Why Congress Should Fix, Not Eliminate, Social Security’s WEP and GPO

November 8, 2024 2 min read Download Report

Rachel Greszler

Senior Research Fellow, Roe Institute

Rachel researches and analyzes taxes, Social Security, disability insurance, and pensions to promote economic growth.

Summary

The data now exist for the Social Security Administration to calculate benefits as intended, applying a progressive benefit formula based on the income that people actually earn and the Social Security taxes they actually pay. The Equal Treatment of Public Servants Act of 2023 (H.R. 5342) is much closer to a fair and accurate fix for the Windfall Elimination Provision and would cost significantly less—about $24 billion over 10 years—with a minimal impact over 75 years. This act or, a separate bill, could incorporate a similar fix for the Government Pension Offset.

Key Takeaways

Eliminating the WEP and GPO would cost Social Security an additional $196 billion over the next 10 years and cause the program to become insolvent six months sooner.

Both the WEP and GPO need to be fixed, but the Social Security Fairness Act of 2023 is neither fair, nor accurate, nor fiscally responsible.

The Equal Treatment of Public Servants Act of 2023 is much closer to a fair and accurate fix and would cost significantly less.

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The Issue

Eliminating Social Security’s Windfall Elimination Provision (WEP) and Government Pension Offset (GPO) would create an unequal benefit structure and hasten Social Security’s insolvency.

A bipartisan group of lawmakers has filed a discharge petition to bring H.R. 82, the Social Security Fairness Act of 2023, to a vote on the floor. The act addresses Social Security’s WEP and GPO. Both need to be fixed, but the Social Security Fairness Act is neither fair, nor accurate, nor fiscally responsible.

Congress passed the WEP and GPO to eliminate unintended “windfall” Social Security benefits for people who worked in government jobs—such as teachers and public utility workers—that were not subject to Social Security taxes. Before the WEP and GPO, Social Security’s benefit formula treated these individuals like they had significantly lower incomes than they did or like stay-at-home spouses when they had full careers and their own non–Social Security pensions.

When Congress passed the WEP and GPO, it lacked the necessary data to calculate benefits as the program intended, based on individuals’ actual earnings and actual Social Security payroll tax contributions. Consequently, the imperfect WEP and GPO adjustments leave some individuals with higher or lower Social Security benefits than they should receive. The data necessary to implement a fair and accurate fix are now available. The Social Security Fairness Act ignores that data, eliminates the WEP and GPO, and reverts to the outdated and flawed benefit structure instead of fixing it.

FS276 Table 1

Not Fair, Not Accurate

Eliminating the WEP and GPO would result in some people with the same lifetime incomes being treated differently while also resulting in other people with different lifetime earnings being treated the same by providing higher replacement rates to those who worked in jobs not taxed by Social Security and by providing spousal benefits to individuals who were not stay-at-home spouses.

FS276 Figure 1

Not Fiscally Responsible, Exacerbating Social Security’s Shortfalls and Hastens Insolvency

Eliminating the WEP and GPO would cost Social Security an additional $196 billion over the next 10 years and cause the program to become insolvent six months earlier than currently projected, in 2033. It would also necessitate even larger across-the-board benefit cuts in 2033 and beyond.

A Better Way Forward

The data now exist for the Social Security Administration to calculate benefits as intended, applying a progressive benefit formula based on the income that people actually earn and the Social Security taxes they actually pay. The Equal Treatment of Public Servants Act of 2023 (H.R. 5342) is much closer to a fair and accurate fix for the WEP and would cost significantly less—about $24 billion over 10 years—with a “negligible” impact over 75 years. This act, or a separate bill, could incorporate a similar fix for the GPO.