Legislature(2021 - 2022)BUTROVICH 205
05/04/2021 03:30 PM STATE AFFAIRS
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SJR 12-SOCIAL SECURITY BENEFIT REDUCTION REPEAL 5:03:28 PM CHAIR SHOWER announced the consideration of SENATE JOINT RESOLUTION NO. 12 Urging the United States Congress to repeal the Windfall Elimination Provision and Government Pension Offset of the Social Security Act. 5:03:48 PM SENATOR WIELECHOWSKI, Alaska State Legislature, Juneau, Alaska, sponsor of SJR 12, introduced the resolution paraphrasing the following sponsor statement: SJR 12 urges Congress to repeal the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO) of the Social Security Act. The WEP cuts the Social Security benefits of public employees in Alaska if they plan to switch between the public sector and private sector or military. In 2021, this loss could be as much as $498 per month, or about $6,000 a year. The GPO cuts spousal or widows' benefits for public employees for no reason other than their work in the public sector. This cut could amount to as much as 2/3rds the value of the individual's government pension. Because Alaska is one of few states that does not offer a defined benefit plan or coverage for social security, the WEP and GPO affect more Alaskans per capita than any other state. Public employees in Alaska are being punished for choosing to work in public service. The WEP and GPO negatively impact recruitment and retention of Alaska public employees such as firefighters, police officers and especially teachers. Those who do not want to be subject to these provisions will simply look elsewhere for employment. Punishing individuals for choosing public service runs counter to retaining dedicated Alaskan workers and recruiting the best of the best to Alaska. Passage of SJR 12 will demonstrate that the Alaska Legislature opposes arbitrary and unfair cuts to the rightfully earned Social Security benefits of Alaskans. Alaskans deserve to retire with dignity. I urge your support of SJR 12. 5:06:16 PM At ease 5:07:03 PM CHAIR SHOWER reconvened the meeting. 5:07:20 PM TREVOR BAILEY, Staff, Senator Tom Begich and former Intern to Senator Bill Wielechowski, Alaska State Legislature, Juneau, Alaska, delivered a PowerPoint presentation to explain the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO). He began with an explanation of how Social Security benefits are calculated. First, an individual must have 40 quarters or 10 years paid into Social Security. The Social Security Administration adds the highest 35 years of earnings adjusted for inflation. The total is divided by 420 (the number of months in 35 years) to arrive at the average index monthly earnings (AIME). A progressive scale is used to calculate earnings from the AIME. An individual keeps 90 percent of the first $996 of earnings. Between $996 and $6,002, the individual keeps 32 percent. For earnings over $6,002, the individual keeps 15 percent. 5:08:21 PM MR. BAILEY explained that the Windfall Elimination Provision is a reduction to a qualified individual's Social Security benefits because they also worked in job(s) not covered by Social Security. These individuals are primarily public employees. In Alaska, public employees, teachers, firefighters, police officers, and legislators are not covered by Social Security. He said the WEP can reduce the factor in the first step to calculate the AIME from 90 percent to anywhere from 85 to 40 percent depending on the number of years paid into Social Security. In 2021 that factor can be as much as $498 per month. In 2019, the offset affected about 11.5 of all Social Security recipients. This was 2 million Americans, 12,050 of whom were Alaskans, which is the highest number of any state. MR. BAILEY explained that the Government Pension Offset affects spousal or widower benefits of Social Security recipients. The reduction is based on the individual receiving a government pension in a job that did not pay into Social Security. The reduction is two-thirds of the value of the government pension. He highlighted that Alaska's Tier IV defined contribution plan is considered a government pension. If the value of the spousal or widower benefit is less than two-thirds of the value of the government pension, the benefit is zero. This offset affected 717,000 Americans in 2020; 3,320 beneficiaries were Alaskans, 2,419 of whom received zero benefit. He pointed out that a spouse or widow affected by GPO would receive no help with funeral costs and no financial help surviving without their spouse. 5:11:11 PM CHAIR SHOWER asked how the military is affected. MR. BAILEY offered his understanding that the military pays into Social Security so members who work in public sector jobs not covered by Social Security would be affected by the WEP. CHAIR SHOWER asked if they might be affected by both WEP and GPO. MR. BAILEY replied it depends on the number of years the individual worked in a job covered by Social Security. Somebody with 20 or fewer years in a job covered by Social Security who then moves into a public sector job that does not pay into Social Security, would see the number drop to 40 percent. The percentage increases 5 percent up to 90 percent for anything between 21 and 30 years. Somebody who works 30 years in a job covered by Social Security and then works in a job that is not covered would not be affected by the WEP. 5:13:05 PM SENATOR WIELECHOWSKI pointed out that somebody who leaves the military after 20 years and then becomes a legislator would see their Social Security benefit reduced. 5:14:04 PM At ease 5:14:40 PM CHAIR SHOWER reconvened the meeting and moved to invited testimony. 5:15:36 PM TOM KLAAMEYER, President, NEA Alaska, stated that while he is not an expert on the WEP and GPO, he has had to become educated on the topic because it is such an important issue for NEA members, Alaska PERS or TRS members, legislators and staff. They are all potentially subject to the GPO/WEP penalties. He agreed with Mr. Bailey that the GPO/WEP can negatively affect Social Security benefits of certain state employees simply because they collect a PERS or TRS retirement. Public employees and educators hired after PERS and TRS changed from a defined benefit system to a defined contribution system in 2006 are particularly vulnerable because they do not receive a PERS or TRS pension. Nevertheless, they are subject to the GPO/WEP penalties on their earned Social Security benefits. MR. KLAAMEYER said the committee members should know that Alaska TRS members are in an even more difficult situation. About 60 percent of certificated Alaska TRS members hired after 2006 do not receive a pension and are not able to participate in Social Security even if they want to. He said they have the dubious distinction of having the least secure, worst retirement system in the country. If teaching is a second career or if they had to work a second job to make ends meet they get no pension and their Social Security safety net is shredded by GPO/WEP. MR. KLAAMEYER said the reason for PERS to opt out of Social Security may have made sense in 1951 when there was just Tier I but he would like to think that state leaders at the time would have made different choices had they known the precarious situation it placed future educators. On a more positive note, he said there is a process by which individual school districts or the state as a whole can reenter the Social Security System. This might provide more retirement security but it would require a cost benefit analysis because of the GPO/WEP problem. He said NEA is doing its best to educate members on this topic, but it is complex. He thanked the sponsor for introducing the resolution and noted that NEA had been working with the congressional delegation on this topic for years. He expressed hope that this resolution would raise the profile of this problem and give the delegation the support it needs to more effectively advocate for this change. SENATOR REINBOLD recognized Mr. Klaameyer as a constituent and said she would not make a commitment because she was such a fiscal conservative. 5:24:16 PM CHAIR SHOWER opened public testimony on SJR 12. 5:24:23 PM RICHARD SEWELL representing self, Anchorage Alaska, testified in support of SJR 12. He explained that he paid into Social Security on an off over 50 years. He moved to Alaska in 1981, worked for the Municipality of Anchorage, and is a Tier I member of PERS. The municipality pays into Social Security but because of the WEP, his Social Security benefit is reduced by 40 percent. 5:25:51 PM CARMEN RUSSO, representing self, Anderson, Alaska, testified in support of SJR 12. She stated that she paid into Social Security for 30 years and would have received a full Social Security benefit but she became a teacher and the WEP reduced her benefit by two-thirds. 5:26:59 PM MITCHELL ROTH, Retiree, University of Alaska, Girdwood, Alaska, testified in support of SJR 12. He stated that he was hired by UAF in 1983 and before that worked in the private sector. Two things happened the year he started at UAF that he did not know about. First, his prior work qualified him for Social Security benefits. Second, the Social Security Act of 1983 included the WEP provision. As a result he has forfeited 50 percent of his previously earned Social Security benefits. He has lost over $48,000 in retirement benefits that he earned prior his work in Alaska. 5:28:55 PM SUSAN FREEL, representing self, Fairbanks, Alaska, testified in support of SJR 12. She stated that she is a UAA retiree and while she has 16 years of substantial earnings, seven of the years overlapped with her tenure at the university. She earned the full Social Security benefit but she receives just 64 percent. 5:29:51 PM CATHY MCDORQUODALE, representing self, Fairbanks, Alaska, testified in support of SJR 12. She said she has the same issue the previous speakers mentioned. Social Security sent annual reports telling her what her benefit would be on retirement but it was not that amount. She said "windfall elimination" is a perfect description for a contradiction and unfairness. 5:30:40 PM ROBERT SEWARD, representing self, Newark, Delaware, testified in support of SJR 12. He said he worked for the State of Alaska for 28 years and he learned about the WEP in the Social Security office. He paid into Social Security and he does not think his benefit should be reduced. "When I heard you were considering this resolution, my heart leapt." 5:31:27 PM NADINE LEFEBVRE, representing self, Juneau, Alaska, testified in support of SJR 12. She stated that she is a PERS retiree. She reported that about 19 percent of the Alaska population are seniors and 10,000 receive some combination of earned Social Security benefit and retirement pension benefits. She said eliminating the unfair reductions to earned Social Security benefits will help ensure that the growing senior demographic can age in place and continue to support their community. She pointed out that seniors contribute over $1.5 billion to the Alaska economy annually. Present and future retired Alaskans will benefit by the repeal of the WEP and GPO. She advised that she would send her full comments in an email. SENATOR HOLLAND advised that he had stepped in to chair the meeting. 5:33:46 PM CAROL WATERS, representing self, Anchorage, Alaska, testified in support of SJR 12. She stated that she and her husband have been retired for 20 years and they began receiving Social Security 10 years ago. Their benefits were decreased $491 per month per person and they estimate that between the GPO and WEP they have lost $320,000. She said the federal government has taken that money from her family and that is wrong. 5:34:47 PM KIMBERLY METCALFE, representing self, Juneau, Alaska, testified in support of SJR 12. She stated that she was close to age 66 when she decided to retire and was concerned that her Social Security benefit might be affected by the GPO or WEP. She worked for the state for 8 years and had a small state pension. The Social Security representative said her benefit would not be affected because she had worked in the private sector for 30 years. She understood that if she waited to collect Social Security until age 70 she would get a larger benefit and until then she could collect a $1,400 per month widow's pension on her late husband's benefit. He died before he received a benefit but had paid in his entire life. However, she was told there would be an offset when she filled out the paperwork. She learned that her pension counted against her husband's benefit. 5:36:49 PM STEVEN CLICK, representing self, testified in support of SJR 12. He stated that he retired from teaching in 1987 as a Tier I retiree. He paid into Social Security for 40 quarters and he estimates that his benefit was cut by 40 percent. He will receive almost nothing from his husband's Social Security benefit even though he paid Social Security throughout his life. He related that his son who is a teacher in Barrow will be a Tier III TRS retiree and he is part of the worst type of retirement system in the nation. He noted that he lives in California now and public employees in that state also are affected by the WEP and/or the GPO. 5:38:49 PM JOHN DART, representing self, North Pole, Alaska, testified in support of SJR 12. He stated that he spent half his career in the private sector and half in the public sector and he cannot understand why the WEP and GPO is still affecting the lives of retirees throughout the nation. This needs to change because it is affecting people's lives. Many people do not find out about the penalty until it is too late to do anything about it. 5:40:35 PM BARBARA MCNINCH, representing self, Soldotna, Alaska, testified in support of SJR 12. She stated that she moved to Alaska in 1975 and she worked in the private sector until she was in her 40s and thereafter worked in Alaska public schools. She is affected by both the WEP and the GPO. 5:41:35 PM JOY GREEN, representing self, Kona, HI, testified in support of SJR 12. She stated that as a retired teacher from Alaska, her Social Security benefits are affected by both the WEP and the GPO. She is unable to receive the full benefits she earned before becoming a teacher and she is denied the spousal benefits her late husband earned. She feels she is being penalized for choosing a teaching career. 5:42:46 PM LADAWN DRUCE, Staff, Sterling, Alaska, testified in support of SJR 12. She stated that her husband retired as a Tier I teacher nine years ago and the WEP and the GPO reduced his benefit $400 per month, which is a little over $43,000 over the last nine years. She pointed out that recruiting educators and public employees in Alaska is more difficult now because of the defined contribution retirement system and the GPO/WEP. 5:44:09 PM JAN CAROLYN HARDY, representing self, Anchorage, Alaska, testified in support of SJR 12. She stated that when the GPO and the WEP were devised, the reasoning was that public employees were double dipping, although there was no such claim about private sector employees who receive multiple retirement from various companies. It was a policy of the ages to take from the poor and give to the rich. She said she paid into both Social Security and Medicare and was taxed like everyone else who receives the full benefit. 5:45:42 PM ACTING CHAIR HOLLAND closed public testimony on SJR 12. SENATOR WIELECHOWSKI thanked the committee for staying late on this critical issue that affects many thousands of Alaskans. It will not cost the state anything, but it will bring money into Alaska and change the lives of many Alaskans, he said. ACTING CHAIR HOLLAND held SJR 12 in committee.