Restoring Equity and Fairness to the Social Security Windfall Elimination Provision (WEP) and Government Pension Offset (GPO)

The original public policy intent of the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO) is to ensure fair treatment between workers with earnings covered by Social Security and workers with earnings that are not covered by Social Security. It is important to maintain this fair treatment between covered and non-covered workers. Hence, a repeal of WEP and GPO would violate the principles of fairness and equity that these provisions were intended to protect.

Unfortunately, given data limitations at the time the current WEP and GPO provisions were established in law, the WEP and GPO create an overly complex structure rife with what economists call perverse incentives. This can sometimes result in higher replacement rates for some people with high lifetime combined earnings than those with low lifetime earnings. Further, the complexity and lack of transparency in the current WEP and GPO provisions can hinder people’s ability to accurately plan for retirement and potentially cause undue hardship for retirees.

Much good could come from a relatively straightforward change that would make the Social Security benefit formula a proportional, or prorated, benefit formula based on the replacement rate derived from the current method of determining the primary insurance amount (PIA) but applying it only to the years of covered earnings. This change would allow for the use of one benefit formula for all Social Security beneficiaries, would be simple to understand, and would be fairer than the current system, while maintaining the original intent of fairness and equity of the WEP and GPO provisions.

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