The Windfall Elimination Provision (WEP)
The WEP hits those teachers who have work experience both in the CalSTRS system and in Social Security-covered employment. For someone who has 20 years or less in Social Security jobs, the WEP reduces the Social Security pension by 50 percent.
The typical Social Security benefit is figured by a three-step formula.The first step provides 90 percent of the first $656 of average monthly earnings; the second step provides 32 percent of the next $3,046, and the final step provides 15 percent of the remaining earnings.
For a retired teacher, the benefit is figured on a modified formula. Instead of 90 percent of the first $656, the benefit is calculated on 40 percent of those earnings – a reduction of 50 percent!
The Rationale: Social Security is intended to provide a greater level of income replacement for poorer members of society. The formula could not differentiate between those who worked in low-paid jobs their entire career and those who appeared to have been low paid because they worked for many years in jobs not covered by Social Security. The WEP was developed to eliminate this discrepancy.
The Reality: Teaching is not a highly paid profession and imposition of the WEP formula results in significant losses of earned retirement income. Most agree that the amount of the reduction was an arbitrary figure, and since it applies only to the first increment of earnings it is a highly regressive formula. It is essentially the only means-testing in Social Security, but without taking into account the actual income of the recipient.
The Government Pension Offset (GPO)
The GPO deprives retired teachers of their spousal and survivor benefits under Social Security. Typically the spouse of a Social Security recipient receives half of the amount of their partner’s benefit if they do not qualify for Social Security on their own.
Under the GPO, that amount is reduced by two-thirds of the amount of the pension provided by California State Teachers Retirement System.Incredibly, the effect of the offset is to penalize only the public worker, such as a teacher. If the retired teachers have a survivor’s benefit on their pension, the spouse receives that full amount plus any Social Security to which either party is initially eligible.
The Rationale: The GPO was imposed ostensibly to control highly paid federal civil servants from being able to double-dip into Social Security and other pensions.
The Reality: The GPO hits hardest those who have provided lifetime careers of public service, such as teachers, often for comparatively lower salaries and pensions.
