[Senate Hearing 108-279]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 108-279

 PENALTY FOR PUBLIC SERVICE: DO THE SOCIAL SECURITY GOVERNMENT PENSION 
OFFSET AND WINDFALL ELIMINATION PROVISION UNFAIRLY DISCRIMINATE AGAINST 
                        EMPLOYEES AND RETIREES?

=======================================================================

                                HEARING

                               before the

                              COMMITTEE ON
                          GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE


                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                           SEPTEMBER 24, 2003

                               __________

      Printed for the use of the Committee on Governmental Affairs



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                   COMMITTEE ON GOVERNMENTAL AFFAIRS

                   SUSAN M. COLLINS, Maine, Chairman
TED STEVENS, Alaska                  JOSEPH I. LIEBERMAN, Connecticut
GEORGE V. VOINOVICH, Ohio            CARL LEVIN, Michigan
NORM COLEMAN, Minnesota              DANIEL K. AKAKA, Hawaii
ARLEN SPECTER, Pennsylvania          RICHARD J. DURBIN, Illinois
ROBERT F. BENNETT, Utah              THOMAS R. CARPER, Delaware
PETER G. FITZGERALD, Illinois        MARK DAYTON, Minnesota
JOHN E. SUNUNU, New Hampshire        FRANK LAUTENBERG, New Jersey
RICHARD C. SHELBY, Alabama           MARK PRYOR, Arkansas

           Michael D. Bopp, Staff Director and Chief Counsel
            Jennifer A. Hemingway, Professional Staff Member
           Priscilla Hobson Hanley, Professional Staff Member
      Joyce A. Rechtschaffen, Minority Staff Director and Counsel
                    Larry B. Novey, Minority Counsel
                      Amy B. Newhouse, Chief Clerk


                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Collins..............................................     4
    Senator Akaka................................................     6
Prepared statement:
    Senator Lautenberg...........................................    31

                               WITNESSES
                     Wednesday, September 24, 2003

Hon. Dianne Feinstein, a U.S. Senator from the State of 
  California.....................................................     1
Jo Anne B. Barnhart, Commissioner, Social Security Administration     8
Julia Worcester, Columbia, Maine.................................    19
Charles L. Fallis, National President, National Association of 
  Retired Federal Employees......................................    21
Kenneth Rocks, National Vice President, Fraternal Order of Police    23

                     Alphabetical List of Witnesses

Barnhart, Jo Anne B.:
    Testimony....................................................     8
    Prepared Statement...........................................    32
Fallis, Charles L.:
    Testimony....................................................    21
    Prepared Statement...........................................    46
Feinstein, Hon. Dianne:
    Testimony....................................................     1
Rocks, Kenneth:
    Testimony....................................................    23
    Prepared Statement...........................................    52
Worcester, Julia:
    Testimony....................................................    19
    Prepared Statement...........................................    42

                                Appendix

Hon. Barbara A. Mikulski, a U.S. Senator from the State of 
  Maryland, prepared statement...................................    56
Maria M. Alamor and Leo R. Alamar, Social Security Administration 
  Decision submitted by Mr. Fallis...............................    59
Additional prepared statements submitted for the Record:
    Ronald S. Dick, Silver Spring, Maryland......................    70
    Junita Drisko, Orrington, Maine..............................    72
    Carolyn T. Engers, Joliet, Illinois..........................    73
    Jane Nelson, Cleveland, Texas................................    76
    Sharon Richard, Sour Lake, Texas.............................    78
    Suzanne Shaw, Penobscot, Maine...............................    81
    Ralph White, President, Retired State, County and Municipal 
      Employees Association of Massachusetts, and Shawn Duhamel, 
      Legislative Liaison........................................    87
    Patricia Wolfe, President, Federally Employed Women (FEW)....    90

 
 PENALTY FOR PUBLIC SERVICE: DO THE SOCIAL SECURITY GOVERNMENT PENSION 
OFFSET AND WINDFALL ELIMINATION PROVISION UNFAIRLY DISCRIMINATE AGAINST 
                        EMPLOYEES AND RETIREES?

                              ----------                              


                     WEDNESDAY, SEPTEMBER 24, 2003

                                       U.S. Senate,
                         Committee on Governmental Affairs,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 9:33 a.m., in 
room SD-342, Dirksen Senate Office Building, Hon. Susan M. 
Collins, Chairman of the Committee, presiding.
    Present: Senators Collins and Akaka.
    Chairman Collins. The Committee will come to order.
    Good morning. Today, the Committee on Governmental Affairs 
is holding a hearing to examine the effect that the Social 
Security government pension offset and the windfall elimination 
provisions have on public employees and retirees.
    I am going to go immediately to the distinguished senior 
Senator from California, Senator Dianne Feinstein, for her 
opening statement because of scheduling considerations. I will 
then resume with my own opening statement and we will continue 
with the hearing.
    I want to welcome Senator Feinstein here this morning. She 
has been such a leader in the Senate in remedying this inequity 
that has affected so many of our constituents. I am very proud 
to be the lead Republican cosponsor of the legislation that 
Senator Feinstein has introduced. We work together on many 
issues and it is a great pleasure to welcome her to the 
Committee this morning.
    Senator Feinstein.

  TESTIMONY OF HON. DIANNE FEINSTEIN, A U.S. SENATOR FROM THE 
                      STATE OF CALIFORNIA

    Senator Feinstein. Thank you very much, Madam Chairman. I 
appreciate your holding this hearing, and even more than that I 
appreciate your cosponsorship of this legislation which we 
together have introduced, along with 21 others of our body.
    The reason we have introduced it is because under current 
law, public employees, whose salaries are often lower than 
those in the private sector, actually find that they are 
penalized and held to a different standard when it comes to 
retirement benefits. The arbitrary reduction in their benefits 
makes it more difficult to recruit teachers, police officers, 
and firefighters, and it does so at a time when we should be 
doing everything we can to recruit the very best and brightest 
to these careers.
    I am very delighted to have introduced you to Bill Lambert, 
of the United Teachers of Los Angeles. He represents some 
48,000 teachers, the dominant majority of whom lose benefits 
under the present system that no one in the private sector 
does, and that is what our bill seeks to remedy.
    The current government pension offset provision reduces 
Social Security spousal benefits by an amount equal to two-
thirds of the spouse's public employment civil service pension. 
This can have the effect of taking away entirely a spouse's 
benefits from Social Security, and as one might guess, this 
provision disproportionately affects women. So as Mr. Lambert 
just said to you, you had better hope if you are going to be a 
teacher that you live a long time because if you don't, your 
spouse is going to be disadvantaged because you chose a public 
career rather than a private one.
    The Social Security windfall elimination provision reduces 
Social Security benefits for retirees who pay into Social 
Security and also receive a government pension, such as from a 
teacher retirement fund. Private sector retirees receive 
monthly Social Security checks equal to 90 percent of the first 
$561 in average monthly earnings, plus 32 percent of monthly 
earnings up to $3,381, and 15 percent of earnings above $3,381. 
Government pensioners, however, are only allowed to receive 40 
percent of the first $561 in career monthly earnings. Now, that 
is a penalty of $280.50. It is a big penalty for people who 
really need those funds. To my mind, it is simply unfair.
    Our legislation will allow government pensioners the chance 
to earn the 90 percent to which non-government pension 
recipients are entitled. I don't understand why we want to 
discourage people from pursuing careers in public service by 
essentially saying that if you do enter public service, your 
family is going to suffer by not being able to receive the full 
retirement benefits they would otherwise be entitled to.
    Record enrollments in public schools and the projected 
retirements of thousands of veteran teachers are driving this 
urgent need for teacher recruitment. Efforts to reduce class 
size also necessitate hiring additional teachers. It is 
estimated that schools will need to hire between 2.2 and 2.7 
million new teachers nationwide by 2009.
    My State, California, currently has more than 285,000 
teachers, but is going to need to hire an additional 300,000 
teachers by 2010 to keep up with California's rate of student 
enrollment, which is three times the national average. All in 
all, California has to hire 26,000 new teachers.
    Now, to combat the growing teacher crisis, 45 States and 
the District of Columbia now offer alternative routes for 
certification to teach in the Nation's schools. It is a sad 
irony that policymakers are encouraging experienced people to 
change careers and enter the teaching profession at the same 
time that we clearly tell them we will reduce your Social 
Security benefits for making such a change, benefits they 
worked hard to earn.
    Almost 300,000 government retirees nationwide are affected 
by the government pension offset and windfall elimination 
provisions, but their impact is greatest in the 13 states that 
chose to keep their own public employee retirement systems, 
including yours and mine.
    According to the Congressional Budget Office, the 
government pension offset reduces benefits for some 200,000 
individuals by more than $3,600 a year. That is the loss; it is 
tremendous. As I mentioned earlier, the windfall elimination 
provision causes already low-paid public employees outside the 
Social Security system, like teachers, firefighters and police 
officers, to lose up to 60 percent of the Social Security 
benefits to which they are entitled.
    Sadly, the loss of Social Security benefits may make these 
individuals eligible for more costly assistance, such as food 
stamps. So we deny these workers the benefits and that entitles 
them to food stamps. I am not sure this is the pride that we 
want to take in public employees.
    I am also very aware that we are facing extraordinary 
deficits and that fixing the problem that we are talking about 
here will be expensive. So I am open, and I know you are open 
to considering all options that move us toward our goal of 
allowing individuals to keep the Social Security benefits to 
which they are entitled.
    The reforms that led to the government pension offset 
provision and the windfall elimination provision are almost 20 
years old now. At the time they were enacted, I am sure they 
seemed like a good idea. Now that we are witnessing the 
practical effects of those reforms, I think it is time that we 
pass legislation to address the unfair reduction of benefits 
that make it even more difficult to recruit and retain public 
employees.
    What I want you and Senator Akaka to know is that I look 
forward to working with this Committee as you work this issue 
out. It is an expensive issue, but there is no question, on the 
side of fairness, that fairness says we should remedy this 
problem. So because on our bill we have some 23 Senators, and I 
know Senator Mikulski has a bill that does half what we do and 
I believe she has some 25 cosponsors, it seems to me that 
between the two bills, we ought to be able to put something 
together to get a fair conclusion to this in this session of 
the Congress.
    Thank you very much.
    Chairman Collins. Thank you very much, Senator. I certainly 
share your hope in that regard. I am proud to be a cosponsor of 
Senator Mikulski's bill, as well. Like you, I am open to 
compromises on this issue, but my hope is that by holding this 
hearing today, the Committee can shine a spotlight on what is a 
very troubling problem particularly for lower-income women 
retirees, as your statement so eloquently has pointed out, and 
that we will be able to prompt the Finance Committee to move 
these bills.
    So I thank you very much for taking the time out of your 
busy schedule to be here with us today. I know this is of 
enormous importance to you and I thank you for your leadership.
    Senator Feinstein. Thanks, Madam Chairman. I appreciate it.
    Chairman Collins. Senator Akaka, we began the hearing by 
hearing from Senator Feinstein because she has an 
Appropriations meeting that she needs to go to. I am now going 
to go to my opening statement and then I will call on you 
shortly.

             OPENING STATEMENT OF CHAIRMAN COLLINS

    Chairman Collins. Senator Feinstein has given an excellent 
overview of the issue that we are looking at today. Individuals 
affected by both the government pension offset and the windfall 
elimination provisions are those who are eligible for Federal, 
State, or local pensions from work that was not covered by 
Social Security, but who also qualify for Social Security 
benefits based on their own work in covered employment or that 
of their spouses.
    While the two provisions were intended to equalize Social 
Security's treatment of workers, many of us are concerned that 
they unfairly penalize individuals for holding jobs in public 
service when the time comes for them to retire. These two 
provisions have enormous financial implications not just for 
Federal retirees and employees, but also for our teachers, 
police officers, firefighters, and other public employees as 
well.
    Despite their challenging, difficult, and sometimes 
dangerous jobs, these invaluable public servants often receive 
far lower salaries than private sector employees. It is 
therefore doubly unfair to penalize them when it comes to their 
Social Security retirement benefits. These public servants or 
their spouses have all paid taxes into the Social Security 
system. So have their employers, and I think that is a very 
important point.
    Each of the people that we are talking about has paid 
Social Security into the system, paid payroll taxes; the 
employer has, too. So they earned these benefits. They have 
worked the necessary quarters under covered retirement. Yet, 
because of the way these two provisions work, they are unable 
to collect all of the Social Security benefits to which they 
otherwise would be entitled.
    While the GPO and the WEP affect public employees and 
retirees in virtually every State, their impact is most acute 
in 15 States, including Maine, for the reasons that Senator 
Feinstein explained. Those States have retirement systems that 
do not have a Social Security component.
    Nationwide, more than one-third of teachers and education 
employees and more than one-fifth of other public employees are 
affected by the GPO and/or the WEP. Almost one million retired 
government workers across the country have already been 
adversely affected by these provisions. Millions more stand to 
be affected by them in the future.
    Moreover, at a time when we should be doing all that we can 
to attract qualified people to public service, this reduction 
in Social Security benefits makes it even more difficult for 
our Federal, State, and local governments to recruit and retain 
the teachers, police officers, firefighters, and other public 
servants who are so critical to the safety and well-being of 
our families.
    The Social Security windfall elimination provision reduces 
benefits for retirees who paid into Social Security and also 
receive a government pension from work not covered by Social 
Security, such as pensions from the Maine State Retirement 
Fund. While private sector retirees receive monthly Social 
Security checks equal to 90 percent of their first $606 in 
average monthly career earnings, government pensioners are only 
allowed to receive 40 percent--a harsh penalty of more than 
$300 per month.
    The government pension offset reduces an individual's 
survivor benefit under Social Security by two-thirds of the 
amount of his or her public pension. It is estimated that 9 out 
of 10 public employees affected by the pension offset lose 
their entire spousal benefit, even though their spouses paid 
Social Security taxes year after year.
    What is most troubling is that this offset is most harsh 
for those who can afford it the least, and that is lower-income 
women. In fact, of those affected by the pension offset, 73 
percent are women. According to the Congressional Budget 
Office, as Senator Feinstein noted, the GPO reduces benefits 
for more than 200,000 of these individuals by more than $3,600 
a year. That is the difference between poverty and a 
comfortable retirement for a lot of low-income retirees. Our 
teachers and other public employees face difficult enough 
challenges in their day-to-day work. Individuals who have 
devoted their lives to public service should not have the added 
burden of worrying about their retirement.
    This issue is extraordinarily important in my home State of 
Maine and it is one of the issues that I hear the most about. 
People stop me when I am in the grocery store, at church, 
wherever I am, even at my 30th high school class reunion a 
couple of years ago. I guess all of us as we are getting older 
are starting to finally think about what we are going to do 
when we retire.
    Many of my high school friends entered the teaching 
profession. They are committed to living and working in Maine. 
They love their jobs and the children they teach, but they 
worry about their future and their financial security in 
retirement.
    I hear a lot about this in my constituent mail and I want 
to share a couple of letters that I have received. One was from 
Patricia DuPont, from Orland, Maine. She wrote that because she 
had taught for 15 years under Social Security in New Hampshire, 
she is living on a retirement income of less than $13,000, 
after 45 years in education. Since she also lost survivor 
benefits from her husband's Social Security, she calculates 
that if we were to completely repeal the two provisions we are 
discussing today, it would double her current retirement 
income. And think how much better off she would be with $26,000 
a year, still not exactly a fortune, versus $13,000.
    Moreover, these provisions penalize private sector 
employees who leave their jobs to become public school 
teachers. At a time when we are trying to get more people to 
come into teaching, I think this is another unfortunate effect 
of these provisions.
    Ruth Wilson, a teacher from Otisfield, Maine, wrote to me 
as follows: ``I entered the teaching profession 2 years ago, 
partly in response to the nationwide plea for educators. As the 
current pool of educators near retirement in the next few 
years, our schools face a crisis. Low wages and long, hard 
hours are not great selling points to young students when 
selecting a career. I love teaching and only regretted my 
decision when I found out about the penalties I will unfairly 
suffer. In my former life as a well-paid systems manager at 
State Street Bank in Boston, I contributed the maximum to 
Social Security every year. When I decided to become an 
educator, I figured that because of my many years of maximum 
Social Security contributions, I would still have livable 
retirement wage. I was unaware that I would be penalized as an 
educator.''
    That is a perfect example of someone who thought that she 
had planned well for her retirement years, had worked in the 
private sector, then made the sacrifice to take a lower salary 
and teach. And yet she finds out that she is going to lose the 
benefit of those years in the private sector when it comes to 
retirement.
    Maine, like many States, is currently facing a shortage of 
teachers. I just don't think that we can afford to discourage 
people from pursuing important careers like teaching in the 
public sector in this way, and that is why I have joined 
Senator Feinstein in introducing her bill and have cosponsored 
Senator Mikulski's bill as well.
    Today's hearing will examine how these two provisions work, 
why they were enacted, and what their effect has been on public 
employees and retirees. We will also look at options for their 
modification and repeal. We have heard from Senator Dianne 
Feinstein. We will hear next from the Social Security 
Commissioner, Jo Anne Barnhart, who will help us better 
understand the history and reasons underlying the pension 
offset and windfall elimination provisions, as well as the 
impact that proposals to modify or repeal these two provisions 
would have on the Social Security retirement and disability 
funds.
    Finally, we will hear from a panel representing public 
employees and retirees, including Julia Worcester, who has 
traveled all the way from Columbia, Maine, to tell us about her 
work both in Social Security-covered retirement and as a Maine 
teacher. We will also be hearing from other public employee 
representatives, as well.
    I look forward to hearing all the testimony today. My hope 
is that this oversight hearing, which one of our witnesses 
tells me is the first Senate hearing to delve into this issue, 
will lay the ground work for action to resolve what is a very 
troubling problem for far too many of our retirees.
    I am very pleased to call on my colleague and friend, 
Senator Akaka, for any comments that he might have.

               OPENING STATEMENT OF SENATOR AKAKA

    Senator Akaka. Thank you very much, Madam Chairman, for 
holding this hearing. I commend you for highlighting this 
troubling issue not only for women, but for people of our 
country. I want to say good morning, also, to all of those who 
are with us today.
    I am pleased that Senator Feinstein was able to join us and 
give her remarks. Senator Mikulski unfortunately could not be 
with us. They are leaders in addressing problems associated 
with the government pension offset, and also the windfall 
elimination provision, both of which impact our Federal 
employees and retirees.
    As the Chairman noted, the general pension offset was 
established to create a level playing field between government 
and private sector workers who receive Social Security spousal 
benefits when the individual also receives a pension for work 
not covered by Social Security.
    Under the GPO, those individuals are subject to a reduction 
in their Social Security spousal benefits equal to two-thirds 
of the amount of the government pension. Unfortunately, the 
reduction has proved to be imprecise and has uneven results.
    As of last December, there were 376,000 government 
annuitants whose Social Security spousal benefits were affected 
by the GPO. Approximately 73 percent of them were women. The 
impact of the GPO is especially hard on women. The 2001 data 
shows that the average monthly offset for women was nearly one-
third greater than that for men.
    In addition, women are harmed because many may have taken 
time off work to raise a family, resulting in a reduced 
pension. The reduction in one's pension, combined with reduced 
Social Security spousal benefits, put at risk many female 
retirees who have dedicated their lives to public service.
    This Committee has acted before to protect women and their 
retirement benefits. Last year, we passed legislation I 
introduced, the thrift savings plan catch-up bill, which allows 
Federal employees age 50 and over to contribute additional 
amounts to the thrift savings plan. Just like the GPO proposal 
before us today, the TSP change will help those women who 
return to the workforce after raising families and have not 
been able to prepare adequately for retirement.
    Due to the problems with the GPO and its aggravated impact 
on women, I am pleased to again cosponsor Senator Mikulski's 
legislation, S. 363. This bill would eliminate the application 
of the GPO for those individuals whose monthly combination of 
Social Security, spousal benefits, and non-Social Security 
pensions is $1,200 or less. Senator Mikulski's legislation will 
go a long way to minimize the harsh impact the GPO has on those 
government retirees, particularly women, who depend heavily on 
Social Security.
    Today, we are also discussing the windfall elimination 
provision. Although the WEP, like the GPO, was created to even 
the playing field between public and private workers, it has 
had the effect of penalizing those who had lower earnings in 
their non-Social Security employment.
    The problem has become so severe that last winter the CBS 
Evening News ran a special feature on the WEP, depicting the 
hardships faced by hundreds of thousands of Americans who 
receive less than their full Social Security benefits because 
of this provision. Congress must act now to mitigate the 
financial strains placed upon our retired workers because of 
the GPO and WEP.
    Madam Chairman, I hope we can work together to find a 
solution to the problems facing retired government employees 
and their spouses, and help those who have dedicated their 
lives to public service. You have been a great leader, Madam 
Chairman, in this respect, too, and I thank you again for 
holding this hearing.
    Chairman Collins. Thank you very much, Senator.
    Senator Akaka. Madam Chairman, I am sorry that I have 
another hearing to go to and I won't be able to stay for the 
remainder of the hearing.
    Chairman Collins. I understand. I have that hearing also, 
so represent me well there.
    Senator Akaka. Thank you.
    Chairman Collins. This is a day with a lot of hearing 
conflicts, but thank you very much for coming by.
    The Committee would now like to welcome and call forward 
the Hon. Jo Anne Barnhart, the Commissioner of the Social 
Security Administration. I know that the Commissioner 
rearranged her very busy schedule in order to be with us today, 
and I want to express my appreciation for her efforts.
    I also want to say that the Commissioner has done an 
excellent job running the Social Security Administration. It is 
an enormous task. My case workers in Maine tell me that you 
have made real progress in cutting down on the backlogs and 
processing claims and disputes, and I want to recognize that 
good work.
    Commissioner Barnhart's experience with Social Security 
dates back to her service in 1981 as Deputy Associate 
Commissioner of the Office of Family Assistance. I would note 
that she also served as the Republican staff director for this 
very Committee and that we had the pleasure of working together 
decades ago.
    We look forward to hearing your testimony this morning. You 
may proceed.

   TESTIMONY OF JO ANNE B. BARNHART,\1\ COMMISSIONER, SOCIAL 
                    SECURITY ADMINISTRATION

    Ms. Barnhart. Thank you, Madam Chairman. I appreciate those 
kind comments about Social Security. Also, I must say that it 
was something of a nostalgic trip for me to walk in here this 
morning, because I don't think I have been in this hearing room 
for 15 years since I did serve as Republican staff director.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. Barnhart appears in the Appendix 
on page 32.
---------------------------------------------------------------------------
    I want to thank you for inviting me to discuss the 
government pension offset provision, or GPO, and the windfall 
elimination provision, which is also known as WEP. These 
provisions are extremely complex and they are not well 
understood, so I appreciate this opportunity to briefly 
describe their purpose, how they work, and issues that should 
be evaluated when you are considering legislative changes.
    I would like to begin with GPO which, as you have 
indicated, affects government retirees who are eligible for two 
benefits, a pension based on their own work in a Federal, 
State, or local government job that was not covered by Social 
Security and a Social Security spouse's or surviving spouse's 
benefit based on their husband's or wife's work in Social 
Security-covered employment.
    If the GPO applies, the person's spouse or surviving 
benefit is reduced by an amount equal to two-thirds of the 
person's government pension based on work not covered by Social 
Security. As of December 2002, about 367,000 beneficiaries had 
their benefits fully or partially offset due to the GPO. Of 
those, 73 percent were women.
    In enacting the GPO, Congress intended to assure that 
individuals working in non-covered employment would be treated 
in the same manner as those working in covered employment. 
Prior to GPO, a person who worked in a government job not 
covered under Social Security could receive, in addition to the 
government pension based on his or her own earnings, a full 
Social Security spouse's or surviving spouse's benefit. 
However, a person who works in a job covered under Social 
Security is subject to the dual entitlement provision.
    This provision, which has been applied since 1940, requires 
that Social Security benefits payable to a spouse or a 
surviving spouse be offset by that person's own Social Security 
benefit amount. Therefore, GPO really acts as a surrogate for 
the dual entitlement offset, ensuring that spouses and 
surviving spouses are treated similarly regardless of whether 
their jobs are covered under Social Security or not.
    The impetus for enacting the GPO provision was a March 1977 
Supreme Court ruling in Califano v. Goldfarb. That ruling 
eliminated the dependency test that then applied to men but not 
women in order to qualify for Social Security spousal benefits. 
Essentially, it eliminated gender bias in the Social Security 
programs. Because of the dual entitlement provision, men who 
worked in covered employment still did not typically receive 
spouse or widow benefits, but those who worked in non-covered 
employment could. Therefore, Congress enacted the GPO in 
December 1977.
    While the GPO provision is intended to accomplish the same 
purpose as the offset under the dual entitlement provision, the 
amount of the reduction under the GPO is different. Under the 
dual entitlement provision, dollar-for-dollar is reduced. Under 
the GPO, there is a two-thirds reduction, and I would like to 
give just a brief example to clarify the difference.
    If we take Ms. Jones, who is receiving a Social Security 
retirement benefit of $900 a month based on her own work, her 
own employment, she is also potentially eligible for $900 as a 
widow's benefit. So that would be a total of $1,800 if she were 
allowed to receive both. Her Social Security retirement benefit 
is subtracted from her widow's benefit, resulting in her 
widow's benefit being fully offset. So her Social Security 
benefit is subtracted from the $1,800 total and she receives 
only $900 in Social Security benefits.
    A second widow, Ms. Brown, is in a comparable situation. 
She worked for the government and her pension is $900. 
Potentially, she too could be eligible for a Social Security 
widow's benefit of $900. However, the GPO provision reduces the 
$900 widow's benefit by two-thirds of her pension, or $600. So 
she receives a $300 Social Security benefit, in addition to her 
$900 government pension. Therefore, she receives $1,200, while 
the individual who worked in covered employment receives $900.
    That is just a brief example to explain what, looking back 
over legislative history, it appears was Congress' intent in 
enacting the GPO--to create a situation comparable to the dual 
entitlement provision.
    I would now like to briefly address the WEP provision. In 
1983, the Social Security Act was amended and included WEP as a 
means to eliminate what were called and have been called 
windfall Social Security benefits for retired and disabled 
workers who were receiving pensions from employment that isn't 
covered by Social Security.
    Generally while the WEP applies to any pension based on 
non-covered employment, it primarily affects government 
workers. The WEP, I want to point out, though, does not affect 
Social Security benefits that are payable to survivors of 
workers.
    The WEP removes an unintended advantage that the weighting 
in the regular Social Security benefit formula would otherwise 
provide for persons who have substantial pensions from non-
covered employment. This weighting is intended to help workers 
who spent their whole lives in low-paying jobs. It provides 
them with a relatively higher benefit in relation to their 
prior earnings than the benefit that is provided for higher-
paid workers.
    However, because Social Security benefits are based on 
average earnings over a working lifetime, a worker who has 
spent part of his or her career in employment not covered by 
Social Security actually appears to have a lower lifetime 
earning than he or she actually had. Without the WEP, such a 
worker would be treated as a low-income worker for Social 
Security benefit purposes and therefore receive the advantage 
of the weighted benefit formula that was designed to help 
lower-wage earners.
    I would like to explain how the WEP is computed. The 
primary insurance amount formula for determining Social 
Security benefits for workers who reach age 62 in 2003 is, as 
Senator Feinstein described in her testimony, 90 percent for 
the first $606 in average monthly earnings, plus 32 percent of 
the next $3,047, and 15 percent of average monthly earnings 
above $3,653.
    Under the WEP computation, the 90 percent factor is 
reduced, so that the 90 percent of the first $606 becomes 40 
percent of the first $606. Under the regular Social Security 
benefit formula, a worker would get $545 of that $606. Under 
WEP, the individual would receive $242 of the first $606. Under 
both scenarios, the 32-percent and the 15-percent factors 
remain the same. So the effect of WEP occurs at that first 
level of calculation.
    For a worker first eligible in 2003, the maximum WEP 
reduction is $303 a month, because when you take 40 percent of 
$606, that is the largest reduction that you have, the 50 
percent, the difference between the 40 and the 90 percent. 
Unlike the GPO, the WEP can never eliminate a person's Social 
Security benefit.
    For workers who have 30 or more years of substantial 
covered earnings, the WEP does not apply at all. Substantial 
earnings for 2003 are defined as $16,125 a year. The WEP is 
phased out gradually for workers who have substantial earnings 
for 21 to 29 years. There is a phase-out of the WEP from the 
21st year down to the 30th year, where the total exemption from 
WEP begins. As of December 2002, WEP reduced the Social 
Security benefits of approximately 635,000 retired and disabled 
workers, and of those affected workers, 66 percent are men.
    The President's fiscal year 2004 budget includes a proposal 
that would improve the administration of both WEP and GPO. It 
is a change that would allow SSA to independently verify 
whether beneficiaries have pension income from employment not 
covered by Social Security. Right now, we rely largely on the 
applicants who come into the office. We do have an ongoing 
computer matching program with OPM that helps us as far as 
Federal employees go. But with State employees, it is a much 
more difficult situation.
    A number of proposals have also been advanced to change the 
WEP and GPO provisions, and Senator Feinstein's bill is one of 
those. Senator Mikulski's, which you and Senator Akaka 
referenced, is another, and there are several others. Some 
would eliminate those provisions entirely. Others, like Senator 
Mikulski's bill, have set a limit for the offset.
    These provisions would be costly and would restore the more 
favorable treatment afforded to many workers in non-covered 
employment prior to the enactment of the GPO and WEP. I raise 
that issue because I think it was Congress' intent to establish 
equity in enacting these previsions. Since you are looking at 
issues that would need to be addressed as you move ahead in 
looking at the GPO and WEP, certainly that is one that would 
warrant consideration. Further, if both WEP and GPO were 
eliminated, the Social Security trust fund exhaustion date 
would advance by 1 year, from 2042 to 2041, as would the year 
of cash flow deficit advance from 2018 to 2017.
    Most other proposals to modify the effects of WEP or GPO 
provide higher Social Security benefits for government workers 
whose pensions from non-covered employment, in combination with 
Social Security benefits, are below certain levels. That would 
be Senator Mikulski's bill. However, those bills do not address 
the dual entitlement offset that applies to millions of 
comparable beneficiaries who worked only in covered employment. 
If you look at addressing the dual entitlement provision that 
has been in effect since 1940, you find that the cost increases 
substantially to over $500 billion.
    As indicated, the GPO and WEP are two highly technical 
provisions of law that are not well understood by the public, 
and we have therefore greatly increased our public information 
efforts on these provisions. We have revised the annual Social 
Security statement to attempt to make it clearer to people who 
receive the statement that they could be affected by the 
government pension offset or by the windfall elimination 
provision.
    We have individuals who conduct pre-retirement seminars. We 
have a website with a calculator so workers can actually see 
the individual effect of these reductions--actually put in 
their figures. And we are obviously happy to walk them through 
it if they come into our offices for an appointment because it 
is complicated and difficult for people to understand.
    We are in the process right now of putting up a special 
website related specifically to WEP and GPO, in large measure 
because of the increased emphasis and interest that this issue 
has received; many people have expressed concern and a lack of 
understanding about how these provisions operate. We felt it 
was very important to make information accessible in every 
possible form.
    At this time, I would be happy to answer any questions that 
you might have, Madam Chairman.
    Chairman Collins. Thank you very much, Commissioner. Your 
explanation of how the law works, which was very good, 
demonstrates a problem, however, and that is its complexity. 
What I have found is that many of the people who have come to 
me about this issue were surprised to learn of the impact of 
the pension offset and the windfall elimination provision on 
their future Social Security benefits.
    Ms. Worcester, who will be testifying on our next panel, is 
one of those who found out about it only when she happened to 
go to a retirement seminar. It is very common in my State that 
people are surprised to learn of the impact. One teacher friend 
of mine told me that he had worked every summer purposefully 
during his teaching career in order to earn his Social Security 
benefits, having no idea that they would be offset. I am glad 
to hear about your efforts because I really think there is a 
lack of understanding that compounds the problem for a lot of 
retirees.
    You mentioned the Social Security statements that we get 
after a certain age on an annual basis. The last time I got 
mine I specifically looked for mention of these provisions 
because I am one of those who has employment under both the 
public and private sector. I knew the amount that was listed 
was not going to be the amount that I would be eligible for, 
but I didn't see any warning or any caution to me.
    Has that been changed recently?
    Ms. Barnhart. Actually, it was, Senator. Thank you for 
asking that question, Madam Chairman, because I did make 
changes in the Social Security statement this past spring. So I 
hope that you are not going to tell me you received your 
statement since May of this year.
    Chairman Collins. I did not. What does it say now?
    Ms. Barnhart. We actually put in a highlighted area. It is 
in bold print and it actually says, under your estimated 
benefits, ``The law governing benefit amounts may change. Your 
benefit amount may be affected by military service, railroad 
employment, or pensions earned through work on which you did 
not pay Social Security. Visit''--then we give the website--
``to see whether your Social Security benefit amount will be 
affected.''
    In addition, in the ``Some Facts About Social Security'' 
section, we list five publications that we have available and 
one of those is ``The Windfall Elimination Provision: How It 
Affects Your Retirement of Disability Benefits,'' and 
``Government Pension Offset: Explanation of a Law that Affects 
Spouse's or Widow(er)'s Benefits.''
    This information had not been included prior to the changes 
that were made last spring. I felt it was important because of 
the increased concern that I was hearing that we include this 
warning and advisory, basically, to individuals who might not 
realize that their benefits could be affected.
    When we put this statement out--and we do it for everyone 
25 years of age and older--we estimate future earnings, and we 
estimate your benefit; we have the posted earnings--but we 
don't have a way to tell you at this point what the offset 
would be because we don't know whether you will receive a 
noncovered pension or the amount of your pension.
    We are looking at ways to see if we could set some sort of 
parameter for individuals who, on their statement, have many 
years of covered work, but then they have years of noncovered 
work, or they have years of noncovered work and then they are 
working in covered employment. The feasibility of setting up 
some sort of a computer alert, an automated alert, so we could 
then put a special advisory in those statements--is something 
we are investigating now to see if it is possible.
    We still wouldn't be able to tell the individual the dollar 
effect, but if we are able to accomplish this, we could give a 
more direct advisory to the person that it appears, because of 
``x'' years of non-covered employment, you may be affected by 
this.
    Chairman Collins. I think that would be extremely helpful. 
I still believe the provisions themselves need to be modified 
and, in practice, have become unfair. But the least we can do 
is make sure that people realize the impact. And I think 
because the law was changed, a lot of people are surprised.
    In the case of Ms. Worcester, for example, her mother's 
retirement was not affected. So I think it is incumbent upon 
the Social Security Administration to do everything possible to 
wave a red flag so that at least people can make appropriate 
plans for their retirement until we can get this modified or 
fixed.
    Ms. Barnhart. I certainly appreciate that and if you or 
other Members of the Committee have recommendations or the 
panelists that are following me have other recommendations of 
other activities we could undertake, I would certainly be 
willing to take those under consideration.
    Chairman Collins. Thank you. Some have criticized, 
including myself, the windfall elimination provision for the 
way that it actually works in practice; that it sounded fine, 
perhaps, when it was passed--I wasn't a Member of the Senate at 
the time and I want to make sure everybody in the room knows 
that--but that, in practice, it creates inequities and 
hardships.
    For example, many would contend that the arbitrary 40-
percent factor in the formula does not reflect the actual 
``windfall'' when it is applied in individual cases. The 
current formula seems to over-penalize lower-paid workers with 
shorter careers or with full careers that are fairly evenly 
split between Social Security-covered and non-covered 
employment. The current formula, in my judgment, also is 
regressive because the reduction causes a relatively large 
reduction in benefits for lower-wage workers.
    Would it be appropriate to modify the formula, for example, 
by perhaps including a means test--Senator Mikulski's bill does 
that to some extent--to ensure that low-wage workers receive a 
greater portion of the earned benefits?
    Ms. Barnhart. One of the basic tenets of the Social 
Security program has been the ``earned right'' nature of the 
program, and that is that you pay into the system for the 
benefits that you obtain. I do think that if Congress considers 
the inclusion of a means test, it would be important to 
recognize that could be viewed as a significant departure from 
that ``earned right'' nature of the Social Security program.
    Also, it may be helpful for you if I could provide some 
information to you about the relative poverty status of 
individuals who are affected by the WEP.
    Chairman Collins. It would be helpful.
    Ms. Barnhart. I would be happy to do that.
    The information follows:

                  INFORMATION PROVIDED BY MS. BARNHART

 Poverty Status of Beneficiaries Affected by the Windfall Elimination 
                               Provision

        Based on the most recent data available, approximately 3 
        percent of beneficiaries affected by the windfall elimination 
        provision have incomes below the poverty level ($8,628 for aged 
        individual in 2002 and $10,874 for aged couple). In contrast, 
        8.4 percent of all aged (age 65 or older) Social Security 
        beneficiaries have incomes below the povery level.

    Chairman Collins. Thank you. You mentioned the ``earned 
right'' feature of Social Security, but I think that is what is 
so frustrating to teachers and firefighters and police officers 
who have paid in personally into the system, worked for 10 
years in the private sector, earned their benefits and can't 
get the benefit--don't get them.
    Ms. Barnhart. I certainly understand that. I think the 
thing that is a very difficult aspect of the WEP to explain, 
again, looking back at the comparability between individuals 
working in covered and non-covered employment, part-time in 
each of those or entirely covered employment--the Social 
Security program benefit, structure provides a different 
replacement rate depending on the lifetime amount of covered 
wages of the individual.
    For the low-income earner, the replacement rate is 
approximately 56 percent of pre-retirement income. For the 
average earner, it is around 42 percent and for the high-wage 
earner it is somewhere around 27 to 30 percent. So the issue 
here is if you have an individual who worked for 10 years in 
covered employment at, say, $60,000 a year, when we calculate 
the Social Security benefit, we do it over a 35-year work 
history. So we take that $60,000 for 10 years and for the 
remainder of the years, we put zeroes in for all those years.
    So it presents in the benefit calculation a situation where 
that individual has a much lower lifetime earning. In other 
words, the $60,000 a year over 10 years gets averaged out over 
that 35-year time period and it appears that the individual 
worked for many years as a low-wage earner. If we had a person 
who worked in Social Security and had the equivalent lifetime 
earnings as the case that I just described, they would, in 
fact, be a low-wage earner, and therefore entitled to the 
progressivity of the replacement rate.
    I think this is really the dilemma, Madam Chairman, when we 
look at this in terms of how the Social Security benefit is 
structured and the effect that changing the WEP would have on 
the concern that low-wage workers receive a higher replacement 
rate than higher-wage workers do.
    Chairman Collins. But if you look at the CBO study about 
the impact of these two provisions, it seems that they 
disproportionately affect lower-income workers because of the 
way the formula works. Since, as you mentioned, Social Security 
is designed to replace more of the income for lower-income 
workers than higher-income workers, in a sense it already has a 
means test built in, in that it isn't an equal benefit as far 
as the replacement of wages.
    That is why it seems that, at the very least, a first step 
ought to be to try to help those lower-income workers who are 
particularly hard hit by these provisions, because I really 
don't think that Congress intended that. It was an attempt, as 
you said, to have equity in the system, to make sure the dual 
eligibles were not treated differently or more harshly than 
those with other pensions. But, in practice, it has created a 
lot of problems.
    Ms. Barnhart. I certainly understand, and I have read the 
testimony of the panelists who are going to follow me.
    Chairman Collins. I was going to ask you that. Good. I am 
glad you did.
    Ms. Barnhart. Yes, I absolutely did, last night. Let me 
just take this opportunity to say, if I may, in the situation 
that related to the overpayment, I read about that last night 
and met with my staff this morning and have asked them to look 
into that situation and find out the circumstances that created 
it. I will contact your office to let you know if that 
situation can be resolved in any way.
    Chairman Collins. I appreciate that. That was an issue that 
I was going to bring up to you.
    For those in the audience who haven't read the testimony of 
the next panel, the President of the National Association of 
Retired Federal Employees brought to our attention the case of 
a 79-year-old widow who worked for the Veterans Administration, 
retired in 1994. No one ever told her about the impact of these 
two provisions. As a consequence, she received both Social 
Security and her pension without an offset and has now been 
told that she owes more than $20,000.
    I want to tell you, Commissioner, that this is not 
uncommon, that my case workers in my six State offices deal 
with exactly this kind of overpayment case all the time. As you 
can imagine, it imposes a tremendous hardship on elderly people 
when they all of a sudden are presented with this huge bill 
because of an overpayment.
    I did want to ask you what the Social Security 
Administration's general policy is in dealing with overpayments 
and whether there is any procedure for waiving or lessening 
them when it is clear it would impose a considerable financial 
hardship, and it is also clear that the individuals involved 
had no idea and were not at fault.
    Ms. Barnhart. Yes, let me say we do have procedures. First 
of all, the law would allow us technically to withhold the 
entire benefit check. We most times do not do that, 
particularly in cases where it is evident that the individual 
was not at fault and it certainly was an unintended situation.
    Generally what we do, first of all, is offer to sit down 
and negotiate and look at the person's financial status and 
withhold a much smaller amount over time, so that we do not 
expect to be paid back immediately. We actually try to work 
with the individual to do something that will not financially 
penalize them even further.
    We are allowed to grant waivers, and there are special 
circumstances. I would be happy to provide a description of 
that waiver process for you for the record, if you would like.
    Chairman Collins. That would be helpful.
    The information follows:

                  INFORMATION PROVIDED BY MS. BARNHART

    The following outlines the Social Security Administration's process 
for determining if an overpayment can be waived:

     The Social Security Act (Section 204(b)) provides that 
recovery of an overpayment can be waived if the person from whom we are 
seeking recovery is without fault in causing the overpayment and 
recovery would either defeat the purpose of title II of the Act or be 
against equity and good conscience.

     To make a fault/without fault finding, we consider all of 
the circumstances surrounding the overpayment in each case. We take 
into account any physical, mental, educational or linguistic 
limitations the person has. If the person caused or helped to cause the 
overpayment, he is found at fault. If he is blameless in the creation 
of the overpayment, he is without fault.

     To determine if recovery would defeat the purpose, we 
look at the person's current financial condition, that is, his 
situation at the time the waiver decision is being made. Current 
financial information is defined as no more than 1 year old when the 
waiver decision is made. Financial information must be provided to make 
a defeat the purpose determination.

     If a person does not wish to pursue the defeat the 
purpose criteria by providing current financial information, he may 
still pursue waiver by showing that recovery is against equity and good 
conscience. As defined by Social Security regulations, this means that 
the person changed his position for the worse or relinquished a 
valuable right because of reliance on a notice that a payment would be 
made or because of the overpayment itself. Financial circumstances are 
not material to a finding of against equity and good conscience.

     A decision by SSA regarding a request for waiver of an 
overpayment is an initial determination and a decision that is 
unfavorable to the beneficiary may be appealed through all levels of 
administrative appeals within SSA (i.e., reconsideration, hearing 
before an Administrative Law Judge, and review by the Appeals Council.) 
When all administrative appeals have been exhausted, the beneficiary 
may file a civil action with the appropriate United States District 
Court.

    Ms. Barnhart. That is precisely what I have my staff 
looking into to see if this would be one of those cases where 
such a waiver might be appropriate. I would point out to you 
this is one of the reasons--the fact that this situation occurs 
is one of the reasons that the President's budget includes the 
proposal I described in my testimony. Because we have 
situations where we don't know whether a claimant is receiving 
a pension from non-covered work, even though our workers are 
trained to ask. I am sure that doesn't happen a hundred percent 
of the time. Although we have very dedicated workers, there are 
a lot of things they must attend to when someone comes in to 
apply for retirement.
    By the same token, I am sure in some cases individuals 
don't necessarily understand what that means, even if an 
attempt is made to describe it, or they may not be receiving a 
pension at that time and the situation may change later. In 
fact, they may be eligible fully for Social Security at one 
point, but not for the other pension because of different 
rules, and so forth.
    That is one of the reasons that we wanted to have the 
ability to do independent verification so that we wouldn't have 
people in these situations where they receive Social Security 
and then get this overpayment notice. It really is an 
administrative issue for us.
    Chairman Collins. One of the challenges in tackling this 
problem is the cost. You mentioned in your statement that if we 
enacted the various legislative proposals, the Social Security 
trust fund would be depleted a year earlier. I have two 
questions in that regard.
    One is, either today or for the record, could you give us 
an estimate of the Feinstein-Collins bill and the Mikulski-
Collins bill so that we do have a sense of what we are dealing 
with?
    Second, is the administration open to working on this issue 
to try to come up with some sort of approach that would lessen 
the burden particularly for lower-income retirees? I realize 
that, much as I would like to see outright repeal, that may not 
be feasible this year or next year, but surely we can start 
down the path of remedying some of the problems that are 
described by our next panel of witnesses.
    Ms. Barnhart. I do have some estimates that were developed 
by our independent chief actuary's office. First of all, to 
eliminate the GPO and the WEP, as the Feinstein-Collins 
legislation provides, it would cost $22.5 billion over 5 years 
and $61.9 billion over 10 years. In the Mikulski-Collins 
legislation, which modifies the GPO, as has been described 
earlier, the cost is estimated at $10.1 billion over 10 years.
    So we are talking, if we look at it from a 10-year 
perspective, for either the Mikulski or Feinstein bills, about 
a range of $10 to $60 billion-plus in cost.
    Chairman Collins. Thank you. And not to press you, but will 
the administration continue to work with us to try to see if 
there is a way that we can start to remedy this?
    Ms. Barnhart. I wrote that down because I knew I would 
forget the second part of that question. I have my 35th high 
school reunion coming up.
    Certainly, we at the Social Security Administration would 
be very happy to work with you and the Committee and any other 
Members in terms of providing any analysis that we can on the 
effect that various provisions would have. I would say this, 
that due to the cost, and certainly if we look at the $10 to 
$60 billion-plus, and then looking at the dual entitlement--the 
cost of eliminating the dual entitlement should be somewhere 
around $500 billion, not that you suggested that, but if we get 
into those kinds of equity issues, I would say that I do think 
that one could make a real case for waiting until the entire 
Social Security program has been strengthened and protected to 
entertain these kinds of costly changes.
    As you know, and as we have discussed and alluded to in the 
hearing earlier, it is projected by our actuaries that the 
Social Security trust fund will move into a negative cash flow 
basis in 2017 and that the trust funds will be entirely 
exhausted by 2042, which, absent any action, would necessitate 
that only 73 percent of benefits would be able to be paid. So 
it would be my hope that as we undertake changes to benefits--
and clearly this would affect the benefit program into the 
future--that it could be done in that context.
    Chairman Collins. I want to thank you very much for your 
testimony today which has been very helpful to the Committee as 
we consider this important issue. Your testimony was very 
helpful in giving us a better understanding of how it works, 
and I salute you for your efforts on the education front to 
make sure that people understand the impact.
    I still feel very strongly that we do need to act, that we 
can't wait on this issue, because every day it creates a 
hardship for people who are struggling to live on their 
retirement income. Every day, it discourages another would-be 
teacher, firefighter, Federal employee, or police officer from 
going into public sector employment. So I hope we can come up 
with a creative approach and work together to see if we can 
remedy this problem, and I very much appreciate your being here 
today.
    Ms. Barnhart. Thank you, Madam Chairman, and in that spirit 
of cooperation that you have just expressed, let me say that we 
stand ready, as I say, to provide any information and analysis, 
and to answer any questions for the record you or your 
colleagues may have, and certainly any questions that arise as 
a result of the panel that is going to follow me.
    Chairman Collins. Thank you very much.
    Ms. Barnhart. Thank you.
    Chairman Collins. We now will call forward our next panel. 
I would like to extend a special welcome to Julia Worcester, of 
Columbia, Maine. Ms. Worcester worked for 20 years in Social 
Security-covered employment before deciding at the age of 49 to 
go back to school to pursue her dream of becoming a teacher.
    I think it is a wonderful story, Ms. Worcester, and I 
admire you so much for doing that.
    After teaching full-time for 15 years, Ms. Worcester 
retired and now her monthly income is substantially reduced 
because of the government pension offset and the windfall 
elimination provisions. As a result, she is still substitute-
teaching to make ends meet.
    Again, Ms. Worcester, we very much appreciate your 
willingness to share your story with the Committee today. I 
want to mention that you were brought to our attention by Sue 
Shaw, who has been a very strong advocate in the State of Maine 
on this issue, and she will be submitting some testimony which, 
without objection, we will enter into the record as well.
    The Committee is also delighted to welcome Charles Fallis, 
who will testify on behalf of the 400,000 members of the 
National Association of Retired Federal Employees. Since 1921, 
the association has focused on improving the retirement 
benefits of Federal retirees, employees, and their families. I 
know that elimination of both the GPO and the WEP provisions 
are top legislative priorities for the National Association of 
Retired Federal Employees, and the Committee thanks you for 
your work on this issue and for being here today.
    Finally, I would like to welcome to the Committee Kenneth 
Rocks, the National Vice President of the Fraternal Order of 
Police. Due to the physical demands of their jobs and the 
number of law enforcement officers who augment their income 
with second and third jobs, law enforcement officers are 
particularly affected by the provisions we are discussing 
today.
    In fact, Mr. Rocks, my most recent constituent to contact 
me on this issue stopped me at a convenience store in Bangor, 
Maine. He was a Bangor police lieutenant who told me that he 
had been working two jobs for years to try to ensure that he 
would have sufficient retirement income and had only just 
learned of what the impact of these provisions would be on his 
retirement as well. So we very much appreciate your being here 
today on behalf of your members.
    Ms. Worcester, because you are from Maine, we are going to 
start with you on this panel today.
    Ms. Worcester. Thank you, ma'am. It is nice to know 
influential people.
    Chairman Collins. Thank you.

        TESTIMONY OF JULIA WORCESTER,\1\ COLUMBIA, MAINE

    Ms. Worcester. Good morning, Senators. Thank you for the 
chance to tell you how the changes in the way Social Security 
retirement benefits are calculated for public service employees 
has affected me.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. Worcester appears in the Appendix 
on page 42.
---------------------------------------------------------------------------
    I am 73 years old and my husband of 54 years, Oswald, will 
be 88 in December. I am one of seven children, all born in 
Downeast Maine. I was not raised to expect something for 
nothing. I live a modest life, I work hard, and I do not spend 
time fretting about things I cannot change, but this law has 
had a tremendous effect on me.
    I was fortunate to be raised in a family that respected 
education. My father insisted on good grammar and corrected our 
speech when we strayed. My mother's family was college-educated 
and my mother went to what was then Machias Normal School in 
the 1920's and received a lifetime teaching certificate, which 
she updated toward the end of her career by taking courses by 
television. She taught school for many years and retired in the 
mid-1960's. She was able to collect both Social Security 
retirement, earned from work she did during summers and after 
she retired, and her State of Maine pension from her teaching. 
She was not bad off.
    I have worked 20 years outside of my teaching career. As a 
young woman, I worked in a herring cannery factory and in a 
string bean factory. While Oswald and I had two young children, 
a son and a daughter, I persuaded him that we should move to 
Connecticut, since the school system in our town at that time 
was very small. There was a two-teacher grade school and a two-
teacher high school.
    We lived in Branford, Connecticut, for 13 years, and Oswald 
worked in a stone quarry. At first, I waitressed full-time so 
that I could work nights when Oswald could be home with the 
children. When the children were teenagers, I found a day job 
in a factory, as I discovered that teenagers needed their 
mother paying close attention to where they were in the evening 
and their father was not very good at saying no.
    In 1968, when I was 37, we had another child. We decided to 
come home to Maine when she was 6 years old. The other children 
were out of school and on their own, and even though we had 
another young child, the school system had improved greatly. My 
parents were getting older and my husband's brothers and 
sisters were also reaching elder years, and it was time for us 
to come home.
    When we got back to Columbia, I worked part-time for a 
while. Oswald was approaching retirement age, as he is 15 years 
older than I, and I thought seriously about our future. I 
decided to become a teacher, like my mother. It was something I 
always wanted to do. So at the age of 49, with the help of Pell 
grants and federally-subsidized loans, I started at the 
University of Maine, in Machias. I went to school year-round 
and completed my degree in 3 years, completing the degree in 
December 1982. I did some long-term substitute teaching right 
away and was hired full-time in the fall of 1983, which turned 
out to be an ominous year for my retirement benefits, but I 
loved it.
    This is where the problem comes in: Four or 5 years after I 
started teaching, I went to a seminar put on by Horace Mann and 
learned of the new law that meant all those years of working in 
factories and waitressing were not going to count for much in 
my retirement years, and that I was not even going to be able 
to collect much on Oswald's work record if that should be the 
case. That was when I learned that the life I had carefully 
planned wasn't going to work out quite the way I thought it was 
going to. I was nearly 60 years old, much too late to start 
over with a new plan.
    With my working, we are all right. Last year, I subbed 125 
days out of the 175-day school year. The year before that, I 
substitute-taught 140 days out of the 175 days. It certainly 
makes a big difference in our income. We are not big spenders. 
Oswald is a bear about debts. We have long since paid off our 
mortgage and we don't charge things on credit cards.
    But I have to face facts. I will not be able to teach 
forever and Oswald is getting on in years. I should have what I 
rightfully earned. My family is a family that has accepted life 
as it has been handed. You do what you can with what you have. 
I am not bitter about the situation. I just believe I have 
earned this benefit through years of honest work and I should 
be able to receive it.
    I also have an addendum of my monthly income, if you would 
like me to continue with that.
    Chairman Collins. Certainly.
    Ms. Worcester. My monthly retirement is $814. I pay $418 a 
month for companion plan insurance for my husband and I out of 
my retirement, which is a necessity in this day and age. I 
receive from Social Security $107 a month, which is the 40-
percent area, and my husband receives $716 a month, and both of 
those Social Security benefits are calculated after the Part B 
Medicare is taken out.
    I thank you.
    Chairman Collins. Thank you very much for your testimony. 
You so embody the Maine values of independence, hard work, 
thrift, and integrity, and I really appreciate your being here 
today to help us put a human face on what is a serious problem 
not only for you, but for so many others. So I appreciate your 
speaking out and your willingness to be here.
    For all of those years that you worked so hard waitressing 
and in other jobs, to receive only $107 a month in Social 
Security after paying into the system for so long seems just so 
unfair to me.
    Ms. Worcester. Well, it is kind of like an insurance policy 
that the company is not paying off on.
    Chairman Collins. That is a good way to put it, and yet you 
paid the premiums--i.e. payroll taxes--year after year, as did 
your employer, too. So thank you for that testimony.
    Mr. Fallis, can you beat that? [Laughter.]

TESTIMONY OF CHARLES L. FALLIS,\1\ NATIONAL PRESIDENT, NATIONAL 
            ASSOCIATION OF RETIRED FEDERAL EMPLOYEES

    Mr. Fallis. I can't beat that.
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    \1\ The prepared statement of Mr. Fallis appears in the Appendix on 
page 46.
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    Madam Chairwoman, I am Charles Fallis, President of NARFE, 
the National Association of Retired Federal Employees. I am 
testifying today on behalf of 400,000 retirees, employees, 
spouses, and survivors who are NARFE members.
    I would like to commend you, Senator Collins, for paving 
the way and holding the first ever Senate hearing on GPO and 
WEP. These atrocious laws have for many years destroyed the 
quality of life of a significant number of our members. We 
can't afford to wait any longer for corrective action to repeal 
or reform these onerous offsets--corrective action, by the way, 
that has a lot of support in the 108th Congress in the House 
and the Senate.
    NARFE has worked for repeal of GPO and WEP from the very 
beginning, well over 20 years. Throughout the course of those 
years, the pernicious provisions of these two offsets have 
denied many thousands of our older members, particularly women, 
of the economic dignity that they thought they would have in 
retirement.
    So I appreciate your invitation to come here today. I 
humbly ask for this Committee's assistance in the repeal of GPO 
and WEP, and I reiterate NARFE's continuing support for changes 
that would restore earned benefits to women and other deserving 
retirees.
    The GPO law targets government retirees who were first 
eligible to retire after December 1982, preventing them from 
collecting Social Security benefits based on their spouse's 
work record while at the same time they are collecting 
government annuities based on their own work. This law requires 
that two-thirds of a non-exempt public sector retiree's annuity 
must be used to offset whatever Social Security benefits are 
payable to him or her as a spouse, widow, widower, or survivor.
    By all accounts, this two-thirds offset against Social 
Security income is an arbitrary figure and, as such, we believe 
it should be reexamined. Of all the affected GPO beneficiaries, 
about 80 percent are fully offset, which translates into no 
benefits at all. I believe it is important to recognize, also, 
that almost 70 percent of those affected are low-income women, 
many of whom exist either in or on the fringes of poverty.
    Turning to WEP, current law greatly reduces the earned 
Social Security benefit of a retired or disabled worker who 
also receives a public sector annuity based on his or her own 
earnings. It applies to anyone who becomes 62 or disabled after 
1985 and becomes eligible for a government annuity after 1985. 
This windfall reduction can reduce the worker's earned monthly 
Social Security income by up to $303.
    Madam Chairwoman and Members of this Committee, I have 
stated before that the harshness of GPO and WEP as they exist 
today causes both fears and tears among thousands of older 
retirees. They fear for their financial survival and their 
tears come from deep frustration that Congress, despite 
widespread congressional support to do so, has not acted to 
ameliorate their suffering.
    There are several bills pending before the Senate today 
that would offer relief to hundreds of thousands of former 
teachers, policemen, firefighters, cafeteria workers, postal 
workers, VA nurses, Social Security employees, and others who 
work long and hard for their benefits. There are 40 Senators of 
this 108th Congress, including you, Madam Chairwoman and 
several Members of this Committee, who have indicated their 
support for a change in GPO and WEP. They have cosponsored one 
or more of the pending bills introduced by Senator Feinstein 
and Senator Mikulski. We applaud you and we thank all of you 
for your continuing efforts to change or eliminate these Social 
Security offsets.
    I would like to share with you today a sad and compelling 
account of a situation concerning a NARFE member who contacted 
us early last week and described the details of her case. This 
NARFE member is 79 years old and is widowed. We have received 
documentation substantiating the facts in her case and, with 
that member's permission and upon your request, Madam 
Chairwoman, we would provide the documents to you.
    Chairman Collins. Without objection, those documents will 
be part of the record.\1\
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    \1\ The information referred to appears in the Appendix on page 59.
---------------------------------------------------------------------------
    Mr. Fallis. This unfortunate lady originally filed for 
divorced spousal benefits in 1989 while still working for the 
Veterans Administration. Her divorced spouse died in 1991, thus 
converting her claim to an application for surviving divorced 
spousal benefits. She became sick in 1993 and subsequently 
retired in early 1994 and began receiving her government 
annuity soon thereafter.
    She asserts that no one ever explained GPO or WEP to her, 
or the effect these offsets would have on her annuity and 
finally on her total income. Upon her retirement, and with no 
thought that retribution would follow, she began receiving both 
her government pension and Social Security survivor benefits.
    Then, in July 1997, this very unlucky lady received a 
letter from Social Security requesting repayment of $20,737 
because of an erroneous overpayment. It had been determined 
belatedly, they said, that she was not exempt from GPO. She 
began an immediate appeals process that has been denied at 
every stage, culminating in a very recent final denial from an 
administrative law judge in Chicago.
    Madam Chairwoman, it is clear that this elderly lady with a 
meager pension from the VA of only $752 a month has no 
financial means of repaying this tremendous amount of money, 
money that she had no idea that she was not entitled to. Hers 
is not the only case such as this. There have been many, but 
this is a recent one and it is one of the worst that we have 
seen. But there are thousands of others in this same situation.
    Senator Collins, over the past two decades we have received 
thousands of letters from NARFE members, from Maine and 
elsewhere, describing in detail the anguish and economic 
hardships they experience every day because of GPO and WEP. For 
hundreds of thousands of Federal, State, and local government 
retirees, repeal of both of these offsets would ease or 
eliminate the devastating financial burdens they endure because 
of the effects of these onerous laws.
    Social Security Administration actuaries have determined 
that repeal of GPO and WEP would increase the size of the OASDI 
actuarial deficit by an amount estimated at .11 percent of 
taxable payroll. Now, the amount is not negligible, of course, 
but returning this income to long-suffering and deserving 
retirees would help restore their financial independence, 
provide them with increased purchasing power, and return to 
them a measure of self-esteem and economic dignity that was 
taken from them over 20 years ago with the enactment of this 
pair of insidious laws.
    Senator Collins, your hearing advisory today says, ``The 
individuals affected by GPO and WEP are individuals who are 
eligible for Federal, State, or local pensions from work that 
was not covered by Social Security.'' Yes, these affected 
individuals' work was not covered by Social Security, but they 
and/or their spouses worked in other jobs outside of the 
government that were covered long enough to make them eligible 
for Social Security benefits. But they still are being denied 
unfairly the Social Security benefits to which they are 
entitled and they still are being punished for having worked 
another full-time or part-time job in a different venue.
    I want to thank and commend you, Madam Chairwoman and 
Members of this Committee, for recognizing the need for change 
in GPO and WEP, and for addressing that need in this hearing 
today. I ask that you convey the urgency of this need to your 
colleagues on the Senate Finance Committee. Please ask them to 
recognize the significance of these issues, as well, so that we 
can get a bill out of the Senate, passed in the House, and on 
to the President's desk for his signature, a bill that would at 
long last allow Federal, State, and local government retirees 
in this country some relief from these terrible offsets.
    Finally, on behalf of the 400,000 members of NARFE, I 
commit to you today that we stand ready to work with you and 
the Members of the Senate for the expeditious resolution of 
these issues. I thank you.
    Chairman Collins. Thank you very much for your excellent 
testimony. Mr. Rocks, we are pleased to welcome you here today 
as well.

    TESTIMONY OF KENNETH ROCKS,\1\ NATIONAL VICE PRESIDENT, 
                   FRATERNAL ORDER OF POLICE

    Mr. Rocks. Good morning, Madam Chairman. My name is Kenneth 
Rocks and I am a Philadelphia police officer and the Vice 
President of the National Fraternal Order of Police, the 
largest law enforcement labor organization in the United 
States, representing more than 310,000 rank-and-file officers 
in every region of the country.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Rocks appears in the Appendix on 
page 52.
---------------------------------------------------------------------------
    I am here this morning at the request of Chuck Canterbury, 
National President of the Fraternal Order of Police, to share 
with you the views of the members of the Fraternal Order of 
Police on the windfall elimination provision and the government 
pension offset provisions in current Social Security law.
    The Fraternal Order of Police has designated the repeal of 
the windfall elimination provision and the government pension 
offset as one of its top legislative priorities, and we 
strongly advocate the passage of S. 349, the Social Security 
Fairness Act. The Social Security Fairness Act, introduced by 
Senator Dianne Feinstein, would repeal both the windfall 
elimination provision and government pension offset. This bill 
already has 23 cosponsors, drawing strong support from both 
sides of the aisle.
    It is our hope that Congress will take a serious look at 
the manifest unfairness of the windfall elimination provision 
and the government pension offset, and act to correct them by 
passing this bill. Ultimately, this legislation is about 
fairness to the State and local employees who paid for and 
ought to receive their Social Security benefits.
    Let me begin by explaining the impact of the windfall 
elimination provision on retired police officers. Simply put, 
law enforcement officers who serve communities which are not 
included in the Social Security system may lose up to 60 
percent of the Social Security benefits to which they are 
entitled by virtue of secondary or post-retirement employment 
which required them to pay into the Social Security system. 
This 60 percent is a lot of money, especially when you consider 
the officer and his family were likely counting on that benefit 
when they planned retirement.
    The FOP contends that this provision has a disparate impact 
on law enforcement officers for several reasons. First of all, 
law enforcement officers retire earlier than many other 
professions. Owing to the physical demands of the job, a law 
enforcement officer is likely to retire between the ages of 45 
and 60.
    Second, after 20 or 25 years on the job, many law 
enforcement officers are likely to begin second careers and 
hold jobs that do pay into the Social Security system. Even 
more officers are likely to moonlight and to hold second or 
third jobs throughout their law enforcement careers in order to 
make ends meet.
    This creates an unjust situation that too many of our 
members find themselves in. They are entitled to a State and 
local retirement benefit because they worked 20 or more years 
keeping their streets and neighborhoods safe, and also worked a 
job or jobs in which they paid into Social Security, entitling 
them to a benefit as well. However, because of the windfall 
elimination provision, if their second career resulted in less 
than 20 years of substantial earnings, upon reaching the age 
they are eligible to collect Social Security they will discover 
that they lose 60 percent of the benefit for which they were 
taxed.
    Actuarily speaking, I doubt many officers will live long 
enough to break even--that is, to collect the money they paid 
into the system--let alone receive any windfall. These men and 
women earned their State or local retirement benefit as public 
employees and they paid Social Security taxes while employed in 
the private sector. How is this a windfall?
    I think it is clear that Congress did not intend to reduce 
the benefits of hard-working Americans who choose to serve 
their States and communities as public employees and then went 
on to have second careers or worked second jobs to make ends 
meet. When the windfall elimination provision was enacted in 
1983, it was part of a large reform package designed to shore 
up the financing of the Social Security system.
    The ostensible purpose was to remove a windfall for persons 
who spent time in jobs not covered by Social Security, like 
public employees, and also worked other jobs where they paid 
Social Security taxes long enough to qualify for retirement 
benefits. However, we can now clearly see that the windfall 
elimination provision was a benefit cut designated to squeeze a 
few more dollars out of a system facing financial crisis. The 
fallout has had a profoundly negative impact on low-paid public 
employees outside the Social Security system, like law 
enforcement officers.
    This is a matter of fairness. The arbitrary formula in 
current law, when applied, does not eliminate windfalls because 
of its regressive nature. The reduction is only applied to the 
first bracket of the benefit formula and causes a relatively 
larger reduction in benefits to low-paid workers. It also over-
penalizes low-paid workers with short careers or, like many law 
enforcement officers, those whose careers are split inside and 
outside the Social Security system. Simply put, this provision 
has not eliminated a windfall for any individuals who did not 
earn it. It has resulted in a windfall for the Federal 
Government at the expense of public employees.
    Let me now discuss the aspects of the bill which would 
repeal the government pension offset. Like the windfall 
elimination provision, the government pension offset was 
adopted in 1983 to shore up the finances of the Social Security 
trust fund. This provision reduces the surviving spouse's 
benefit from Social Security by two-thirds of the monthly 
amount received by the government pension.
    For example, the spouse of a retired law enforcement 
officer who at the time of his or her death was collecting a 
government pension of $1,200 would be eligible to collect a 
surviving spouse benefit of $600 from Social Security. Two-
thirds of $1,200 is $800, which is greater than the spouse's 
benefit of $600. Thus, under the law, the spouse is unable to 
collect a single dime of it. If the spouse's benefit were $900, 
only $100 can be collected because $800 would be offset by the 
officer's government pension.
    In 9 out of 10 cases, this completely eliminates the 
spousal benefit, even though the covered spouse paid Social 
Security taxes for many years thereby earning the right to 
these benefits. It is estimated that approximately 349,000 
surviving spouses of State and local employees have been 
unfairly affected by the government pension offset.
    The present system creates a tremendous inequity in the 
distribution of Social Security benefits. The standard for this 
narrow class of individuals, retired public employees who are 
surviving spouses of retirees covered by Social Security, is 
inconsistent with the overall provisions of the Social Security 
Act and does not apply to persons receiving private pension 
benefits. This imbalance exists even though Congress, through 
ERISA standards and tax code provisions, has more direct 
influence over private employers than public employers. 
Clearly, this is an issue that Congress must address.
    Previous Congresses sought to save money for the Social 
Security system by cutting benefits earned by State and local 
employees. The windfall elimination provision and government 
offset pension provision do not eliminate a windfall for 
workers. Rather, they have provided a windfall for the Federal 
Government at the expense of public employees. This is not 
right and it is not fair. This Congress has a chance to set 
things right by passing S. 349.
    Madam Chairman, I want to thank you and the Members of this 
distinguished Committee for the chance to appear before you 
today. It is my hope that this hearing will bring greater 
attention to the issue and increase the chances that S. 349, 
the Social Security Fairness Act, will be considered in this 
Congress.
    Thank you for inviting me to testify before you this 
morning and I would be pleased to answer any questions that you 
may have.
    Chairman Collins. Thank you very much, Mr. Rocks. You have 
very ably represented your members and we appreciate your being 
here.
    I am going to start with a question for Mr. Fallis and Mr. 
Rocks and then go back to Ms. Worcester.
    You heard Ms. Worcester testify that she was not aware of 
the windfall elimination provisions or the government pension 
offset until she had been teaching for a number of years. At 
that point I think she testified she was about age 60 and it 
was a little hard to come up with a new plan, in her words.
    Do you think that her situation is unusual, or have you 
found with NARFE members that there is also a lack of 
information and that a lot of your members, retired Federal 
employees, are also shocked to learn of the impact?
    Mr. Fallis. Yes, too many of them are unaware. I think we 
probably have a better communications system than in other 
areas. I think school teachers have been especially hard hit. I 
have two sisters-in-law in Florida who, until they retired and 
were hit with GPO and WEP, had never heard of these two 
terrible laws. So, yes, there is a problem here.
    If I might say so, I think GPO and WEP were enacted in a 
stealthy kind of way. The GPO first passed in 1977 and was not 
implemented until January 1983, thus sort of low-keying the 
whole thing in my mind. The arbitrariness of these two bills is 
really striking. In my own situation, I was eligible first to 
retire in 1982, in September, and if you come right on up to 
WEP, if you were eligible to retire on December 31, 1985, you 
were OK. But if you were eligible to retire on January 1, 1986, 
1 day later, the sky fell. That is arbitrary. You know, what 
happened to equal protection of the law here, while one is 
victimized and the other escapes harm? This sort of thing is 
terribly unfair.
    Chairman Collins. I think you are right that there was not 
a lot of discussion about what the impact would be, as we have 
gone back and studied this issue. I think these changes caught 
a lot of public employees by surprise, particularly because it 
was such a dramatic change without a lot of discussion and 
debate.
    Mr. Rocks, are some of your members surprised to learn 
about the impact of these provisions when they go to retire and 
file for Social Security benefits?
    Mr. Rocks. Yes. Much of it, Senator, is usually the lack of 
information at the local Social Security offices to be able to 
articulate to our members the adverse impact of the government 
pension offset and the windfall elimination provision. Many of 
the counselors in Social Security clearly don't understand the 
application of the law, because our members will go in there 
and represent that they worked for 20 years and when they 
retired from their police departments, they continued to work 
in other secondary jobs, performing security work in their 
communities.
    So they felt that because they worked a substantial amount 
of time, but unfortunately less than 30 years of substantial 
earnings, and therefore they were adversely impacted by the 
windfall elimination provision. It clearly is a shock when you 
have planned for something because in many cases, as a previous 
speaker said, you will work with another officer who is 
eligible to retire on December 31, 1985, and this officer next 
to him was eligible to retire on January 3, 1986. One was 
offset and affected by the windfall elimination and the other 
wasn't, and therein is the confusion.
    If you got it, then I must be able to get it, and therefore 
the confusion actually came into the local Social Security 
offices. And it is still present, with the information being 
requested not really being articulated in a manner which our 
members would understand it.
    Chairman Collins. Ms. Worcester, you decided to become a 
teacher relatively late in life, at age 49. I suspect, though I 
would be interested in your views on this, that you probably 
would have gone into teaching regardless because you enjoyed it 
so much. But do you think that had you known of the impact that 
it might have made a difference in your career choices?
    Ms. Worcester. Not in my case, I don't think, the 
circumstances being what they were and it being something I 
always wanted to do and something I could do at that age. It 
was definitely a boost financially to be able to go into the 
teaching profession where I was, and because of several other 
considerations concerning my family, it probably would have 
still happened.
    Chairman Collins. Do you think that these provisions 
discourage other people from changing professions later in life 
and deciding to become teachers at a time when we really need 
teachers?
    Ms. Worcester. I am sure it will. As a matter of fact, a 
young lady who graduated in my graduating class and ended up 
teaching in the same school I taught in worked 14 years under 
the teaching profession and then chose to leave and withdraw 
her State retirement, invest it privately, and seek other 
employment, mainly because of this law. She felt, as a young 
person, she had to make a decision whether to continue or to 
change professions and she chose to change professions.
    Chairman Collins. I hear that, as well, and I think that is 
one of the problems. In addition to creating hardship and 
inequities for the individuals who are affected, the provisions 
also discourage people from going into careers like teaching, 
like police work, like firefighters, like Federal employees, 
where we really need talented people to be willing to enter 
these careers. So I think that disincentive is an issue as 
well.
    Ms. Worcester. There is one other thing that I might add 
which has been brought up by these other gentlemen. My lifetime 
girlfriend retired last year, and because of all I had been 
through and all of the publicity, because of Sue Shaw's 
enthusiasm, she understood this a little better than anybody 
that might not have had that advantage.
    It required four telephone calls and dogged pursuit to 
convince the Social Security Administration that they were 
overpaying her. When her Social Security checks started coming, 
she put them in a separate account because she knew she was 
being grossly overpaid, and it took her almost 9 months to sort 
this out and to convince somebody to do the work that needed to 
be done to settle the issue and come up with the right sums.
    Because she had put her Social Security checks in a 
separate account, she ended up, of course, just writing a check 
and sending it back. But had she not known that this existed, 
she is one of those people that would have been eventually in 
this sort of a repayment situation.
    Chairman Collins. I am so glad that you mentioned that 
because I know the case workers in my State offices deal with 
overpayments all the time, and very few people would have the 
knowledge that your friend did to actually argue the case with 
Social Security and withhold the money. And then they get into 
terrible problems, just like the case that Mr. Fallis described 
to us.
    I am going to pass on all of your comments to the Social 
Security Administration about people still not being aware and 
the local workers not necessarily being fully aware of how 
these complex laws work. I think that is an excellent point.
    Mr. Fallis, I would like to ask you to respond to the 
argument that the commissioner made that if we correct this 
problem, we create other inequities. I disagree with her about 
that, but do you or Mr. Rocks have any comments about the 
argument regarding dual-eligibles and that if we correct the 
pension offset and the windfall elimination provisions that we 
will create an inequity for the dual-eligibles?
    Mr. Fallis. Well, I disagree with some of the things she 
said, as well. I think there were unintended consequences of 
both these laws when they were passed and, as I say, the 
chickens are coming home to roost now and have been for some 
time.
    I think the truly outrageous and bizarre twist in all of 
this is, with WEP, those people retire and find out that they 
have been penalized to the point that they have to go back to 
work and are working in a Social Security-covered job and are 
paying premiums into Social Security with no hope of ever 
getting any kind of return because WEP has eliminated it.
    Of course, the Social Security payments were designed to 
favor low-income people. But you take a person who takes a 
fairly low-income job with the Federal Government or any public 
sector job and it is totally objective; they get no 
consideration because of the low wage, and so forth, in that 
retirement. And then this thing in Social Security, which is 
designed to take care of them, comes back and hits them and 
takes it away, too.
    So this individual is penalized, even though we have in our 
system a provision to take care of those low-income people. 
They get no benefits from their government job or their public 
sector job and because of WEP, they get none from Social 
Security either. So it is a double whammy here and it is so 
atrocious that I think these other considerations pale in 
comparison.
    Chairman Collins. I want to clarify that I understand that 
the commissioner is correct in saying why the Act was passed in 
the first place, but I think the impact has not been what was 
anticipated.
    Mr. Rocks, do you have any comments on that?
    Mr. Rocks. I think from an actuarial standpoint, the 
commissioner's argument was very sound in that with the members 
I represent, they may retire early due to the rigors of the 
job, the rotation of shift work, working 24 hours, 7 days a 
week, which is the case in some of our departments, and the 
stressful nature of the law enforcement profession.
    But our members do not live based on the actuarial 
standards set down by the Social Security Administration. So in 
many cases, we will not, like I said in my testimony, reap the 
benefits of even the monies that we put in, to recoup them. So 
I don't think from looking at the actual dollar amounts from 
the actuarial standards that argument can carve out certain 
groups. You don't have any basis for an argument. It is easy to 
throw around billion-dollar figures, but when you get into 
reality the actuarial tables of the life expectancy of law 
enforcement officers, you will find it significantly reduces 
and would reduce that figure.
    Chairman Collins. Thank you. I want to thank all of you for 
testifying. This is the first Senate hearing to review the 
impact of these two provisions. It is my intention to share our 
hearing record with every single member of the Finance 
Committee, in the hope of giving them the information that they 
need.
    They deal with so many different issues, but I feel this is 
a very important issue. It is important to school teachers, it 
is important to public employees, it is important to our public 
safety officers, and I am going to continue my efforts to get 
this law changed. To me, this is a matter of simple fairness. 
If you are paying into the Social Security system, if your 
spouse had paid into the Social Security system, if you have 
earned those benefits, then as Ms. Worcester said, it is like 
an insurance policy. And if you are paying in the premiums, 
when the time comes to collect, you should be able to do so 
when you have met the other requirements and otherwise would be 
eligible.
    So I thank you for giving us a better understanding today. 
I want to thank all of our witnesses and I want to assure you 
of my personal commitment to keep working to rectify this 
inequity. I also want to thank my staff, which worked very hard 
on this hearing and all others who have contributed to it.
    The hearing record will remain open for the submission of 
additional materials and statements for 15 days, and a special 
thank you to my constituent, Ms. Worcester, who came from Maine 
today. Thank you.
    [Applause.]
    You do deserve that applause. We don't usually allow that, 
but this is well deserved. Thank you.
    This hearing is now adjourned.
    [Whereupon, at 11:22 a.m., the Committee was adjourned.]


                            A P P E N D I X

                              ----------                              


                PREPARED STATEMENT OF SENATOR LAUTENBERG
    Madam Chairman, I believe the Government Pension Offset (GPO) and 
the Windfall Elimination Provision (WEP) are good examples of the law 
of intended consequences.
    While these provisions were designed to shore up the financing of 
Social Security they have instead hurt close to one million public 
service employees.
    I have always supported strengthening Social Security and ensuring 
the programs fiscal solvency. However, I support the repeal of both the 
GPO and the WEP, and I have cosponsored Senator Feinstein's bill that 
will do just that.
    We have an Administration that has its priorities way off the mark. 
The President is giving away huge tax cuts to the wealthy and 
neglecting our teachers, our police, our firefighters, and our Federal 
employees--people who we rely upon more and more in the post-September 
11 world.
    These are not individuals who are counting on stock options or 
extremely generous corporate retirement plans. They are public 
servants--individuals who dedicated their careers to making our 
communities better.
    The current policies penalize those employees least able to afford 
it. I believe we need to fix this inequity.
    I look forward to hearing the views of all our witnesses and making 
progress to identify ways to improve Social Security's fairness for all 
workers.
    Thanks you, Madam Chairman.

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