According to the 2007 Social Security Trustees Report, Social Security trust funds will be empty in 2041. If Congress does not act before then, the trust funds would be unable to pay full Social Security benefits on time. The consequences of waiting to act are serious - by 2041, the benefit cuts and tax increases required to achieve long-range solvency are projected to be about twice as large as those needed today.
Over the past few years, Congress has taken steps to improve the management and accounting of the Social Security trust fund. However, more action is needed to ensure Social Security is available for tomorrow's seniors.
As you may know, President Bush and some Members of Congress have suggested allowing younger taxpayers to enter a dual system whereby some of their Social Security taxes could be individually invested in private accounts. Others have suggested allowing the Social Security trustees to invest in private securities. Of course, still others oppose any major departure from the current system.
While all of these ideas deserve study, I believe that any changes in the way Social Security operates must be approached with extreme caution. Our main objective must be to ensure Social Security's solvency for many years to come.
Government Pension Offset (GPO) and Windfall Elimination Provision (WEP) Formulas
The Government Pension Offset (GPO) and the Windfall Elimination Provision (WEP) reduce Social Security benefits, particularly for teachers and other public servants.
Social Security monthly benefits are computed by applying a formula to an average of a person's earnings from work subject to the Social Security tax. The formula is designed so that workers with low average career earnings receive a larger proportion of their earnings than do workers with high average earnings.
The "windfall elimination provision" was enacted in 1983 as part of major efforts designed to shore up the financing of the Social Security program. This provision's purpose was to remove an unintended advantage that the regular Social Security benefit formula provided to persons who also had pensions from employment not covered by Social Security, such as work under the Federal Civil Service Retirement System.
Some opponents believe the provision is unfair because it substantially reduces a benefit that workers had included in their retirement plans. Others criticize how the provision works, claiming the windfall elimination formula is an inaccurate way to determine the actual windfall when applied to individual cases. For example, they say it over-penalizes lower paid workers with short careers, or with full careers that are fairly evenly split. They also say it is regressive, because the reduction is confined to the first bracket of the benefit formula and causes a relatively larger reduction in benefits for low-paid workers.
I have cosponsored the following two bills dealing with this issue:
· H.R. 82 (the Social Security Fairness Act). This bill fully repeals the GPO and WEP formulas.
· H.R. 1714 (the Public Servant Retirement Protection Act). This bill eliminates the current-law WEP for those first entering non-Social Security covered employment one year after the bill's enactment.