Important points for CSRS employees

We reported on it Civil Service Retirement Scheme (CSRS) Social Security Reform for several years here at Serving Those Who Serve. And for good reason, as the latest proposed law – the so-called Social Security Fairness Act – could affect benefits 2.8 million American recipients.

If passed, the bill would repeal two provisions that currently limit Social Security benefits for certain employees who work for federal, state and local governments. According to a 2020 study the Urban Institute estimates that repealing these two provisions alone could provide affected beneficiaries an average of $7,300 annually in Social Security benefits.

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

The two provisions that the Social Security Fairness Act proposes to repeal are the Provision to eliminate windfall (WEP) and the State pension equalization (GPO). When WEP was introduced in 1983, it was intended to improve the equity of Social Security by preventing workers who receive pensions (e.g. CSRS employees) from also receiving full Social Security benefits if they do not contribute to the Social Security program. The aim was to promote fairness for pensioners by preventing “double dipping”.

The problem with WEP is that it cuts Social Security benefits for those workers who have worked in both the public and private sectors throughout their careers. Despite having paid Social Security contributions as part of their work in the private sector, approximately 2 million retirees are seeing their Social Security benefits reduced because of the way WEP is calculated.

Similarly, the GPO provision will also reduce benefits, but this time the impact will be felt by the spouses and widows or widowers of those receiving pensions from government jobs not covered by Social Security. The GPO calculation – affecting almost 800,000 pensioners – social security benefits will be cut by two-thirds of state pensions.

Who would be affected by the reforms?

Police officers, firefighters, postal workers, educators and other civil servants with jobs that do not pay Social Security are among the groups that could benefit from a significant increase in benefits from the Social Security Fairness Act. It is common for these workers to pursue a second career or part-time job where they contribute to the social security system. If the reforms are adopted, their performance could be significantly increased.

Likewise, there are many Feds that are part of the CSRS, have earned Social Security credits through other employment, and could also see an increase in benefits. The Urban Institute believes that eliminating WEP and GPO would be possible Increase in social security benefits between $3,600 and $8,900 per year for affected retirees.