Senate may soon vote on a bill to change certain Social Security rules. Here's what to know
In the final days of this Congressional session, the Senate could vote to nix rules affecting certain pensioners that have been in place for decades
During the Senate's final days of business in this Congressional session, it is expected to vote on a bill that would change certain Social Security rules.
The bill — the Social Security Fairness Act — would repeal provisions that reduce Social Security benefits for some individuals who also receive pension income from jobs in the public sector.
On Nov. 12, the House of Representatives passed the bill with the support of members of both sides of the aisle.
Now, it is up to the Senate to pass the bill amid a packed schedule that also includes a deadline to avoid a federal government shutdown.
What Social Security rules would be repealed?
The Social Security Fairness Act would eliminate certain rules affecting some public pensioners — the Windfall Elimination Provision, or WEP, and the Government Pension Offset, or GPO.
The WEP reduces Social Security benefit payments for individuals who also receive income from non-covered pensions — payments from employers who did not withhold Social Security taxes from their salaries.
The GPO adjusts Social Security spousal or widow(er) benefits for people who receive income from non-covered pensions.
Both rules have been in effect for decades.
The WEP was enacted in 1983 to make it so workers with non-covered pensions were not reimbursed as though they were long-time low wage earners. Social Security has a progressive benefit formula, which means low earners receive a higher income replacement rate.
The Government Pension Offset was established in 1977 and reduces Social Security benefits for spouses and surviving spouses who receive a pension based on their own government work that wasn't subject to Social Security payroll taxes and Social Security spousal benefits based on their spouse's work record.
Who is — and isn't — affected by the rules?
The WEP affected 2.01 million individuals — or 3.1% of all Social Security beneficiaries — as of 2022, according to the Social Security Administration.
The GPO applied to almost 735,000 beneficiaries as of 2022, according to the Social Security Administration. That rule affects about 1% of all beneficiaries, according to previous estimates from the Congressional Research Service.
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To be sure, the WEP and GPO do not apply to everyone.
Specifically, the WEP doesn't affect beneficiaries who have 30 or more years of substantial earnings under Social Security. The rule also doesn't apply to individuals who fall under other specific categories, according to the Social Security Administration: federal workers who were first hired after Dec. 31, 1983; employees of non-profit organizations that were exempt from Social Security coverage as of Dec. 31, 1983; individuals who only receive pension income for railroad employment; and individuals whose only work that didn't include Social Security taxes was before 1957.
The GPO generally doesn't affect spouses or surviving spouses who receive government pensions not based on their earnings or who are federal, state or local government employees whose pension is from employment where they paid Social Security taxes.
The Social Security Administration provides a tool on its website to help estimate how a pension may affect Social Security benefits.
What are the chances the bill will pass?
Last week, Senate Majority Leader Chuck Schumer, D-New York, said he would put the Social Security Fairness Act up for a vote.
Schumer has since filed a notice that he intends to call a cloture vote on the motion to proceed this week. If the cloture vote to proceed has the necessary 60 votes, the rest of the process may go "fairly quickly," said Maria Freese, senior legislative representative at the National Committee to Preserve Social Security and Medicare.
"The big vote is usually the motion to proceed," Freese said. "If they can get 60 for that, then they should be in pretty good shape to get it done this year."
A Senate version of the bill has 62 co-sponsors. However, there is no guarantee the bill will get 62 votes, Freese said. Two co-sponsors — Sens. Bob Menendez, D-New Jersey, and Dianne Feinstein, D-Calif. — are no longer in office. However, their replacements — Sens. Andy Kim, D-New Jersey, and Adam Schiff, D-California — both supported the bill when they were House members.
Yet another co-sponsor — Vice president-elect and current Sen. J.D. Vance, R-Ohio — may not be present to vote, Freese said.
Once a motion to proceed passes, amendments to the bill could be proposed if Senate leadership allows for it, said Emerson Sprick, associate director of economic policy at the Bipartisan Policy Center. Those amendments could seek to replace a full repeal of the rules with a different fix or to offset the cost of the benefit increases.
"It has not been the ideal process for a significant change to Social Security to go through," Sprick said.
The co-sponsors of the House bill had to file a discharge petition to bring it to the floor for a vote, which means it didn't go through committees. Similarly, lawmakers in the Senate have not had the opportunity to hear the drawbacks of a full repeal of the rules and the alternatives, Sprick said.
"Full repeal makes the program less fair and more financially insecure," Sprick said.
How soon would affected beneficiaries see changes in their benefit checks?
The change for nearly 3 million Social Security beneficiaries may take time to implement, according to Freese.
The Social Security Administration, which is already short staffed, may lose another 2,000 employees if it does not get the additional funding it requested in the continuing resolution Congress is also working to finalize, she said.
Moreover, it would take time for the agency's staff to reprogram its computers and then begin sending out the new benefit payment amounts.
If the change is not put into effect immediately, the Social Security Administration will likely retroactively send catch-up checks or deposits to make up for the difference, Freese said.
How will the bill affect other Social Security reform?
The Social Security Fairness Act has received strong support from groups representing firefighters, police, teachers and other government employees who would be affected by the repeal of these rules.
However, policy experts have generally voiced opposition to the change, since nixing the rules would alter the progressive nature of the program.
It would also move Social Security's projected trust fund depletion date to six months sooner, while costing about $196 billion over a decade, according to the Committee for a Responsible Federal Budget.
Even without this change, the trust fund the program relies on to pay retirement benefits may run out in nine years, the program's trustees have projected.
"We are racing to our own fiscal demise," Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said in a statement criticizing the efforts to repeal the WEP and GPO rules.
If the bill passes, it would also affect future reform efforts. But the problems Social Security now faces are bigger than just paying for the WEP and GPO repeal, Freese said.
"The closer it gets to the depletion date, the harder it gets, because you end up having less flexibility in terms of what you can do for the program in order to make it solvent," Freese said. "You have less time to implement the changes."
This story originally appeared on: CNBC - Author:Lorie Konish
