Smith Introduces Legislation to Make Social Security More Equitable for Retirees
Washington, D.C. – Today, Congressman Adam Smith introduced the Social Security Equity Act, legislation to provide relief to some of those workers and retirees who see their Social Security benefits reduced because of the Windfall Elimination Provision (WEP).
The Social Security Equity Act helps to keep many workers and retirees from experiencing benefit cuts due to the Windfall Elimination Provision (WEP). The WEP reduces payments to many retirees who split their careers between jobs that were covered by Social Security and in positions where they earned even minimal public pension benefits.
“Hard-working Americans should not experience a significant hit to their Social Security benefits because they happened to work for an employer that provided a pension, in addition to facing low wages, inconsistent work opportunities, or the need to take time away from work. By simply changing the WEP formula, Congress can make this aspect of Social Security less regressive and allow more retirees to collect full Social Security payments,” said Congressman Adam Smith.
First implemented in 1983 as part of broader efforts to bolster the Social Security program’s finances, the WEP was intended to reduce excess benefits, or “windfalls,” accruing to workers who spent much of their career earning a pension instead of paying into the Social Security program—in jobs most often found in the public sector—but who also received benefits from relatively short tenures in Social Security-covered employment.
Unfortunately, the WEP disproportionally hurts those who earned lower wages and experienced less consistent employment outside of jobs where pensions were available. Receiving even a small pension from relatively brief employment not covered by Social Security places those who did not work full-time, earned lower wages at Social Security-covered jobs, took time away from work to care for loved ones, or those forced to go on disability, at risk of being hit by the WEP. For example, a public school teacher who earned a modest pension from a teaching position that was not covered by Social Security, then took a number of years away from work to care for a family member, and returned to work in part-time and relatively low paying positions for the remainder of their career, could see their Social Security benefits reduced under the WEP.
To avoid these cuts, retirees must have worked long enough and made enough each year in Social Security-covered employment to qualify for an exemption. In many years, full time work for the full calendar year at the federal minimum wage would still not be enough to help that worker avoid the WEP when he or she retires.
The Social Security Equity Act reduces, from 30 to 25, the number of years in Social Security-covered employment required to become exempt from the WEP. The bill also decreases the annual earnings threshold for each of those years to count toward a WEP exemption—also known as the substantial earnings floor.
By lowering barriers to achieving a WEP exemption, this legislation provides WEP relief to more retirees of blended career histories and will allow retirees to receive more of their Social Security benefits.