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. 10:09:44 AM Co-Chair Bishop relayed that it was the first hearing of SJR 12. 10:10:13 AM Senator Bill Wielechowski, Sponsor, explained that SJR 12: 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. 10:12:29 AM Co-Chair Bishop asked about the Windfall Elimination Provision (WPE). Senator Wielechowski explained that the WPE would be further discussed in the presentation. 10:12:52 AM KEEGAN FARONE, STAFF TO SENATOR WIELECHOWSKI, discussed a presentation entitled "Senate Joint Resolution 12, Senator Wielechowski, 24 Feb 2022," (copy on file). Mr. Farone showed slide 2, "Windfall Elimination Provision: • The Windfall Elimination Provision (WEP) was enacted in 1983 by the Social Security Administration. • The WEP reduces Social Security benefit payments to beneficiaries whose work histories include both Social Securitycovered and non-covered employment, with the non-covered employment also providing pension coverage. • WEP reductions could amount to nearly $75 million annually for affected Alaskans. • In Alaska, the WEP potentially affects any public employee who is also eligible for Social Security. Mr. Farone addressed slide 3: • For the first bend in average annual earnings, the WEP reduces the replacement rate from 90 percent to as low as 40 percent, depending on the quantity of years of qualified substantial earnings under Social Security coverage. Mr. Farone estimated that WEP reductions could result in a $75 million reduction annually for affected Alaskans. 10:13:32 AM Co-Chair Bishop asked whether the $75 million figure had been provided by the sponsor or the Social Security Administration. Mr. Farone replied that the estimate was based on the $498 per month, multiplied by the number of Alaskans affected by the WEP. Co-Chair Bishop added that the number included direct payments and not indirect payments. Mr. Farone agreed. 10:14:41 AM Mr. Farone reiterated that the first bend from slide 3. 10:15:10 AM Mr. Farone relayed that the Three Bend Formula constituted the primary insurance amount (PIA), which was the amount paid to a retiree at full retirement age. He said that under the WEP there would be no reductions in the second or third bend of the formula, only the first bend. 10:15:32 AM Mr. Farone spoke to slide 4, "Windfall Elimination Provision": • The WEP affects more Alaskans per capita than any other state. • Reductions under the WEP may equate to as much as $498 per month, or approximately $5,976 annually. Mr. Farone shared that there were 12,000 retired workers affected by the WEP, 60 of which were disabled, 478 were spouses and children, which combined constituted 11.6 percent of all Alaskan social security beneficiaries affected by the WEP. 10:16:03 AM Co-Chair Stedman went back to slide 3. He shared that he supported the resolution. He thought the issue was surprising to many who did not realize it existed until it was directly affecting their social security payout. He asked Mr. Farone to explain Table 3 on slide 3, without acronyms. Mr. Farone explained that the Social Security Administration had a chart that indicated what the considered to be substantial earnings, which increased yearly. He said that if a person did not have at least 30 years of what the social security administration considered to be substantial earnings, for every year below that number 90 percent of the first $996 was reduced by 5 percent. Co-Chair Stedman believed that the practice was called a social security offset. Mr. Farone clarified that the practice was called the WEP. 10:17:52 AM Co-Chair Bishop asked about slide 4. He wondered about Alaskas anomalous number of per capita workers. Mr. Farone agreed that Alaska had the most workers, per captia, affected by the WEP. 10:18:15 AM Mr. Farone showed slide 5, "Government Pension Offset": Government Pension Offset    • The Government Pension Offset (GPO) reduces Social Security benefits paid to spouses or survivors when the spouse or survivor earned a pension from a government job that was not covered by Social Security. • Unlike the WEP, which can apply to any non-covered employment, the GPO applies specifically to government workers' retirement benefits. • Although pensions mitigate the effect of the WEP adjustment to Social Security benefits, pensions from noncovered employment trigger the GPO adjustment, which reduces the spouse and survivor benefit. 10:18:53 AM Mr. Farone spoke to slide 6, "Government Pension Offset": Under the GPO, the reduction may equal up to two- thirds of the value of the pension in noncovered work and may wipe-out the spouse or survivor benefit entirely. Mr. Farone spoke to the chart on slide 6, noting that it was a hypothetical example of the GPO reduction. He explained that if there was a covered worker with an $1,800 benefit, the spousal benefit before GPO would be $900. If the spousal benefit included a $1000 non-covered pension, the two-third reduction of the $900 would leave a remaining benefit of $233. This was called a partial offset. In a full offset if the GPO was larger than the spousal benefit, no benefit would be paid. 10:20:00 AM Mr. Farone addressed slide 7, "Government Pension Offset": • In 2020, 3,322 Alaskans were subject to GPO reductions, 2,419 of which were fully offset, meaning those affected received no Social Security spousal or survivor's benefit because the reduction was greater than the benefit itself. Mr. Farone added that 43 percent of those affected were widows or widowers. 10:20:52 AM Mr. Farone referenced slide 8, "Conclusion": SJR 12 is designed to protect employees whose work was contracted under the premise that their dedication to public service would be rewarded upon their retirement. Although the WEP and the GPO were enacted to address one inequality, they inadvertently created another. Legislators must right this wrong and ensure that individuals are not forced to choose between serving the public good or retiring with financial stability. 10:21:14 AM Senator von Imhof wondered whether the United States Congress would pay attention to the resolution should the legislature pass the bill. Senator Wielechowski thought many Alaskans were concerned about the issue. He relayed that President Biden had expressed support for eliminating the GPO and the WEP. He believed that legislation had been introduced on the federal level. Co-Chair Bishop commented that the state legislature advocating a position helped guide state representatives on the federal level. 10:23:00 AM Senator von Imhof thought it would be helpful to see the status of the related federal legislation. Senator Wielechowski agreed to provide the information. 10:23:37 AM Co-Chair Bishop OPENED public testimony. 10:24:03 AM AT EASE 10:24:12 AM RECONVENED DAVID GUTTENBERG, FORMER LEGISLATOR, FAIRBANKS (via teleconference), wanted to share his experience with the WEP. He had experienced a $500 per month penalty after retirement, which was a significant amount of his monthly retirement. He felt that it was fair to receive the benefits one had already paid into. He thought that the underlying factor was the management of social security. He reiterated that the WEP took away money that people had paid into the system. He urged support for the resolution. 10:27:31 AM Co-Chair Stedman wanted to clarify that the testifier had paid into social security for 25 years. Mr. Guttenberg affirmed he had paid into Social Security for 25 years. Co-Chair Stedman understood that Mr. Guttenbergs penalty had been $500 per month. Mr. Guttenberg replied in the affirmative. 10:28:13 AM Co-Chair Bishop CLOSED public testimony. Senator Hoffman asked whether the benefits of the legislation would be applied retroactively. He thought it was known that the Social Security fund was underfunded and wondered whether Congress would address the solvency of the fund. Senator Wielechowski responded that retroactivity and enforcement would be determined by Congress. He hoped that the benefits would be retroactive. He did not think back payment. He agreed that Social Security solvency was an issue he hoped would be addressed by Congress. 10:30:14 AM Co-Chair Stedman thought it would be important to have 30 or more years in Social Security. He believed it was reasonable for people to expect to be paid out by the fund they had paid into during their working lives. Co-Chair Bishop set an amendment deadline for 1pm, Monday, February 28, 2022. SJR 12 was HEARD and HELD in committee for further consideration. Co-Chair Bishop discussed housekeeping. 10:31:18 AM AT EASE 10:31:30 AM RECONVENED