Federal legislative update
Bill to reform the Windfall Elimination Provision (WEP) stalled; will remain in committee until public servant groups can agree on how to address reforming the WEP
As of July 25, 2016
The Equal Treatment of Public Servants Act of 2015 (HR 711), sponsored by the House Chair of the Ways and Means Committee, Congressman Kevin Brady (R-Texas), and Massachusetts Congressman Richard Neal, was set to be reported favorably out of committee on July 13, 2016, when at the last moment, part of the coalition to the reform the WEP withdrew their support due to changes in the bill that would have reduced the so-called “rebate payments” to current retirees. In addition to the reduced payments to current retirees, some members of the active employee coalition also had raised concerns about HR 711. At this time the bill is being held in committee until the coalition of public servant groups reach agreement on the bill.
While past efforts would have completely repealed the WEP at a ten-year cost of $40 billion, the Equal Treatment bill’s new formula is expected to be cost-neutral due to provisions that would expand the pool of workers who would be subject to modest reductions under the new formula, as well as the Social Security Administration’s (SSA) efforts to recover overpayments using enhanced data tools.
The Social Security formula is based on 35 years of average indexed monthly earnings. Under the current formula, the years during which a public employee worked in a position not covered by Social Security are treated as zero earnings years. By contrast, HR 711 would calculate the Social Security benefit amount using all of the employee’s covered and non-covered career earnings, and then multiply the result by the ratio of the covered earnings to the total.
The WEP provisions apply to nearly all public employees who were not required to make contributions to Social Security while they were employed in a public pension plan. There are about 15 states where the majority of public employees are subject to the WEP provisions, and in about 25 states teachers are not required to contribute to Social Security. Every state has someone that is affected by the WEP provisions.
Finally, in regard to amending the GPO provisions, over the last few years there has been far less attention on this issue compared to the WEP provisions. If the WEP bill moves further along in the legislative process, there could be a similar attempt to make modifications to the GPO provisions.
Information from the House Ways and Means Committee regarding HR 711
NARFE: “NARFE Opposes Changes to WEP Reform Bill in Advance of Committee Consideration”
NEA: “Letter to House Ways and Means Committee on GPO/WEP”
For more information on Massachusetts bills: To learn about proposed legislation that could affect the MTRS and its members, you can obtain the text of any Senate or House Bills through the General Court’s website.
A warning about pending legislation: In simple terms, a bill is an idea that has been presented to the state Legislature for possible action. The process is complicated, and it does not always lead to enactment of the bill. The MTRS urges caution in making retirement plans based on pending legislation because bills:
- must pass both houses and be signed by the Governor to become law,
- may be amended,
- may not pass,
- may take years to pass, and
- may never become law.
For information on how bills become law, please see The Legislative Process .
This legislation would allow members to purchase up to 4 years of creditable service for any periods teaching at a nonpublic school.
H2366: An Act Relative to Cost of Living Adjustments for Retired Public Employees of the Commonwealth
The legislation would increase the COLA base from $12,000 to $16,000 upon its passage and index future COLA base increases to a percentage of the maximum Social Security benefit over the course of the next 16 years. The current maximum Social Security benefit is just over $25,000 and it increases every year by the increase in the Consumer Price Index (CPI).
In addition, the legislation provides that the COLA would be the CPI or 3%, whichever is greater (currently, it is the CPI or 3%, whichever is less). Finally, the bill would extend the pension funding schedule from 2023 to 2040.
This legislation would allow a school administrator to purchase up to 3 years of service for any period or periods of work experience in the business field.
This legislation would increase the benefits, by a stated dollar amount, paid to retirees who retired prior to July 1, 2004 and selected either Option B or Option C.
This legislation would specifically include school nurses under the definition of teacher. School nurses who are certified by ESE are members of the teachers' retirement system. The MTRS began accepting certified school nurses in 1996.
This legislation would require a member who is reinstated to service after having been out on disability to purchase the period of time he was receiving his disability benefit, plus interest, in order to have his pension recalculated using the period he was receiving his disability benefit. Currently, the statute does not require the reinstated member to purchase that period of service when they return to work. That period, however, is currently included in any subsequent retirement calculation.