Current and future federal retirees will lose tens of millions of dollars over the next decade unless Congress votes to modify or repeal two little-known but hard-hitting formulas used to reduce their Social Security benefits.
The offending if you’re a fed formulas are called “Windfall” and “Offset.”
But the problem is the enormous cost of either modification or repeal. If either happened, Social Security would have to pay benefits now reduced or eliminated by the two formulas.
“We have a majority of the minority party [Democrats] on our side, but a minority of the majority party [Republicans] on our side,” says a lobbyist for active and retired feds.
“That’s why its been impossible to get any of the bills past the hearing stage within the powerful House Ways and Means Committee.”
Windfall reduces any Social Security benefit earned by retired public employees who didn’t work under, and pay into, Social Security for at least 30 years. Most of the feds who have been, or will be, hit by Windfall worked in relatively low-paying jobs either before, while or after they were in government.
Without Windfall those retirees would on paper appear to be short-service and/or low-income workers that Social Security was primarily designed to help. To qualify for some kind of Social Security benefit, workers generally must have 10 years (40 quarters of service time paying into Social Security).
But once their civil service benefits are factored in, the Windfall formula can reduce their Social Security benefit as much as $270 per month.
The Offset formula hits retirees who never worked under Social Security a different way. It reduces the Social Security spousal or survivor benefit those feds had expected based on a spouse’s Social Security coverage.
The Offset formula can and usually does eliminate any Social Security spousal/survivor benefit of anyone who gets even a modest government annuity, or any pension for work not covered by Social Security.
For years, groups led by the Alexandria-based National Association of Retired Federal Employees and federal and postal unions have fought for modification of the Windfall and Offset formulas. Modification would be a first but giant step toward outright repeal of the two laws.
Under the Windfall-modification proposal, the first $2,000 of monthly combined civil service-Social Security benefits would be exempt from any reduction. Combined benefits between $2,000 and $3,000 would be subject to a sliding scale Windfall formula and those over $3,000 per month would be subject to the full Windfall benefit formula.
Last year, Rep. Barney Frank, Massachusetts Democrat, got 233 co-sponsors out of 435 House members for his Windfall-modification bill.
Offset is tougher because it hits many low-income widows. Last year, Sen. Barbara A. Mikulski, Maryland Democrat, introduced a bill that would exempt the first $1,200 of combined monthly benefits from the formula.
Rep. William J. Jefferson, Louisiana Democrat, proposed a similar bill but may raise the “hold harmless” level to $2,000 per month in legislation he is said to be considering.
Proposals to modify or (less likely) repeal Windfall and Offset got a shot in the arm last year when powerful teachers unions led by those in California got on the bandwagon.
The National Association of Retired Federal Employees is planning a massive legislative conference here March 15-18. One day of the conference will be devoted to sending thousands of members to see their representatives in Congress.
“Congress is swamped with letters and e-mails on all kinds of things,” a NARFE official said. “We’re convinced that the way to get attention is for voters to have a one-on-one with their state’s senators and representatives.”
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