Government workers trying to decide which pension route to follow should keep an eye on the House Ways and Means Committee, which may make major changes in future Social Security benefits.
The committee will act next week on two plans to drastically alter how Social Security benefits -- earned and unearned -- are treated under the new federal pension plan. Earned benefits are those based on the worker's Social Security covered work. Unearned benefits include those based on the Social Security entitlement of a spouse.
This year most of the 2 million U.S. workers hired before 1984 must decide whether to switch to the new Federal Employees Retirement System, or stay in the Civil Service Retirement System.
Changes being considered by the committee could alter the pension plans of millions of federal employes.
The situation is so uncertain that federal and postal unions are advising members to delay making a pension switch until they know what changes Congress may make in the FERS program.
This is where things stand:Workers now switching to FERS can, after only one day of coverage, escape a so-called double-dipper penalty applied to those under the old CSRS plan. Retirees under CSRS who collect spousal or survivor Social Security benefits have those benefits reduced $2 for every $3 that they get in a public pension. So if a worker gets a public pension and also applies for Social Security as the spouse or survivor of someone covered by Social Security, it will be reduced by the amount of the worker's government pension.
FERS currently exempts covered workers from the unearned Social Security benefit reduction. But the committee is trying to close that loophole. It generally would require FERS coverage for five years before any exemption from the benefit reduction. Persons now between 60 and 65 would have to spend less time under FERS to avoid the reduction. Most people affected by this change are women who work for the government and haven't earned their own Social Security benefits.The other possible change is even more far-reaching, affecting 60 percent of the government work force. It deals with the so-called windfall benefits penalty currently applied to most government retirees applying for Social Security benefits.
That Public Pension Offset Law covers workers first eligible for government retirement after 1985 (regardless of whether they retired). In general, it reduces or eliminates a Social Security benefit depending on how long the individual worked under Social Security and the amount of the worker's government pension.
Pushed by Rep. Hal Daub (R-Neb.), the committee's Social Security subcommittee has approved language to eliminate the windfall benefits penalty for workers who switch to FERS and in most cases spend five years under the new plan.
Daub, who has a good working relationship with federal unions, is running for the Senate next year. He believes the change would benefit workers who are willing to go into FERS (which costs the taxpayers less) and pay the full Social Security tax for five years.
Full committee approval of either change would be subject to approval by the full House, Senate and the president. But if the committee approves either change, chances are the changes will become law.
Given the importance of the proposed changes, U.S. workers who are eligible for future Social Security benefits should probably hold off on a decision to change pensions until the picture is clearer.