Government Pension Offset

6/27/2000

Committee on Ways and Means Social Security Subcommittee

Chairman Shaw, Ranking Member Matsui, Members of the Subcommittee:

My name is Colleen Kelley and I am the National President of the National Treasury Employees Union (NTEU). Thank you very much for holding this important hearing today on H.R.l2l7, legislation to modify the Government Pension Offset (GPO).

As you may know, NTEU represents over l55,000 federal employees across the federal government. Many of our members have already felt the effects of the Government Pension Offset. Others are not yet aware of the potential impact it may have on their retirement security. Sadly, federal retirees often first become aware of the existence of the GPO at the time they apply for Social Security benefits.

The GPO reduces or even eliminates the Social Security benefit many federal retirees are otherwise eligible for on their spouse's earnings record. Under current law, Social Security benefits that would normally be due an individual as the spouse or widow of a Social Security recipient, are reduced by two-thirds of the amount of the government pension.

More often than not, this offset disproportionately affects those who can least afford to forgo this retirement income. The effects are particularly devastating to female federal employees who are often eligible for only tiny federal pensions resulting from interruptions in their careers while raising their families or working in lower paid or entry level positions for most of their careers. Had these same individuals worked in the private sector and collected private pensions, stock options or 40lk accounts, they would remain fully eligible to collect their spousal Social Security benefits.

The GPO unfairly penalizes individuals who spend their careers in service to their country. It doesn't have to be this way. In fact, according to the Social Security Administration, enactment of H.R.l2l7 and subsequent relaxation of the GPO, would "increase the long-range actuarial deficit by an amount that is estimated to be negligible." The increase in the actuarial deficit is estimated to be less than one-half of one-hundredth of one percent (0.005%).

NTEU has presented testimony to this Committee on the need to modify the GPO several times over the past few years, most recently in May of l998. At that time, the subject of the hearing was H.R.2273, legislation Congressman William Jefferson introduced similar to the bill under consideration today. In the l05th Congress, that legislation gathered l83 cosponsors.

Two hundred and forty two (242) members of the House of Representatives have cosponsored the bill under consideration today, H.R.l2l7. A clear majority has spoken and following today's hearing, I urge the Chairman to push for full Committee consideration of this legislation as soon as possible.

H.R.l2l7 is a modest proposal that would not entirely eliminate the Government Pension Offset. It seeks to apply the GPO only to combined annuity and Social Security spousal benefits that exceed $l,200 per month -$l4,400 each year. For an elderly widow, that $l,200 each month will make a considerable difference. However, I am sure the Chairman would agree - even with this slight relaxation in the GPO, $l4,400 in annual income is hardly a princely sum.

To put these calculations in perspective, if an elderly widow is eligible for a monthly pension of $600 as a result of her federal government service, two-thirds of that amount, or $400, must be used to offset the Social Security spouse or widow's benefits she may also be eligible for. If, for example, she is eligible for a monthly spousal Social Security benefit of $500 based on her husband's earnings record, the GPO results in her receiving only $l00 in Social Security each month, or a total monthly income of $700 instead of the $l,l00 she would otherwise be eligible to receive. This is hardly an isolated example.

I urge this Subcommittee to look carefully at the impact the GPO has on real people. While our files are overflowing with correspondence from individuals severely harmed by the GPO, I want to bring the hardships visited upon one NTEU member in particular to the Subcommittee's attention. Her case presents a particularly cruel application of the GPO.

This individual has been a seasonal employee at the Internal Revenue Service Cincinnati, Ohio Service Center for more than 36 years. As a seasonal employee, she works for the IRS only during tax season and can, therefore, expect a small federal pension at the end of her career. Although she is fully eligible to retire, she cannot afford to do so. Her husband, six years her senior, is retired and collecting Social Security benefits. As long as she continues to work, she is eligible to collect her spousal Social Security benefit! Yet, when she retires, she will lose that benefit.

She can expect a federal pension at retirement of between $700 and $800 each month based on 36 years of federal service. Her spousal Social Security benefit right now is approximately $550 each month. When and if she retires, that Social Security benefit will be reduced by 2/3 of her federal pension, or approximately $530 of an $800 pension. She will be left with a spousal Social Security benefit of about $20 each month. She is not entitled to Social Security benefits in her own right.

Surely, the GPO was never intended to thrust individuals such as this one into poverty, however, that is the unintended effect of the law. Blindly applying a law such as the Government Pension Offset without regard to the economic hardship it causes is difficult to justify.

Thank you again Mr. Chairman for holding this important hearing today. I hope that my testimony helps to shed some light on the importance of passing H.R.l2l7 - a modest amendment to the Government Pension Offset. I look forward to working with you toward this end.