LEXIS-NEXIS® Congressional Universe-Document

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

Document 5 of 26.

View Related Topics

June 27, 2000, Tuesday

SECTION: PREPARED TESTIMONY

LENGTH: 1453 words

HEADLINE: PREPARED TESTIMONY OF VINCENT R. SOMBROTTO PRESIDENT NATIONAL ASSOCIATION OF LETTER CARRIERS

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

SUBJECT - SOCIAL SECURITY "GOVERNMENT PENSION OFFSET"

BODY:
Thank you Mr. Chairman for the opportunity to appear before you today. My name is Vincent Sombrotto, and I am president of the National Association of Letter Carriers. I represent a union of 320,000 members, of which 90,000 are retirees. I am also here in my capacity as the chairman of the Fund for Assuring an Independent Retirement, or "FAIR." FAIR is a coalition of more than 20 organizations representing more than 9 million federal and postal employees and retirees. Needless to say, the "government pension offset" (GPO) is a major issue to the people 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. I travel all over this country speaking with letter carriers, and there are no issues that engender more passion than those associated with reduced Social Security benefits, either through the GPO or the windfall elimination provision. Congressman Frank from Massachusetts has our gratitude for his bill addressing the windfall elimination provision. ! also want to thank Congressman Jefferson for his extraordinary efforts on the government pension offset. In obtaining more than 240 cosponsors for HR 1217, he has managed to educate many Members of Congress and the public at large about the GPO and how it touches the lives of so many retirees. The FAIR coalition has endorsed Congressman Jefferson's bill. The Social Security Administration has calculated that the bill's cost is negligible at less then .005% of payroll. However, we also recognize, Mr. Chairman, that you have some concerns about this bill, and look forward to working with you to craft a solution to the serious problem of the government pension offset.

Over the years there have been a number of efforts to reduce or eliminate the effects of the GPO. Its original enactment in 1977 called for 100% of a government pension to be subtracted from Social Security spousal benefits. In 1983, the House passed a measure calling for the offset to be 1/3 of the government pension, while the Senate made no change to the 1977 100% offset. The legislative department at the National Association of Letter Carriers was involved in the negotiations leading to the compromise creating the current 2/3 offset. Since then there have been numerous attempts to make changes or even eliminate the government pension offset. Congressman Jefferson's effort is the latest in a long line of bills that have seen varying levels of success. These efforts have been bipartisan and bicameral with Members from both sides of the aisle not only cosponsoring legislation, but actively pushing for its passage. At one point, a modification of the government pension offset made it to President Bush, but it was part of a larger package that was vetoed by the president.

As of June 1999, there were about 284,000 government annuitants subject to the government pension offset according to the Congressional Research Service. This number does not reflect workers who, while eligible for spousal benefits, may have decided not to file for them because of the offset. There are also a significant number of people eligible for retirement who have been forced back into the workforce to make up for the effects of the government pension offset. I often speak to retired member of my union, people who spent decades on the street delivering mail, and who should be enjoying the fruits of their labors in their retirement years. Instead, they must go to work each day because they receive little or no Social Security spousal benefit due to the government pension offset. These stories are only going become more common as more and more retirees will be from dual-income households. This will add to the need to do something about this situation and will call into further question the current, simple and arbitrary formula being used to calculate the GPO.

We have several concerns over the government pension offset. The first is that the dual entitlement rule under Social Security is not wholly analogous to situations where a person is entitled to both a government pension and a Social Security spousal benefit. The second concern is that the GPO, which attempts to apply the dual entitlement rule to the government pension context, is arbitrary. Finally, the GPO has created problems that were never envisioned or intended with its original enactment. I would like to touch upon each of these areas in greater detail.

At the core of the issue is the question of what portion of an annuity through the Civil Service Retirement System (CSRS) is comparable to Social Security benefits for purposes of applying the "dual entitlement" rule. In some ways a CSRS benefit is more like a private sector pension than a Social Security benefit. Yet, the 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 to apply for purposes of providing federal retirees with the benefits they have earned, and they 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. Currently, Social Security spousal benefits are reduced by 2/3 of the annuity received under CSRS. As I mentioned earlier, this percentage represented a compromise between a House bill which called for a 1/3 reduction and a Senate bill which retained the original 100% offset. The result is an arbitrary figure. The idea is that the 1/3 of a CSRS annuity that is not subject to the offset calculation is analogous to a pension in the private sector. However, I would contend that 1/3 greatly underestimates the value of such a pension. Using the example I am most familiar with, the United States Postal Service is the largest public sector civilian employer with more than 800,000 employees. If it were a private company, it would rank in the top 10 of the Fortune 500. It would be inaccurate to equate the size of the pensions offered by these Fortune 500 companies with 1/3 of a Civil Service annuity. In addition, the current formula also results in a reduction that often is no different than if there were a 100% offset because even the 2/3 offset totally wipes out their spousal benefit. At the very least, this calls for a modification of the formula with the application of a percentage more in keeping with comparable size employers and pension plans and that doesn't totally wipe out the spousal benefit.

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 a situation where a person is subject to both the government pension offset and the windfall elimination provision, which reduces an annuitant's own Social Security benefits. Many letter carriers need a second job to make ends meet. These people lose out not only on spousal benefits, but also on the Social Security benefits they earned either through a career prior to or while working in the public sector. This serves as something of a "double hit" on the annuitant's benefits.

Public pensions are also treated differently from Social Security benefits for tax purposes. This is yet another area where the "dual entitlement" rule is different for Social Security than it is for a CSRS annuity. A "double hit" occurs here because the annuitant, in addition to suffering the effects of the government pension offset, also must pay taxes on their annuity. A person whose Social Security benefits are reduced under the "dual entitlement" rule does not have to suffer adverse tax consequences as well -- only the CSRS annuitant must.

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 are willing to talk about other avenues to diminish its impact on our retirees. For example, we may want to consider changing the formula either on a percentage basis or by looking at actual dollar amounts. Also, attempts to mitigate the impact on those affected by both the windfall elimination provision and the government pension offset may help alleviate some of the financial burden placed on our retirees. There are no easy answers to this situation, 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 the current system.

Thank you.

END

LOAD-DATE: June 28, 2000

Document 5 of 26.


Search Terms: Government Pension Offset, House or Senate or Joint
To narrow your search, please enter a word or phrase: