CSHJR 30(STA)-ELIMINATE SOCIAL SECURITY OFFSET  REPRESENTATIVE CARL GATTO, resolution sponsor, stated that HJR 30 pertains to Social Security and asks Congress to repeal both the Windfall Elimination Provision (WEP), and the Government Pension Offset (GPO) provision from the Social Security Act. In the early 1980s, the State of Alaska elected to opt out of Social Security and to establish the Public Employees' Retirement System (PERS) and the Teachers' Retirement System (TRS). Sometime thereafter Social Security changed their rules and imposed a penalty on most members that retired after 1985 and qualified for both Social Security and a public pension from a job not covered by Social Security. Few people, he warned, are aware of this penalty and are devastated when they learn about it because it's too late to make different career decisions. For instance, he began receiving Social Security about a year ago after having paid into the system for 50 quarters, which is ten quarters more than required. He receives about $100 per month, which is considerably less than the amount the personalized printouts Social Security sent to him indicated. A Social Security benefit can be reduced in one of two ways. First, the Windfall Elimination Provision (WEP) modifies the formula that is used to figure a Social Security benefit and gives a reduced benefit for those individuals who qualify for Social Security through their earnings record and have also been an Alaska public employee (PERS) or teacher (TRS). The modified benefit is used the first month you receive both a Social Security benefit and the pension from work that didn't pay into Social Security. The other way the Social Security benefit can be reduced is the Government Pension Offset (GPO). This applies if you receive a pension from a federal, state, or local government that isn't covered by Social Security and are eligible for Social Security benefits as a spouse or widow(er). This affects both PERS and TRS retirees. REPRESENTATIVE GATTO gave a hypothetical example of what would happen if he were to die before his wife. Assume he receives a public pension of $3,000 per month and a Social Security payment of $2,000 per month. As a survivor, his wife would receive just the $3,000 pension because of the offset. Social Security would offset two-thirds of his pension or $2,000 from his $2,000 Social Security benefit so his spouse would receive no spousal Social Security benefit whatsoever. HJR 30 asks the Alaska Congressional Delegation to join the 29 senators and 284 representatives who have signed as co-sponsors to repeal the provisions. CHAIR GARY STEVENS said he assumes this would apply to states other than Alaska. REPRESENTATIVE GATTO said there are 14 other states that opted out of Social Security. He thought Alaska was right to opt out, they just didn't know there would be a penalty applied. CHAIR GARY STEVENS asked if all the other states opted out the same way that Alaska did. REPRESENTATIVE GATTO said that's what he thought, but he didn't have that information. SENATOR JOHN COWDERY asked what the other states are doing. REPRESENTATIVE GATTO clarified the states that pay into the Social Security system aren't affected. The provisions only apply to the 15 states that opted out of Social Security. SENATOR COWDERY asked a question about his personal situation. REPRESENTATIVE GATTO replied he didn't believe the senator would be affected. His concern is for the people that have made career decisions based on what they have been led to believe they would receive from Social Security when, in fact, they won't. He predicted this would be a serious situation for more people than you might guess. SENATOR COWDERY said he has been receiving a PERS retirement check since 1995 and he wondered how these provisions might affect him. JERRY PATTERSON, NEA-Alaska Retired, explained two ways to avoid the penalty. First, individuals that paid Social Security and PERS throughout their career aren't affected. Second, the penalty is generational so people that were eligible and retired from state service in 1985 avoided the penalty. REPRESENTATIVE GATTO noted that the House Finance Committee met with PERS and TRS retirement last night and learned a good deal about what is needed to keep that system solvent. CHAIR GARY STEVENS said the disincentive for retired troops to become teachers in Alaska is shocking and asked for a comment. REPRESENTATIVE GATTO replied there are two issues. First there are people who might consider moving to Alaska to teach after they retire and the other issue is those retirees who decide to leave Alaska at some time before the start the eighth year of teaching. For instance, if a retired autoworker from Michigan is receiving Social Security and he or she moves to Alaska and teaches for seven years, everything looks fine. At the start of the eighth year, the provision to reduce the Social Security benefit kicks in. This makes it difficult for Alaska to recruit teachers who have retired from a job outside Alaska and easy for retirees who are teaching to leave Alaska after their seventh year. MR. PATTERSON said the troops-to-teachers program typically targets retirees from the military who have Social Security benefits so it's more advantageous to those retirees to go to a state where the penalties don't apply. The head of the troops- to-teachers program in Alaska is well aware of the penalties and has expressed concern. CHAIR GARY STEVENS asked him to explain the troop-to-teacher penalties. MR. PATTERSON explained that retired military personnel would become vested as a teacher in Alaska at eight years. Upon vesting, they would already be pegged for a Social Security reduction starting at something less than 60 percent and going down to zero. SENATOR COWDERY asked which public positions are affected in addition to teachers and state employees. MR. PATTERSON replied police, firemen, and municipalities that opted out of Social Security. Potentially, 7,000 people between the ages of 65 and 75 are impacted and some 11,000 people between 55 and 65 years old are due to be impacted. CHAIR GARY STEVENS asked if he mentioned the University of Alaska because they are affected. MR. PATTERSON said he considers them to be TRS. SENATOR BERT STEDMAN remarked he ran into this in his work before he became a legislator. Some clients had no idea this existed while others knew, but didn't understand the implications. He stated he didn't think the current penalty and offset structure is fair and he'd like to see them removed. The state would benefit greatly if the teacher retention issue was resolved and removing the penalties would be fair to everyone. CHAIR GARY STEVENS asked about the situation in which a widow receives a substantially reduced pension. REPRESENTATIVE GATTO said he likes to use numbers because they're more descriptive. A $3,000 a month pension, you're entitled to $36,000 per year. If you are subject to the provisions of Social Security here - if you also had a great amount of Social Security benefit like $2,000 - well they could take the entire $2,000 of your Social Security benefit because of the two-thirds. Two-thirds of $3,000 is $2,000. If your benefit was $2,000 in Social Security, that's the amount that's removed. If your benefit was $1,500 in Social Security, that's under the $2,000 so they take 100 percent of it [the Social Security benefit]. Therefore you're left with the pension only, which wasn't part of your planning. MR. PATTERSON pointed to the nationwide statistic that 9 out of 10 individuals lose the entire spouse survivor's benefit. MARIE DARLIN, retired federal employees representative, testified in support of HJR 30. She said the reason the retired federal employees are concerned is because they paid into the civil service retirement system and not the Social Security system so the Social Security provisions adversely affect them. Federal employees are now part of FERS [Federal Employees Retirement System] that pays into Social Security, but it doesn't help those who retired under the old system. She read the following: Alaska has over 6,600 annuitants in the state of which 1,336 are survivor annuitants. They bring about $12.5 million monthly into the economy of this state. About 1,500 people are actually members of NARFE (National Association of Retired Federal Employees) and our Alaska federation has been active since 1987. NARFE has been working for years to get Congress to repeal these pension offsets since they began in 1982, although they didn't become effective until about 1985. They were intended to reduce the Social Security annuities of anyone who also received a government annuity. By that they meant anybody who had not paid into Social Security - as a city government, state government, or the federal government never did. We feel this is totally unfair because those Social Security payments were made to Social Security and the employers made their portion of the payments. And the GPO reduces or eliminates the Social Security benefit from the spouse Social Security. The other one, the WEP, reduces a person's own earned benefit by using a formula that can result in a loss of as much as 60 percent - or maybe even more - just because their career or even a part of it was with a governmental entity. MS. DARLIN concluded the low-income widows are impacted the most, but thousands are affected. She urged members to support the resolution. SAM TRIVETT, president of the Retired Public Employees Association of Alaska (APEA/AFT), stated he represents the retirees in the group that aren't teachers. They represent people who have retired from state government as well as the municipalities that participate in PERS. He said the association supports the resolution strongly. The association has become involved quite recently and he acknowledged that is because they weren't aware of the provisions before. He checked on his personal situation as a retiree with a wife who is still working. If he dies before she does, she will probably get no spousal Social Security. Social Security sent him benefits statements regularly before he retired and never informed him that his benefit would be reduced because he was also a state employee. It wasn't until after he retired and then signed up for Social Security that he learned that his Social Security benefit would be reduced by about $500 per month. Multiply that by the number of months he expects to live and that amounts to a considerable sum of money. There are thousands of retirees in his same situation and it will have a major impact on people's lives. The state opted out of Social Security in 1980 and it wasn't until six or seven years later that Congress passed the bill. No one was notified of the change so they didn't have any idea they should revisit their retirement decisions. The impact to the state in terms of lost income will amount to millions of dollars he warned. A top official in the Social Security Administration admitted they didn't send notification initially; they weren't sending notification now and probably wouldn't start sending notification for several years. When he was lobbying for the repeal of these provisions he was asked why anyone should support a repeal because Social Security can't afford it. His response is that it is a penalty to those who continued to work after the WEP and the GPO were passed. He and others paid the full amount that was required into the system so that money is in the system. "So the people that tell you the money is not there are not right." CHAIR GARY STEVENS asked if he understood correctly that anyone who worked as a state employee, a teacher, or a university employee before 1980 paid into Social Security. MR. TRIVETTE said that is correct and noted he paid into Social Security from the time he was in 9th grade until 1980 when the state opted out. There was no further testimony. CHAIR GARY STEVENS asked for a motion. SENATOR COWDERY made a motion to move CSHJR 30(STA) from committee with individual recommendations and attached fiscal note. There being no objection, it was so ordered.