I’m putting this here because I know it’s going to turn into a debate. There is a Windfall Elimination Provision in Social Security that affects benefits for certain people who had public sector jobs where they did not contribute to Social Security, It doesn’t affect public sector employees who paid SS tax on earnings from their public sector job. It doesn’t affect people who contributed to Social Security for 30 years of substantial earnings. The reason for the adjustment is because of the way Social Security benefits are calculated - it’s not a straight percentage of average pay. Rather, there are different percentages paid for different pay levels - for someone turning 62 this year, their benefit at age 67 will be calculated based on their average monthly earnings over 35 years.
The first $1,174 of average monthly earnings is multiplied by 90% ,
earnings between $1,174 and $7,078 are multiplied by 32%, and
the balance is multiplied by 15%.
Let’s say with have a public sector worker who did pay SS taxes on his public sector earnings. They also earned $21,000 (in 2024 dollars) per year for 20 years in work covered by SS - maybe it was before/after the public sector job , maybe it was during the summers. So they earned $420,000 over those 20 years . Divide that by 420 to get a monthly income (35 years x 12 months) and you get a $1000 month average income. Without some sort of adjustment , that person will have the same percentage of income replaced as someone who earned $1000/month for 35 years. Who is definitely a poorer person than the one who has a pension and the SS benefit.
Let’ s say we have two people , each of whom earns an average of $50,000 at their primary job where they work for 35 years. One pays SS on the earnings from that primary job and the other does not. During those 35 years, they each earn $21,000 by working a second job for 20 years ( maybe they are teachers and work at a camp during the summers.). The person who doesn’t pay SS tax on their public sector wages will have a benefit of $900 month while the other person will only have their benefit increased by $320 for that same average $1000 month in income.
I know a lot of people are outraged by the windfall elimination provision - but what I don’t know is if they think there should not be any adjustment or if they think it should be a different adjustment ( for example, dividing the SS wages by the number of months in which SS taxes were paid rather than by 420)
I’ve spent all but a couple of years of my professional career in the public sector. The first 13 years were in public libraries, where I paid into SS. The last 20 are in the DC school system, where I just paid into the pension fund. My salary was a lot lower when I was paying into SS, but it wasn’t nothing. I’d be happy to get a thousand a month or so.
I think that if I paid into SS for 25 years (which I did), I should not be discriminated against because after that I took a job with the state. If I had taken another private sector job, it wouldn’t have happened.
The point, as I understand it, is that in that case you would also be entitled to a state pension, whereas you wouldn’t if you had taken a private sector job.
No, it wouldn’t have. But if you had taken another private sector job ( or a public sector job where you paid into SS) you would have paid into SS for whatever amount of time you worked at that job But do you think there should be no adjustment at all , that you should get the same benefit as someone who paid in the same total for 35 years rather than 25 - IOW , should you be treated as having a lower income than you actually did ? Or do you think there should be an adjustment using a different method than is currently used?
That’s not really an answer. What does “fully compensated” mean to you? Does it mean that your 25 years of private sector earnings should be divided by 420 months to calculated the monthly income your benefit is based on? Or should it be divided by the number of months in which you paid SS taxes?
It means I should receive the same monthly amount as I would have had I opened a hot dog stand, or run off to a desert island, or became a bank robber, instead of taking a (relatively low paying) job with the state.
It has to do with you taking a state job to the extent that the only reason you didn’t have to pay into SS while you had that job is because state and local governments are not required to participate in SS. In some states, government employees do pay into SS - I did for the entire time I worked in government jobs.
But OK , I understand you now. You want to be treated like someone who didn’t report any income for the years you worked for the government. Even though you did in fact earn income those years and will get a pension based on that income.
IMO, peoples’ responses are likely going to reflect a desire for whatever yields themselves the most money. Which they generally will consider the most “fair.” The responses of many folk who are not affected by the offset will tend to be colored by jealousy over others’ receipt of state pensions.
Meanwhile, there is little consideration of what the actual policy reasons might be (which, of course, are not clearly explained).
(BTW - if you are looking to personally be treated “fairly”, you might do well to look elsewhere than at a huge bureaucratic framework such as sSocial Security.)
I think the thing revolves around how long someone paid in, and at what level.
I mean, I work for a municipal government now, and don’t pay into SS any more. BUT… I did pay into SS for nearly 20 years, and all of that was at 2x-3x minimum wage. So I would expect some SS payout for having done so.
The frustration I have is that I’ve never made less than 3x minimum wage in my career (according to the minimum wage of the day), so it doesn’t really make sense that paying into SS for nearly 20 years would somehow translate into less SS payout than someone who paid 1/3 as much in for twice as long. I’m not arguing that I should get more than anyone else, just that I shouldn’t get less because I’ve actually paid more money in over a shorter period.
I’m not sure what the problem is here. My wife taught in public schools for 33 of her 40+ years in the workforce. For the first 15 years of that she was covered by a state pension in place of Social Security. Then the state vested that pension and converted to to a very generous 403B defined contribution plan in place of Social Security.
She still paid into Social Security at the beginning and end of her career, and she draws a small benefit from that, along with Medicare. But her pension and her annuitized 403B payments give her a total retirement benefit that exceeds my Social Security benefits by a fair margin.
This is in Missouri, a state which is not known for treating public employees well. Don’t public sector employees in other states have good retirement plans?
Sure they do. The issue is that folk wish to maximize BOTH their SS AND their govt pension, with no set-off. You and your wife sound content with the benefits you are receiving. Others seem to feel you ought to feel entitled to more.
The example I see most frequently is slightly different than the OP describes, and concerns people who have applied for their own SS AND spousal/survivor’s benefits based on their spouses non-SS public pension. Many such persons feel it very unfair that there is any offset.
Like I said above, if you are looking for irrational aspects of major legislation, you could find plenty in the Social Security Act and regulations. As could be expected, people tend to be upset over factors that they believe disavantage themselves personally - while tending to overlook equally irrational, outdated, and/or arbitrary factors that work to their personal advantage.