On October 1, the Social Security Advisory Board (SSA Board) released a position paper describing a proposal to modernize the formula used to calculate Social Security benefits, “The Windfall Elimination Provision: It’s Time to Correct the Math.”
In the paper, the SSA Board recommends that beginning in 2017, Congress change the current Windfall Elimination Provision (WEP) formula to one that uses actual earnings data. The report states that data-based approach would be more fair for all workers and could be communicated to affected employees in a way that is more straightforward and easier to understand.
The position paper criticizes the current WEP formula, arguing that “it does not work as it should for people who work part of their careers in jobs not covered by Social Security.”
In 2017, Congress will have access to 35 years of data on earnings from covered and non-covered employment since WEP was implemented in 1983. A new formula could be applied to benefits of all retired worker and disabled worker beneficiaries newly eligible for benefits after December 2016.
Under this approach, a replacement rate would be calculated using both covered and non-covered earnings. Two workers with the same earnings, one from work that is all covered by Social Security and one from work that is only partially covered by Social Security, would have identical replacement rates of covered earnings, which is a fair outcome.
Representatives Kevin Brady (R-TX) and Richard Neal (D-MA) co-sponsored Congressional legislation introduced earlier this year that uses a proportional “Public Servant Fairness Formula” for beneficiaries with non-covered employment.
The Social Security Advisory Board recommends implementation of the new proportional formula. “Congress should change the WEP so that replacement rates are based on total earnings, regardless of whether they are from covered or non-covered employment,” the position paper states. “The process will appear to be and, in fact, will be more fair.”
The Social Security Advisory Board was created in 1994 when Congress passed legislation establishing the Social Security Administration as an independent agency. The seven-member bipartisan board advises the President, the Congress, and the Commissioner of Social Security on matters related to the Social Security and Supplemental Security Income (SSI) programs.
The SSA Board plans to release a future paper discussing the Government Pension Offset.
PERA encourages members and retirees to let their elected officials at the federal level know how the WEP and GPO have or will impact them.
Read more about the proposed WEP legislation on PERA on the Issues.