Social Security: The Public Servant Retirement Protection Act (H.R. 4391/S. 2455)

Publication Date: July 2004

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Labor

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Abstract:

A worker is "covered" by Social Security if he or she pays into Social Security through the Old-Age, Survivors, and Disability Insurance (OASDI) payroll tax. Currently 96% of all workers are covered by Social Security. The majority of noncovered positions are held by federal, state, and local government employees.

The current-law Windfall Elimination Provision (WEP) reduces the Social Security retirement or disability benefits of workers who also receive a pension from employment not covered by Social Security. The goal of the WEP was to remove an unintended advantage that the regular Social Security benefit formula provided to employees who divided their careers between covered and non-covered positions. As of December 2003, approximately 758,000 beneficiaries (approximately 1.6 % of the entire beneficiary population at that time) had their benefits reduced as a result of the current-law WEP.

On May 19, 2004, Representative Kevin Brady introduced H.R. 4391, the Public Servant Retirement Protection Act (PSRPA), which would alter the current-law WEP formula for those who first enter non-Social Security-covered employment one year after the bill's enactment. The PSRPA would maintain the current-law WEP for workers who have worked in non-covered employment prior to this date except in cases where the PSRPA WEP provides them with a higher benefit. On May 20, 2004, Senator Kay Bailey Hutchison introduced the sister bill, S. 2455. Both bills would replace the current-law WEP formula with a new WEP formula that provides a benefit in rough proportion to the percentage of earnings worked in Social Securitycovered employment.

When compared to current-law, the effect of the PSRPA WEP on a worker's benefit levels varies both by earnings level and the number of years of Social Security covered-earnings. The current-law WEP generally provides a benefit that increases with additional years of Social Security coverage. By contrast, the key determinant of the new proportional benefit amount is the percentage of the highest 35 years of covered and non-covered earnings that can be attributed to covered work - the higher the value of these covered earnings compared to the highest 35 years of covered and non-covered earnings, the larger the benefit under the PSRPA. Thus, the PSRPA WEP provides a benefit that increases with a rise in the proportion of Social Security covered earnings relative to overall earnings, regardless of the number of years worked in Social Security covered employment.

This report will be updated as legislative activity warrants.