SENATE THIRD READING

STR Bill Id:SJR 3

Author:(Wilk)

As Introduced Ver:March 4, 2019

Majority vote

SUMMARY:

Requests the United States (U.S.) Congress to enact, and the President to sign, legislation that would repeal the Government Pension Offset (GPO) and Windfall Elimination Provision (WEP) from the federal Social Security Act.

Major Provisions

Please see the summary above.

COMMENTS:

Background: The GPO and WEP

Social Security was originally established in 1935, state and local governments and their employees were prohibited from participating. Over the years, federal laws were passed allowing these employees the opportunity to elect to join the program and many California jurisdictions joined, including the State of California, except for peace officers, firefighters, correctional officers, teachers, and others.

Nationwide, more than a third of all teachers are not covered under Social Security. A majority of these teachers will be subject to either the GPO or WEP, or, in some cases, both. The application of these provisions can have a severe impact on the financial security of these retirees. Under federal law, state and local public employees who work for an employer in a position not coordinated with Social Security and who receive a government pension upon retirement may be affected by two federal offsets to their Social Security benefits.

The WEP affects individuals who earn a pension in any job where the person did not pay into Social Security and also worked in other jobs long enough to qualify for a Social Security retirement or disability benefit for those jobs. Depending on how many years of qualifying substantial earnings the individual has in Social Security, the WEP results in a significant pro rata reduction of one of the three factors used in determining the average monthly earnings upon which the Social Security benefit is based.

The GPO affects individuals who earn a government pension based on work where the employee did not pay into Social Security but who are also eligible for Social Security dependent's benefits (i.e., benefits based on a spouse's Social Security benefit or as the widow or widower of an eligible Social Security benefit recipient). The GPO reduces the dependent's Social Security spouse/widow/widower benefit by a significant amount of the individual's government pension.

In California, the WEP and the GPO primarily impact teachers and public safety officers who begin their careers in the private sector and earn enough qualifying quarters to receive a Social Security benefit but then switch mid-career to become, for example, a teacher in a public school or a safety officer in a job with a state or local government employer not coordinated with Social Security. Many do not learn of the consequences to their Social Security benefits until they apply to begin receiving Social Security benefits.

According to the Author:

"The GPO and WEP have been in place for a few decades with no shortage of unintended consequences. Because of these flawed policies, countless public servants have seen their hard-earned and much-needed social security benefits cut in half or in some cases even eliminated due to previous or simultaneous nongovernment and non-social security employment. There is no reason why an individual should have their benefits slashed after paying into the system for years. Not only is this unfair, it is harmful to our state and country overall.

'The effects of the GPO and WEP tend to be felt the most by those employees who earn the least, meaning those who already struggle with low incomes will often be the ones who end up disadvantaged in retirement. These policies can almost be seen as a punishment doled out by the government on some of its hardest-working public servants such as teachers and peace officers. It is also in the best interest of the nation as a whole to repeal these measures, as they can discourage people from pursuing much-needed public sector jobs, making it more difficult for the country to compete on an international level. It is well past time for these penalties to be eliminated."

Arguments in Support:

The California Teachers Association states in part that, "[i]n California, public school educators are affected by both the WEP and GPO. In addition to being inequitable and draconian, they reduce public schools' ability to recruit individuals from the private sector to teach in our classrooms. Many prospective educators decide to not become teachers once they hear how taking a teaching job not only reduces their annual pay but also puts their Social Security at risk. This situation exacerbates the difficulty in ending the teacher shortage."

Arguments in Opposition:

None on file.

FISCAL COMMENTS:

This bill is flagged as nonfiscal by Legislative Counsel.

VOTES:

SENATE FLOOR: 38-0-0

YES: Allen, Archuleta, Atkins, Bates, Beall, Borgeas, Bradford, Caballero, Chang, Dodd, Durazo, Galgiani, Glazer, Grove, Hertzberg, Hill, Hueso, Hurtado, Jackson, Jones, Leyva, McGuire, Mitchell, Monning, Moorlach, Morrell, Nielsen, Pan, Portantino, Roth, Rubio, Skinner, Stern, Stone, Umberg, Wieckowski, Wiener, Wilk

ASM PUBLIC EMPLOYMENT AND RETIREMENT: 7-0-0

YES: Rodriguez, Voepel, Cervantes, Cooley, Cooper, Fong, O'Donnell

UPDATED:

VERSION: March 4, 2019

CONSULTANT: Michael Bolden / P.E. & R. / (916) 319-3957 FN: 0001169

Date of Hearing: June 26, 2019

ASSEMBLY COMMITTEE ON PUBLIC EMPLOYMENT AND RETIREMENT

Freddie Rodriguez, Chair

SBPCA Bill Id:SJR 3

Author:(Wilk) – As Introduced Ver:March 4, 2019

SENATE VOTE: 38-0

SUBJECT: Social Security

SUMMARY: Requests the United States (U.S.) Congress to enact, and the President to sign, legislation that would repeal the Government Pension Offset (GPO) and Windfall Elimination Provision (WEP) from the federal Social Security Act (SSA), and transmittal of this resolution, as specified. Specifically, this resolution:

1. Requests the U.S. Congress to enact, and the President of the U.S. to sign, legislation to repeal the GPO and the WEP from the federal SSA.
2. Directs the Secretary of the Senate to transmit copies of this resolution to the President and Vice President of the U.S., the Speaker of the House of Representatives, the Majority Leader of the Senate, and to each Senator and Representative from California in the U.S. Congress, and to the author for appropriate distribution.
3. Makes the following declarations:
   1. The WEP and GPO, passed by Congress over 30 years ago without statistical analyses, diminish or eliminate the fully earned Social Security benefits of large numbers of California public employees;
   2. The WEP and GPO affect workers who have been employed in a government position which is not coordinated with Social Security, such as public school teachers who have been unable to receive Social Security credits since 1965;
   3. Most peace officers, including the California Highway Patrol, firefighters, and public servants working for cities and special districts, are not covered by Social Security and subject to the WEP and GPO;
   4. More than 300,000 California retirees have had their Social Security benefits diminished or eliminated by the WEP and GPO;
   5. Effective government requires highly qualified and motivated personnel, and California government agencies need to compete to recruit and retain employees, including hiring 16,000 new public school teachers each year;
   6. The recruitment and retention of qualified individuals reentering the workforce is impeded by the WEP and GPO which reduce or eliminate the benefits earned by workers or received through dependent status;
   7. The GPO severely cuts, and usually eliminates, all spousal and survivor benefits earned from what is deemed by the State of California as community property income;
   8. The GPO requires a beneficiary to report any yearly cost-of-living increases in the recipient’s public pension, so that the recipient’s Social Security benefits may be reduced by two-thirds of that amount;
   9. The WEP reduces earned Social Security benefits from work that is separate from the work for which the individual earned a government pension;
   10. The WEP cuts earned Social Security retirement benefits by eliminating the formula that reimburses low-income workers at a higher rate than high-income workers, causing severe hardships for those who have not been employed in a high-paying public job; and
   11. Until 2005, there were no requirements that a public employer advise new employees they would be subject to these penalties.

EXISTING LAW:

1. Federal
2. Requires that a beneficiary’s Social Security allowance be offset if the beneficiary also receives a government pension and was employed by an employer not coordinated with Social Security (42 U.S. Code § 403, 20 CFR § 404.243).
3. Requires that a beneficiary’s spouse, widow or widower, may receive a reduced Social Security benefit if the beneficiary also receives a government pension and was employed by an employer not coordinated with Social Security (42 U.S. Code § 403, 20 CFR § 404.408a).

FISCAL EFFECT: This resolution is flagged nonfiscal by Legislative Counsel.

COMMENTS: According to the author, “[t]he [GPO] and [WEP] have been in place for a few decades with no shortage of unintended consequences. Because of these flawed policies, countless public servants have seen their hard-earned and much-needed social security benefits cut in half or in some cases even eliminated due to previous or simultaneous nongovernment and non-social security employment. There is no reason why an individual should have their benefits slashed after paying into the system for years. Not only is this unfair, it is harmful to our state and country overall.

‘The effects of the GPO and WEP tend to be felt the most by those employees who earn the least, meaning those who already struggle with low incomes will often be the ones who end up disadvantaged in retirement. These policies can almost be seen as a punishment doled out by the government on some of its hardest-working public servants such as teachers and peace officers. It is also in the best interest of the nation as a whole to repeal these measures, as they can discourage people from pursuing much-needed public sector jobs, making it more difficult for the country to compete on an international level. It is well past time for these penalties to be eliminated.”

1. Background: The GPO and WEP

Social Security provides benefits to retired workers and, under certain circumstances, their spouses, former spouses, surviving spouses, and surviving former spouses. When Social Security was originally established in 1935, state and local governments and their employees were prohibited from participating. Over the years, federal laws were passed allowing these employees the opportunity to elect to join the program and many California jurisdictions joined, including the State of California, except for peace officers, firefighters, correctional officers, teachers, and others.

Nationwide, more than a third of all teachers are not covered under Social Security. A majority of these teachers will be subject to either the GPO or WEP, or, in some cases, both. The application of these provisions can have a severe impact on the financial security of these retirees. Under federal law, state and local public employees who work for an employer in a position not coordinated with Social Security and who receive a government pension upon retirement may be affected by two federal offsets to their Social Security benefits.

The WEP affects individuals who earn a pension in any job where the person did not pay into Social Security and also worked in other jobs long enough to qualify for a Social Security retirement or disability benefit for those jobs. Depending on how many years of qualifying substantial earnings the individual has in Social Security, the WEP results in a significant pro rata reduction of one of the three factors used in determining the average monthly earnings upon which the Social Security benefit is based.

The GPO affects individuals who earn a government pension based on work where the employee did not pay into Social Security but who are also eligible for Social Security dependent's benefits (i.e., benefits based on a spouse's Social Security benefit or as the widow or widower of an eligible Social Security benefit recipient). The GPO reduces the dependent's Social Security spouse/widow/widower benefit by a significant amount of the individual's government pension.

In California, the WEP and the GPO primarily impact teachers and public safety officers who begin their careers in the private sector and earn enough qualifying quarters to receive a Social Security benefit but then switch mid-career to become, for example, a teacher in a public school or a safety officer in a job with a state or local government employer not coordinated with Social Security. Many do not learn of the consequences to their Social Security benefits until they apply to begin receiving Social Security benefits.

1. Comments by Supporters

According to the Los Angeles County Employees Retirement Association (LACERA), “[this resolution] would greatly improve the opportunities for hiring and retaining teachers, peace officers, firefighters, and other public employees in California. … the WEP and GPO must be repealed as a matter of fairness since these provisions unfairly penalize individuals who earn Social Security benefits through their employment in the private sector prior to or after public service.”

1. Prior or Related Legislation

Resolution Chapter 197, Statutes of 2018 (AJR 41, Thurmond)

Resolution Chapter 92, Statues of 2015 (SJR 1, Beall)

Resolution Chapter 126, Statutes of 2012 (SJR 30, Hancock)

Resolution Chapter 103, Statutes of 2009 (AJR 10, Torlakson)

Resolution Chapter 116, Statutes of 2007 (AJR 5, Hernandez)

Resolution Chapter 62, Statutes of 2006 (SJR 15, Dutton)

Resolution Chapter 65, Statutes of 2003 (AJR 29, Pavley)

Resolution Chapter 66, Statutes of 2001 (AJR 3, Leonard)

Resolution Chapter 94, Statutes of 2001 (SJR 4, Soto)

REGISTERED SUPPORT / OPPOSITION:

Support

California Retired Teachers Association

California State Retirees

California Statewide Law Enforcement Association

California Teachers Association

Los Angeles County Employees Retirement Association

Peace Officers’ Research Association of California

Opposition

None on file

Analysis Prepared by: Michael Bolden / P.E. & R. / (916) 319-3957

 THIRD READING  

Bill No: SJR 3

Author: Wilk (R), et al.

Introduced: 3/4/19

Vote: 21

SENATE LABOR, PUB. EMP. & RET. COMMITTEE: 4-0, 4/24/19

AYES: Hill, Jackson, Mitchell, Pan

NO VOTE RECORDED: Morrell

SUBJECT: Social Security

SOURCE: Author

DIGEST:

This resolution petitions the United States Congress to enact, and the President of the United States to sign, legislation to repeal the Government Pension Offset and the Windfall Elimination Provision from the Social Security Act and to instruct the Secretary of the Senate to transmit copies of this resolution to members of Congress.

ANALYSIS:

Existing law:

1. Requires Social Security to offset a beneficiary’s Social Security allowance if the beneficiary also receives a government pension and was employed by an employer not coordinated with Social Security (42 U.S. Code § 403, 20 CFR § 404.243).
2. Provides that Social Security may reduce a beneficiary’s Social Security spousal or survivor benefit if the beneficiary also receives a government pension and was employed by an employer not coordinated with Social Security (42 U.S. Code § 403, 20 CFR § 404.408a).

This resolution:

1. Requests the United States Congress to enact, and the President of the United States to sign, legislation to repeal the Government Pension Offset (GPO) and the Windfall Elimination Provision (WEP) from the Social Security Act.
2. Directs the Secretary of the Senate to transmit copies of this resolution to the President and Vice President of the United States, the Speaker of the House of Representatives, the Majority Leader of the Senate, and to each Senator and Representative from California in the United States Congress, and to the author for appropriate distribution.
3. Makes the following declarations:
   1. The WEP and GPO, passed by Congress over 30 years ago without statistical analyses, diminish or eliminate the fully earned Social Security benefits of large numbers of California public employees;
   2. WEP and GPO affect workers who have been employed in a government position which is not coordinated with Social Security, such as public school teachers who have been unable to receive Social Security credits since 1965;
   3. Most peace officers, including the California Highway Patrol, firefighters, and public servants working for cities and special districts, are not covered by Social Security and subject to the WEP and GPO;
   4. More than 300,000 California retirees have had their Social Security benefits diminished or eliminated by the WEP and GPO;
   5. Effective government requires highly qualified and motivated personnel, and California government agencies need to compete to recruit and retain employees, including hiring 16,000 new public school teachers each year;
   6. The recruitment and retention of qualified individuals reentering the workforce is impeded by the WEP and GPO which reduce or eliminate the benefits earned by workers or received through dependent status;
   7. The GPO severely cuts, and usually eliminates, all spousal and survivor benefits earned from what is deemed by the State of California as community property income;
   8. The GPO requires a beneficiary report any yearly cost-of-living increases in the recipient’s public pension, so that the recipient’s Social Security benefits may be reduced by two-thirds of that amount;
   9. The WEP reduces earned Social Security benefits from work that is separate from the work for which the individual earned a government pension;
   10. The WEP cuts earned Social Security retirement benefits by eliminating the formula that reimburses low-income workers at a higher rate than high-income workers, causing severe hardships for those who have not been employed in a high-paying public job; and
   11. Until 2005, there were no requirements that a public employer advise new employees they would be subject to these penalties.

Background

The Government Pension Offset and the Windfall Elimination Provision

Under federal law, the Social Security Administration (SSA) applies two deductions to state and local public employees’ Social Security benefits if they worked for an employer in a position not coordinated with Social Security and also received a government pension upon retirement.

SSA applies the GPO to beneficiaries’ spousal or dependent benefits if they earned a government pension based on work where the beneficiary did not pay into Social Security. The GPO reduces the beneficiary’s Social Security spousal or dependent benefit by two-thirds of the amount of the individual’s government pension.

SSA applies the WEP to a beneficiary’ Social Security benefits from the beneficiary’s own earnings (as opposed to a benefit based on spousal earnings) if the beneficiary receives a government pension based on non-covered service. (Non-covered service is work that is not coordinated with Social Security and from which the federal government did not collect Social Security taxes.) The WEP results in a pro rata reduction of 40 to 90 percent of one of the three factors SSA uses in determining the beneficiary’s Social Security benefit.

In California, the WEP and GPO primarily affect teachers and public safety officers who begin their careers in the private sector, earn enough qualifying quarters to receive a Social Security benefit, and then move to careers in the public sector to a job not coordinated with Social Security. Many of these employees do not learn of the consequences to their Social Security benefits until they apply to begin receiving Social Security.

FISCAL EFFECT: Appropriation: No Fiscal Com.: No Local: No

SUPPORT: (Verified 4/23/19)

California Association of Highway Patrol

California Retired Teachers Association

California State Teachers’ Retirement System

California Teachers Association

Peace Officers’ Research Association of California

Retired Public Employees Association

OPPOSITION: (Verified 4/23/19)

None received

ARGUMENTS IN SUPPORT: According the California Retired Teachers Association, “these penalties harm California’s public school educators, fire fighters, police and many other dedicated public servants.”

According to the California State Teachers’ Retirement System, “CalSTRS members eligible for Social Security benefits would no longer have their Social Security benefits reduced or eliminated if the WEP and GPO are repealed.

“A teaching career would be more attractive to individuals considering a mid-career change because previously earned Social Security benefits would retain their full value if the WEP and GPO are repealed.”

Prepared by: Glenn Miles / L., P.E. & R. / (916) 651-1565

4/24/19 14:48:30

**** END ****

SENATE COMMITTEE ON LABOR, PUBLIC EMPLOYMENT AND RETIREMENT

Senator Jerry Hill, Chair

2019 - 2020 Regular

Bill No: SJR 3 Hearing Date: April 24, 2019

Subject: Social Security

KEY ISSUE

Should the Legislature petition the United States Congress to enact, and the President of the United States to sign, legislation to repeal the Government Pension Offset and the Windfall Elimination Provision from the Social Security Act and to instruct the Secretary of the Senate to transmit copies of this resolution to members of Congress?

ANALYSIS

Existing federal law:

1. Requires that a beneficiary’s Social Security allowance be offset if the beneficiary also receives a government pension and was employed by an employer not coordinated with Social Security (42 U.S. Code § 403, 20 CFR § 404.243).
2. Requires that a beneficiary’s spouse, widow, or widower, may receive a reduced Social Security benefit if the beneficiary also receives a government pension and was employed by an employer not coordinated with Social Security (42 U.S. Code § 403, 20 CFR § 404.408a).

This joint resolution:

1. Requests the United States Congress to enact, and the President of the United States to sign, legislation to repeal the Government Pension Offset (GPO) and the Windfall Elimination Provision (WEP) from the Social Security Act.
2. Directs the Secretary of the Senate to transmit copies of this resolution to the President and Vice President of the United States, the Speaker of the House of Representatives, the Majority Leader of the Senate, and to each Senator and Representative from California in the United States Congress, and to the author for appropriate distribution.
3. Makes various declarations:
4. The WEP and GPO, passed by Congress over 30 years ago without statistical analyses, diminish or eliminate the fully earned Social Security benefits of large numbers of California public employees;
5. WEP and GPO affect workers who have been employed in a government position which is not coordinated with Social Security, such as public school teachers who have been unable to receive Social Security credits since 1965;
6. Most peace officers, including the California Highway Patrol, firefighters, and public servants working for cities and special districts, are not covered by Social Security and subject to the WEP and GPO;
7. More than 300,000 California retirees have had their Social Security benefits diminished or eliminated by the WEP and GPO;
8. Effective government requires highly qualified and motivated personnel, and California government agencies need to compete to recruit and retain employees, including hiring 16,000 new public school teachers each year;
9. The recruitment and retention of qualified individuals reentering the workforce is impeded by the WEP and GPO which reduce or eliminate the benefits earned by workers or received through dependent status;
10. The GPO severely cuts, and usually eliminates, all spousal and survivor benefits earned from what is deemed by the State of California as community property income;
11. The GPO requires a beneficiary report any yearly cost-of-living increases in the recipient’s public pension, so that the recipient’s Social Security benefits may be reduced by two-thirds of that amount;
12. The WEP reduces earned Social Security benefits from work that is separate from the work for which the individual earned a government pension;
13. The WEP cuts earned Social Security retirement benefits by eliminating the formula that reimburses low-income workers at a higher rate than high-income workers, causing severe hardships for those who have not been employed in a high-paying public job; and
14. Until 2005, there were no requirements that a public employer advise new employees they would be subject to these penalties.

Background

The Government Pension Offset (GPO) and the Windfall Elimination Provision (WEP)

Under federal law, two deduction offsets to Social Security benefits affect state and local public employees who work for an employer in a position not coordinated with Social Security and who receive a government pension upon retirement.

The GPO affects individuals who earn a government pension based on work where the employee did not pay into Social Security but is eligible for a Social Security dependent’s benefit. The GPO reduces the dependent’s Social Security benefit by two-thirds of the amount of the individual’s government pension.

The WEP affects individuals who receive both a pension based on non-covered service and who also qualify for a Social Security retirement or disability benefit from working in covered service. The WEP results in a pro rata reduction of 40 to 90 percent of one of the three factors used in determining the average monthly earnings upon which the Social Security benefit is based depending on how many years of qualifying earnings the individual has in Social Security.

In California, the WEP and GPO primarily affect teachers and public safety officers who begin their careers in the private sector and earn enough qualifying quarters to receive a Social Security benefit but then move to careers in the public sector to a job not coordinated with Social Security. Many of these employees do not learn of the consequences to their Social Security benefits until they apply to begin receiving Social Security.

COMMENTS

1. Need for this bill?

The author states the following:

These policies diminish the retirement benefits of some of our most important public servants like peace officers and educators – many of whom already struggle with relatively low incomes. In many cases, it may cut their rightfully earned social security benefit in half. Not only is this completely unjust, but it discourages private-sector employees from and moving to badly needed public-sector careers like education. The GPO and WEP also tend to be disproportionately unfair to lower-wage workers. Individuals with lower incomes are meant to receive proportionately greater benefits than those with higher incomes. Those who have spent only a short time in the public sector will appear as low income based on the Social Security Administration’s (SSA) formula. The WEP in particular was meant to keep those individuals from receiving higher social security benefits as well as pensions from their other employers – however it does not make a distinction between these individuals and actual lower-wage employees. As a result, many lower-wage employees have no retirement protection from the WEP.

1. Proponent Arguments

According the California Retired Teachers Association, “these penalties harm California’s public school educators, fire fighters, police and many other dedicated public servants.”

According to the California State Teachers’ Retirement System,

CalSTRS members eligible for Social Security benefits would no longer have their Social Security benefits reduced or eliminated if the WEP and GPO are repealed.

A teaching career would be more attractive to individuals considering a mid-career change because previously earned Social Security benefits would retain their full value if the WEP and GPO are repealed.

1. Opponent Arguments:

None received.

1. Prior Legislation: The following joint resolutions were substantially similar to SJR 3:

• AJR 41 (Thurmond, Chapter 197, Statutes of 2018)
• SJR 1 (Beall, Chapter 92, Statutes of 2015)
• SJR 30 (Hancock, Chapter 126, Statutes of 2011)
• AJR 10 (Torlakson, Chapter 103, Statutes of 2009)
• AJR 5 (Hernandez, Chapter 116, Statutes of 2007)

SUPPORT

California Association of Highway Patrol

California Retired Teachers Association

California State Teachers’ Retirement System

California Teachers Association

Peace Officers’ Research Association of California

Retired Public Employees Association

OPPOSITION

None on file.

-- END –