you in the future to truly increase the retirement income of American workers.

For today, it is true that the elimination of GPO would increase the retirement incomes for nearly 300,000 government employees -- retirees by an average of 340 a month. However, those millions of other Social Security recipients who are subject to the dual- entitlement rule and will not be getting any relief have a valid reason to ask why their plight has also been ignored.

Thank you.

REP. SHAW: Thank you, Mr. John.

Mr. Atwater?

MR. FRANK G. ATWATER: Good morning, Mr. Chairman and members of the subcommittee. I'm Frank G. Atwater, the national president and CEO of the National Association of Retired Federal Employees, or better known as NARFE.

I thank you for scheduling this hearing, Mr. Chairman, on the Social Security government pension offset. And I'm grateful that you have afforded me the opportunity to testify on an issue of great importance to our members. I'm wearing two hats today.

I'm testifying on behalf of my own organization, NARFE, which has not 420,000 members of federal retirees, employees, spouses, and their survivors across the United States. I'm also speaking on behalf of the coalition to assure retirement equity, or CARE, a coalition of 43 organizations representing millions of federal, state, and local government retirees and employees.

In 1991, CARE was formed specially to address the Social Security government pension offset which, as you are aware of course, was enacted as part of the Social Security amendments in 1977. The GPO Social Security Act amendment originally enacted in 1977 went into effect in 1983 and since then has affected over almost 285,000 federal, state, and local retirees.

And I heard different numbers this morning. And I think those numbers change periodically every day and are rising. It reduces or eliminates the Social Security spousal benefit, wife, husband, widow, or widower to which an affected retiree may be eligible.

Two-thirds of the amount of the monthly government annuity that the retiree has earned is used to offset whatever Social Security spousal or survivor benefit might be payable. According to the Congressional Budget Office, about a 145,000 retirees from federal, state, and local governments had their Social Security auxiliary benefits reduced or eliminated as a result of the GPO in December 1991.

Since then, that figure has almost doubled. The Social Security administration states that the number of Social Security beneficiaries affected by GPO as of December 1,997 was 270-some thousand. And that number increased by December 1999 to nearly 285,000. Of the 285,000 affected beneficiaries some 230,000 or 80 percent are fully offset which translates into no benefit.

It is crucial, sir, for you to note that 104,137, or 38 percent, of the total number of affected beneficiaries are widows or widowers. And 71,000, or 68 percent of them, are fully offset.

As noted in the table below, ten states in this country represented 169,000, or 63 percent, of the total number of affected individuals. California, Ohio, and Texas had significantly higher numbers than the others. But Illinois and Florida follow close behind.

And I will not read that table to you, because it's right there. And it's in the record. Mr. Chairman, I understand from our members through correspondence with their congressional representatives that there are members of this committee who have concerns regarding means testing.

I am led to believe that these concerns specifically relate to HR-1217 and the provisions of a $1,200 per month threshold before GPO would be applied. When Congress enacted the GPO in 1983, it set a means test precedent by introducing a means test provision into the Social Security program by denying the full application of spousal benefits to persons receiving government pensions.

This application of denial is not applied to those persons who are recipients of annuities or other retirement benefits from the private sector. We, as federal annuitants, share you and your colleagues' concern over the impropriety of means testings in Social Security and believe that Congressman Jefferson's bill, HR-1217, is the most pragmatic approach to the modification of the GPO in lieu of repealing it.

The preliminary projections of HR-1217 are based on a threshold of $1,200 and indexed by the Social Security COLA over ten years retro active to December 31, 1999. Social Security Administration actuaries have determined that justice with the earnings test repeal enactment of HR-1217 would increase the OASDI long-range actuarial deficit by an amount that is estimated to be negligible; that is, less than .005 percent of the taxable payroll.

Members of the committee, you are able to expeditiously change the Social Security act to benefit older workers through Public Law 106.182. We are now asking you to expend the same effort to effect change through HR-1217 for government retirees.

In fact, since repeal of the earnings limit, government workers 65 and older can receive full Social Security benefits based on their own work or as spouses or survivors. However, as soon as they retire, sir, their Social Security is cut or ceases altogether.

Therefore, a benefit counted on for retirement is paid while one is working, only to disappear when needed most, at retirement. We urge you to support Congressman Jefferson's legislation, HR-1217, a proposal to modify the Social Security GPO as supported by millions of federal, state, and local government employees and retirees across the United States represented by CARE.

Mr. Chairman, I would like now to introduce Mrs. Ruth Pickard, a member of the NARFE and a constituent of yours, sir. And I believe you have met her. And this is her first trip to Washington, D.C. And she's relatively pretty nervous this morning. And I told her not to be, but that doesn't mean a darn thing, and you know that. (Laughter.)

Mrs. Pickard?

REP. SHAW: Mr. Atwater, she was not at all nervous in my office. I think she's got -- she's got a story that I know that my colleagues up here on the dais will be interested in, the Committee here will be interested in hearing.

MR. ATWATER: Sir, we appreciate your taking the time to hear her.

REP. SHAW: Slide your microphone over to --

MR. ATWATER: I certainly will.

REP. SHAW: I'm sure she'll do quite well.

Welcome.

MS. RUTH PICKARD: Thank you. Mr. Chairman and members of the committee, I'm Ruth Pickard, a 73-year-old working woman from Palm Beach Gardens. I greatly appreciate the opportunity to personally ask you to give early and serious consideration to the ways and means of alleviating the dire financial consequences of government pension offset provisions.

The GPO has drastically curtailed my retirement income and that of thousands of others. We are being denied Social Security benefits, not because we have never worked, but because we spent some or all of our working years in the public service.

Now we find that our government work has eroded the retirement income we have counted on for years of Social Security taxes we and our spouses have paid over a lifetime. I went to work in 1943 at the age of 16 and left the workforce in 1957 to stay home with two young children for seven years. All my early retirement employment were in the private sector.

In 1963, I went back to work, this time for the US Postal Service, where I paid into Social Security until 1967 when I became covered by the civil service retirement system. In the late 1960's, I developed high blood pressure. And then in 1986, I suffered a brain aneurysm. Fortunately, I had more than enough sick leave and annual leave to cover five months of recuperation.

Despite my health problems, I returned to work for the post office and until I retired in 1990 at the age of 63. When I applied for Social Security based on my own work, I found my benefits reduced considerably to $112 because of the windfall elimination provision of Social Security Act.

And although I had been divorced after more than 20 years of marriage, I was still entitled to an additional $248 in wife's benefits. I was informed by Social Security that, we cannot pay you because of the two-thirds of my federal annuity was more than the wife's benefits I might otherwise have had.

That was the government pension offset. That was the second time my government service reduced my Social Security. I soon realized I could not make ends meet on my federal annuity and my small Social Security check. So six-and-a-half years ago, I went back to work part-time. I'm still working. And I still have Social Security deducted from my paycheck.

Today, after 46 years of work, 22 years under Social Security, 24 years under civil service and an additional six-and-a-half years part time, I have a total monthly retirement of $1,245. $1,071 comes from the federal annuity and $171 from Social Security. And I'm still paying about $50 a month into Social Security payroll taxes, with little hope of my benefits increasing in the future, unless the government pension offset is radically reformed or repealed.

Mr. Chairman, as one of your own constituents, I greatly appreciate you scheduling this hearing to consider the purpose and impact of the GPO along with the ways to modify it. I hope you will give a serious consideration to Congressman Jefferson's bill which has been found worthy of support by more than half of your colleagues in the House of Representatives.

And I particularly hope that you and all your colleagues will remember that GPO is just not another confusing concept of the Social Security Act, nor is it simply a safeguard against individuals getting more than their fair share from Social Security.

The GPO is a provision of the Social Security law which has denied benefits to hundreds of hard-working elderly constituents in each of your states and districts. Unless you and your fellow members of Congress change this law, retirement security will be difficult if not impossible for many women like me.

I commend you all for voting to repeal the Social Security earnings test so that seniors can afford to work. I ask you now to give equal consideration to the GPO so others can afford to retire. Thank you for the opportunity to talk.

REP. SHAW: Thank you, Ms. Pickard.

Mr. Matsui?

REP. MATSUI: Thank you, Mr. Chairman. Ms. Pickard, how many months or years did you work and receive Social Security -- and pay into the Social Security system did you say?

MS. PICKARD: Twenty-two.

REP. MATSUI: Twenty-two?

MS. PICKARD: I paid into it, yes, sir.

REP. MATSUI: I was just talking to staff there. And they -- was it full-time?

MS. PICKARD: Some of it was. Some of it wasn't.

REP. MATSUI: But I would imagine --

MS. PICKARD: Most of it was, yes.

REP. MATSUI: Most of it full-time? That doesn't seem right, does it, okay, because --

MS. PICKARD: I worked for a long time.

REP. MATSUI: That sure is a long time. I mean, it's stunning that you only receive?

MS. PICKARD: Well, it's been raised $171. It started out as $112, which was a terrible shock.

REP. MATSUI: That's terrible.

MS. PICKARD: It is. I'm sorry. I agree.

REP. MATSUI: I thank you very much for your testimony. We really appreciate it.

MS. PICKARD: It wasn't easy.

REP. MATSUI: It was very helpful, obviously, and insightful.

Vince, can I ask you a question? You know, I really understand the concerns that all of you have raised here. But I'm trying to understand, though, and figure out in my own mind is how we deal with the fact that when you have the dual-entitlement couple -- we have that offset -- and if we do make changes on the GPO, it gives those that might have non-Social Security pensions a higher benefit than those that have two Social Security benefits, you know, because I know there's a distinction between the two. You know, one's a pension -- and you know -- it's probably fully funded.

And, obviously, you pay taxes on it. And so there are differences. But at the same time, you know, it's just by happenstance that one happened to work for a agency or an employer that has Social Security and another one doesn't, so how do you -- how does one rationalize that?

MR. SOMBROTTO: Well, I rationalize it through the eyes of a letter carrier --

REP. MATSUI: Yes. I understand that. I appreciate that.

MR. SOMBROTTO: -- that's worked 30 or 40 years. And the postal servant has attained the criteria to be eligible to retire and then does retire. However, during the 30 or 40 years of employment, he found it difficult to support a family without getting a second job.

And most letter carriers have had the opportunity or been forced to work more than one job to support a family, because the wages were so low in the postal service for many, many years. And so consequently you have a letter carrier that pays into -- pays for their civil service retirement, pays a percentage, seven percent of his earnings into civil service retirement and at the same time when they worked in the private sector paid Social Security.

And so we came to the conclusion that you're entitled to those benefits that you paid for. And so now the shock comes when after you retire and you believe that you're going to get a Social Security benefit and then it's offset, that's the windfall.

But if your spouse was working -- in many cases, they were -- then there's a spousal benefit that sometimes has denied a retiree, particularly if one of -- either of them predeceases the other.

For instance, one of the interesting things that I was thinking about in listening to the testimony here, if you have two people, a husband and a wife that both work in the private sector and are both covered by Social Security, they both get Social Security benefits don't they? And whatever that amount is, that's what they'll live on when they are retired.

If one dies and the other doesn't, if you offset it, then they are living on after as much money as they were when both of them were alive. Does that seem fair? I mean, I'm trying to figure out if that's fair. It doesn't seem fair to me.

REP. MATSUI: I understand what you're saying. I'm not disputing what you're saying.

But a couple or a surviving spouse in which both received Social Security benefits could make the same case that you're making now and legitimately so.

And that's why I'm wondering if we should handle it on the basis of dealing with the GPO in the form of Mr. Jefferson's legislation? Or should we try to deal with it in terms of, you know, the overall benefits and the overall survivor's benefits that one receives as sort of a threshold.

You know, that's the only question, because I think what you're saying is correct. The problem is that there are others that would not benefit from this legislation that could make that same case.

MR. SOMBROTTO: And they very well may.

REP. MATSUI: Right.

MR. SOMBROTTO: And if they do, then you have the responsibility for listening to them as you're listening to us.

REP. MATSUI: And that's right. And that's why, perhaps, we should try to deal with both problems in a way that, you know, that tries to deal with it comprehensively. And that's my concern, because I certainly appreciate the problems that you raise. On the other hand, you know, like two years from now or a year from now, you can have the same situation from those who receive Social Security benefits.

MR. SOMBROTTO: Well, there are two things I'd like to say if I may, one, that in terms of looking at from a letter carrier's eyes if you have someone that's in the private sector that works for General Motors and they get a pension from General Motors, they are also covered by Social Security. Are they covered by an offset?

REP. MATSUI: No, I don't --

MR. SOMBROTTO: No, I understand they are not. The point is why is somebody that's in the federal sector that gets a retirement --

REP. MATSUI: I understand my staff has said under the dual benefit.

MR. SOMBROTTO: Under the dual benefit.

REP. MATSUI: Thank you. My time has --

REP. SHAW: Why don't you finish? And I know the time is running short.

REP. MATSUI: All right. Go ahead.

MR. SOMBROTTO: In order to facilitate the hearing go ahead. I'll delay.

REP. SHAW: Mr. McCrery?

REP. McCRERY: Well, Mr. Chairman, first I want to thank you for inviting us to the Palm Beach Gardens town meeting. It's nice to join you.

Ms. Pickard, thank you for coming up and sharing with us your story.

REP. SHAW: Next time, I'll do it in February. (Laughter.)

REP. McCRERY: I don't think any of us thinks that the system in place is absolutely fair to anyone. However, there does seem to be kind of a fundamental hurdle to get over here, and that is why should we treat the GPO different from the dual-entitlement provision?

Why is it not fair for government pensions to be offset and yet fair for dual-entitlement recipients to be offset? Can anybody answer that question?

MR. SOMBROTTO: I'd like to take a shot at that.

REP. McCRERY: Okay.

MR. SOMBROTTO: I think it's what pot you're getting the money out of. In our case when our member retires, then we pay him a pension benefit. When he dies the spouse's benefit is reduced and paid on to the spouse. That comes out of the Police and Fire Pension Fund.

Folks that are getting benefits out of the Social Security system when one member of the wedded union dies, there are that reduction and it applies. In our case, the people -- the benefit that we are paying our members doesn't come out of the Social Security fund, not costing the Social Security fund any money. And we don't think there should be an offset. It's just that simple.

We just don't think there should be an offset when our members paid into Social Security. Any of our police officers and firefighters and their secondary employment pay in vast amounts into the Social Security system and then it gets on to the other side of the issue that's not here before us.

But, you know, it's just wrong to take money from people to say, I'm going to take this money. We're requiring you to pay it. We're requiring your employer to match it. And when it comes time for you to get in line and go to the pay window and get your benefit, they say, sorry. It's just not right.

The Social Security dual-entitlement benefit, both of those benefits are coming out of the Social Security trust fund. And that is the difference in answer to your question. The government pension offset issue is that the primary benefit is coming out of another source of income that the members paid for. We paid for that pension that we're having.

REP. McCRERY: And I follow you. But the dual-entitlement recipients would say, well, we paid into the Social Security system, whereas you didn't. We paid into the government pension. While you were doing that, you were not paying into the Social Security system.

MR. SOMBROTTO: In the case of most of the people, sir, they are paying. And it's all levels of the government. College professors are out working at other places in the summer doing other things. Lots and lots of people in government service pay into the Social Security.

REP. McCRERY: Yes. Mr. John, can you comment on that from --

MR. JOHN: Well, yes. With respect to the gentleman to my right, the fact is that the benefits that are coming and that are offset by GPO were actually paid for by the spouse, the spouse that has presumably died by the time you're getting to reach survivor benefits or something along that line. So that spouse has paid for benefits, has received benefits.

And now, there's the question of, essentially, what's left over here. So there actually has been a payment to Social Security. There has been a benefit that has been received from Social Security.

There is a fact that one -- that the basic benefit that the surviving spouse receives from this gentleman's pension fund is paid for and funded really doesn't come into the equation here with the payment of the spousal benefit, because all of that's coming out of a different account, a different earner's account. And it's coming out of a different trust fund.

MR. JOHN: Yes. I mean, we're talking about spousal benefit here. We're not talking about the worker's benefit. Is that right?

REP. McCRERY: That's correct. So on the one hand, you've got the government pensioner who paid, yes, into a defined benefit plan. But he was not paying into the Social Security system. And then, you've got a spouse, I guess, who was paying into the Social Security system -- but who was not paying into the Social Security system.

So she's offset. So I don't really -- I still don't understand how the dual-entitlement folks are different from the GPO folks. I just -- anybody else want to take a shot at why you should treat them differently?

You understand the problem we have as policy makers, we feel some sympathy for your plight. But we also feel sympathy for the plight of the dual-entitlement folks. And then, when you try to put everybody you try to fix it for everybody, it's a very expensive problem situation.

MR. JOHN: In some of the cases I was speaking about, we have a woman who is entitled to Social Security benefits because she worked.

She's married to a man who belonged to a public pension fund and who also paid into the Social Security system. And when he dies, she's getting whacked twice. And that's what we're here opposing.

We think that this whole question of these offsets, if you pay the money in, you ought to be able to get it back out. And the Social Security folks here who testified awhile ago, they are really not sure. They are really not sure how many people are offset. But when someone asks them for a very precise number and magically it came right up.

But, you know, we just think that if the Congress has enacted a law that requires our people to pay into the Social Security system, when it comes time to get in the pay line, our people ought to be there. And they should not have their spouse's benefits after they expire offset because of the fact that they also spent a lifetime working a main career in public service.

REP. McCRERY: Thank you, Mr. Chairman.

REP. SHAW: Mr. Levin?

REP. LEVIN: Mr. Chairman, I'm really glad we're having this hearing. It's a bit complicated. But it's, I think, a pretty urgent issue. I think, Mr. Keane, what you're saying is that when you have both in Social Security, it is different because in terms of determining benefits, when you have two different actuarial pools, it's really different than when you have one, in terms of setting the level of benefits.

I think, Mr. McCrery, that's what's being said. And clearly we need to wrestle with this. Could I just ask a question, because the testimony about benefits that you're receiving, if the typical letter carrier, say, who works full-time for 30 years, do you know, more or less, what the pension would be, forget about Social Security?

MR. KEANE: Yes. The -- not from Social Security.

REP. LEVIN: Right.

MR. KEANE: I'm talking about civil service and retirement. The average would be about $1,300 a month.

REP. LEVIN: Well, I think everybody better digest that. That's $16,000 a year.

MR. KEANE: We ought to know out of that at least 10 percent goes toward their payment for a total benefit.

REP. LEVIN: Right. And I think without getting into another issue part of the dynamite in the prescription medicine issue is the retiree who's worked 30 years and is receiving that kind of pension. The 10 percent may be low in terms of their overall healthcare cost.

MR. KEANE: That's just premium.

REP. LEVIN: Right.

MR. KEANE: In terms of their premium in the FEBA program, they pay about 10 percent is the average of their annuity towards a benefit. That doesn't account for the co-pays, the moneys that they pay for prescription drugs, so on and so forth, no.

REP. LEVIN: Thank you.

REP. SHAW: Let me just follow that up with a question. I assume that the 10 percent they pay is in lieu of Medicare?

MR. SOMBROTTO: Well, they pay for Medicare, as well. If they want part B, they have to pay for Medicare. That's absolutely --

REP. SHAW: What are the drug benefits?

MR. SOMBROTTO: Well, that's individual plans will have different plans for drug benefits. But Medicare, there were no drug benefits.

REP. SHAW: What is the 10 percent?

MR. SOMBROTTO: The 10 percent is the premium they paid to have one of the programs in the FEBA program.

REP. SHAW: Would that include drug benefits?

MR. SOMBROTTO: In most of them, it will. There will be different types of drug benefits. So will have co-pays. Some will have other payment that the individuals -- if they go to their own pharmacists, they have to pay. If they have mail-order prescriptions, they pay less.

There's different types of plans have different -- there are some 400 plans in the program. And any civil service retiree can select any one. A letter carrier has the same option as --

REP. SHAW: Based on 10 percent of the pension?

MR. SOMBROTTO: Yes. They pay an average of about 100 some odd dollars a month towards health plans, health care.

REP. SHAW: I guess that's the government guaranteed plan where the government picks up the balance of that. That doesn't pay for the whole program, does it? Or does it?

MR. SOMBROTTO: They pay -- what they paid -- the government doesn't pay for the retiree. It pays for a portion, yes. But the individual retiree pays about 60 percent, a little more than 60 percent of the entire cost of the program.

REP. SHAW: And the government picks up the balance?

MR. SOMBROTTO: Yes.

REP. SHAW: Okay.

Mr. Hulshof?

REP. HULSHOF: Thanks, Mr. Chairman. I appreciate you having this hearing. And I think this panel has pointed out the dilemma that we face, because we hear the very -- the gut-wrenching stories, Ms. Pickard, as you've indicated to us.

And I think it was Dr. Cullinan in the previous panel, one of you associated his remarks with yours saying that the GPO in trying to address it is a blunt instrument. And that's on this side of the dais, when we pass a law, of course, it is the law of the land.

And, Ms. Pickard, unfortunately, those types of situations as you've described, if we had scalpel-like precision, we would address those specific cases. Also, Mr. John, it's interesting, not that I tuned into the number of prolific talk shows that have these panels, but there seems like there's sometimes -- and you clearly in this panel, at least, are outnumbered, but I want to ask you and -- actually, Mr. Keane, I think the two of you could I think could provide a good back-and-forth.

Mr. John, you say that eliminating the GPO would give government workers an unfair advantage over other workers that are covered by Social Security. Is that a fair assessment?

MR. JOHN: Yes.

REP. HULSHOF: All right.

Mr. Keane, why do you disagree with that?

MR. KEANE: I disagree with that for the following reason. And I'll use myself as an example. I belong to the retirement system. I draw benefits from the retirement system. I now work for the retirement system and pay into Social Security.

When I die, my wife's benefit from the retirement system will be reduced as it should be. When she goes to apply for Social Security, which she's supposed to be entitled to, they are going to say, we're going to reduce your Social Security benefit because your husband not only paid into Social Security, he also belonged to that police and fire pension fund. And that's what I call wrong.

That Social Security benefit I paid for.

If I had worked -- as an example was used here earlier -- for General Motors, they are not going to tell my wife, well, he was working for General Motors. And because you're getting that General Motors pension, we're going to reduce your Social Security. They just don't do it that way.

REP. HULSHOF: And, again, I think you point out making the distinction that Mr. McCrery made is that I hope you have a good, long healthy life.

MR. SOMBROTTO: Myself, I agree with you.

REP. HULSHOF: And you will be getting your pension. And as you've qualified for Social Security, we're talking about, of course, surviving spouses and our vexing problem. Mr. John, any quick comment back to Mr. Keane because of his situation?

MR. JOHN: Well, the one thing is that if Mr. Keane was getting a pension from General Motors, he would also have Social Security. And he would also be in the case at the time that a survivor's benefit comes in play here or a spousal benefit, there would be the dual- entitlement rule to hit him at that point. So if he doesn't have the dual-entitlement rule, then essentially he is getting, as Dr. Ross' chart showed, a fairly significant additional benefit.

REP. HULSHOF: Now, before you go back to Mr. Keane, let me ask you this because this is what I hear, again, from my NARFE members back home. I'm simplifying it greatly in the interest of time. But we pay more. We pay more into the system.

In fact, Mr. Keane, we appreciate your brevity in your oral testimony, but I went to your written statement and you mentioned under page 2 current law fails to consider the average employee pays an average of 8 percent into their pension plan plus the average 13 percent the employer pays, therefore, a combined contribution rate of 21 percent, much higher than other employees under Social Security. So therefore, we pay more. We're entitled to more.

What's your answer to that, Mr. John?

MR. JOHN: If you included the total amount that I paid to Social Security, the 12.6 percent, if you include the employer and the employee's share -- and we're not taking about any of the health care portions at that point -- in order to have a valid comparison, you'd also have to compare the amount that I put into my pension plan and/or that my employer matches my contributions to my pension plans.

So, essentially, to look at both if you look at, for instance, my personal thing, you would find that roughly 21 percent would be about the same.

REP. HULSHOF: Mr. Keane, did you probably want to get the last word? I see my time is about up.

MR. KEANE: Thank you. Yes, sir, I do want to respond to that. My wife, although she worked for the government for many years and she draws a very small pension from the government, she also worked for a number of years, but not enough to qualify for a Social Security benefit.

So her Social Security that she would get had I not worked for the government, she would draw the surviving spouse's share off of the thousands of dollars I'm paying into the Social Security system.

But because I also worked for a governmental agency, Social Security wants to peel some of that money off and not give it to her. We're not trying to get anything that we didn't pay for. I mean, that's what I'm trying to do.

REP. HULSHOF: Thank you, gentlemen. I thank all of you. And, Mr. Chairman, I appreciate it.

REP. SHAW: Mr. Hulshof.

Mr. Jefferson, you're not a member of this committee, but I'll be welcomed to make you a member for a day if you'd like to ask a question. (Laughter.)

REP. JEFFERSON: Thank you, Mr. Chairman. I accept your invitation. I don't have a question so much as I have an observation that I think it's maybe worthy of being made. It's really a iteration of what I said earlier, maybe with a little more of a point to it based on the testimony.

It's important to note that when this system was set up way back when in the 1930's that the dual-entitlement provision was a part of the system way back then. And it was permitted then and there wasn't anything like a GPO. It didn't exist. So there's a notion about comparing these two things and you have one. You have the other.

There really -- it's incongruent to do it that way. It turns out now to be an argument that seems apparent. But back then, it wasn't. And so you ask yourself, then, why the gulf between 1936 or 5 or when ever it went into effect and 1983?

Why only then did we have to do the present provision? I don't know if it was 77 when you had the one for one. And it was because of the Supreme Court decision that came into play which said that a man no longer had to prove dependency to get his wife's benefit. That's only going to happen between '34 and now.

So there's no rationale that we're dealing with here. And we're wrestling with the data based on the dual-entitlement and now the GPO. And if we don't have the one, how do we do the other? We're wrestling with a demon here that doesn't really exist.

What really happened was there was some folks that became afraid that it was going to be very expensive to the Social Security system if we didn't have a GPO rule. But that's a rational that wasn't that we're going to treat a set of employees unfairly and another set of employees ought to have the same treatment.

That never was the discussion. Had it not been for that decision, we'd have the same system today. You have a man trying to a woman would be presumed to be dependent. And the man would have to establish dependency. That Supreme Court says that's unfair. You've got to treat everybody the same way. Enter the GPO.

So I just want to get the committee to start -- not to think about these two things as things that we have to resolve in our minds before we can get to GPO and have to resolve this so-called inequity between GPO and dual-entitlement. That is not how it developed historically. That is not what I think is before the committee. And so we'll kind of look at it in a different way.

REP. SHAW: Well, I thank this panel, particularly my constituent from Palm Beach Gardens. I appreciate you all being here. It means a lot to us. You certainly have given us a lot of things to think about.

Next year, I'm confident that we will be going forward with some type of reform to save Social Security. This will certainly be on our plate and on our minds next year. And whereas this year, with the shrinking legislative agenda left with us and the appropriations before us, I don't know if we'll be able to get to it any this year, as far as actually passing the legislation. But we will be looking at it. Fairness is vitally important.

I do want to be sure that, at least under my chairmanship, that another notch is not created for future generations to have as a headache. But there is an inequity in the system that I think we recognize and that you've certainly pointed out to us very vividly.

And, again, I want to thank Mr. Jefferson for his input and his good work in this particular issue. Thank you very much.

And we stand adjourned.

END

LOAD-DATE: June 29, 2000

Document 11 of 26.


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