Today's post will still focus on the WEP, but it deals more with proposed reform and our "lovely" elected members of Congress. It is something I found very interesting.
I have heard from some of my financial clients and educators that they are "excited" that the "new" Congress has bills in the House and Senate to remove the WEP and Government Pension Offset (GPO) (note - they are essentially the same thing and for this article any reference to WEP is also a reference to GPO). Specifically, there is the House bill, HR 235 (H.R.235) - Social Security Fairness Act of 2009, and the Senate bill, S 484 (S.484) - Social Security Fairness Act of 2009. This sounds great until you dig a little deeper.
It seems that every single year/term there are new bills to remove the WEP. I found one website, The Coalition to Preserve Retirement Security (CPRS), that had news items going back on this subject till 2004 about bills that mirror this current legislation. Take a look for yourself - Windfall Elimination Provision News and Reports. Since this has been an ongoing issue, both the Democrats (who have been in control of Congress since 2007) and the Republicans (who controlled Congress from 1995-2006) are not without blame for not confronting this issue.
What really strikes me as odd is that every year bills are introduced with tremendous support, but they never get out of committee or reach the floor for a vote in either the House or Senate. For instance, the 2009 House version has 301 sponsors, and for those that do not know, there are 435 Representatives. You would think that this would be an easy bill to pass since a majority have already sponsored it, but it just sits in the House Ways & Means Committee.
On the Senate side, the numbers are not quite as large, but 29 Senators have sponsored it (out of 100). I have not done the research, but I wonder how many of the 29 are up for reelection this next cycle? In any event, the bill also just sits in committee - Senate Finance - with no hope of being brought up for a committee or floor vote.
For those wondering, the 2007 versions of the bills had the following:
- Senate - S 206 - Social Security Fairness Act of 2007 - 39 sponsors including former Senator and now President Barack Obama - view sponsors
- House - HR 82 - Social Security Fairness Act of 2007 - 353 sponsors including former Representative and now President Obama's Chief of Staff Rahm Emanuel - view sponsors
I looked at a number of articles about reforming WEP, and the prospects are not good. In a time of soaring deficits, a Social Security system that WILL run deficits in 30 years without reform (see SSA Trustee Annual Report), and a population that is already being beat down with health care reform and cap and trade (both proposals would lead to higher taxes and/or expenses), it is tough to try to find a way to pass these WEP reform bills that could cost up to $80 billion over 10 years.
There are solutions, but each of them cost money, and right now no one wants to spend the "political capital" to reform it. Previous reports I have read said various reform proposals could cost from $5 billion to $80 billion over 10 years. Most on the low end simply alter the formula to help the very lowest incomes and those on the high end repeal the WEP altogether. The problem with just reforming the bottom is that the top will also beg and plead for reform.
Years ago, before I started this blog, I had heard story after story from my wife and her colleagues about how the WEP was costing educators hundreds of dollars every month in reduced benefits. I heard about various legal ways that educators around the country tried to circumvent the system to take them outside the WEP formulas, and it all seemed a bit "over-the-top" to me. Having researched it, written about it, received e-mails asking/talking about it, and knowing my own wife will confront it, it is obviously something that will continue to be an issue.
The reality is that WEP reform opens up the subject of Social Security reform (greatly needed), but rather than deal with both issues, we just push it back further and further. They could both be solved, but no one wants to be the bad guy that alters SSA benefits or full retirement age.
I really wish I could point to something positive on the subject, but it looks as if the current system will remain in place - despite what our elected members of Congress say and propose.
On a side note, I was asked how I decide to focus on any particular subject. Truthfully, I respond to e-mails privately, but if the subject is of a broad scope I try to use it to help others that may have similar questions/concerns. Also, I can view what searches people have used to find the blog, and the number of searches for windfall elimination provision or something similar have far exceeded other subjects. What has been a surprise to me is that since I posted the previous WEP article it has been the second most viewed article over that time period (retirement safety being the first). The bottom line being if you have questions or suggestions, please send them to me. I am always looking for a good subject to discuss and hopefully help others. E-mail me your thoughts at email@example.com.