Retirees Say Provisions Pinch Their Pensions

M argaret Kane, who retired after teaching for 35 years in Medford, Mass., does not collect Social Security benefits earned by her late husband because she receives a state pension.

At 77, Julia Worcester of Columbia, Maine, works as a substitute teacher to make ends meet. Her retirement income is less than $800 a month, even though she paid into Social Security for more than 20 years and earned pension credits by teaching full time for 15 years.

Kane and Worcester receive less than they expected in retirement because of two little-known provisions of Social Security law that were the subject of a Senate Finance subcommittee hearing yesterday chaired by Sen. John F. Kerry (D-Mass.).

The two provisions are the windfall elimination provision, called the WEP, and the government pension offset, known as the GPO. Both reduce the Social Security benefits of retirees who also receive a government pension that is not part of the Social Security system.

About a fourth of public employees do not pay into Social Security because they are in government-sponsored pension plans. That category includes federal employees hired before 1984, when Congress created a new federal retirement system and made Social Security part of it.

Many public sector retirees think they are unfairly penalized by the WEP and GPO, and a half-dozen bills have been introduced in Congress to repeal or modify the two provisions. One introduced by Sens. Susan Collins (R-Maine) and Dianne Feinstein (D-Calif.) came up at Kerry's committee hearing yesterday.

The GPO "is most harsh for those who can least afford the loss, and that is lower-income women," Collins testified yesterday. The offset reduces benefits by more than $3,600 a year for more than 200,000 retirees, "an amount that can make the difference between a comfortable retirement and poverty," Collins said.

She described how the provisions have affected Worcester and other public servants in Maine.

Congress approved the WEP in 1983 as part of an effort to shore up the financing of the Social Security program. The WEP uses a different Social Security benefit formula for government retirees who receive a pension that does not include Social Security, such as those under the Civil Service Retirement System, and who also have enough Social Security-covered employment to qualify for a Social Security benefit. The WEP formula lowers the proportion of earnings that are converted to benefits.

Supporters of the WEP contend it prevents over-generous payment of benefits to people who are reasonably well-off because they are receiving a government pension.

The GPO dates to 1977 and essentially mirrors Social Security's "dual-entitlement" rule, which commonly applies to two-income couples. Under that rule, a spouse or surviving spouse receives the higher of his or her Social Security benefit or the spousal benefit, but not both.

The GPO applies to federal retirees covered by the Civil Service Retirement System and makes a reduction in spousal benefits that is equal to two-thirds of the government pension. Defenders of the GPO say it stops government workers from obtaining an unfair advantage by collecting two full retirement incomes.