Maggie Ellis spent more than 20 years as a teacher, including 10 at a public school, before she learned a dirty little secret: She won't be getting all the Social Security she would be entitled to in retirement.
Ellis' current job, as a fifth-grade teacher in the Elk Grove Unified School District, isn't covered by Social Security. Her previous work, as a counselor and teacher in the private sector, was covered. And she's about to get married to a self-employed man who's also covered by the program.
But her career in public service is going to cost her a chunk of the Social Security she already earned, as well as a portion, and possibly all, of the spousal retirement benefit she would otherwise be due through her husband.
"Never would I have suspected that I would be penalized for being a teacher," Ellis, 46, told me. The discovery, which she made when she joined a retirement policy committee of the California Teachers Assn., shined new light on her retirement planning. "Had I known, I would probably would have managed my money differently."
In retirement, Ellis, like tens of thousands of her teaching colleagues — and firefighters, police officers, and other public employees in California and a dozen other states — will face the consequences of two little-understood provisions of Social Security.
Formally speaking, these are the government pension offset, enacted in 1977, and the windfall elimination provision, enacted in 1983. They're known as GPO/WEP for short.
They were designed to keep state and local employees whose jobs were not covered by Social Security from getting excessive benefits from Social Security, either via their spouses' Social Security benefits or their own earnings from private-sector jobs they held before or after their public employment. The rules require those benefits to be reduced to offset their own public employee pension benefits. This is a special burden for teachers and other public employees in states like California that don't require all public workers to be in Social Security.
Obviously, the issue isn't new. Rep. Howard Berman (D- Valley Village) and Sen. Dianne Feinstein (D-Calif.) have introduced bills to repeal the offsets for nearly a decade. Berman's bills regularly attract more than 300 co-sponsors, but co-sponsorship is cheap: The bills never have been brought to a vote. Why? The cost of repeal is estimated at $82 billion over 10 years.
But it's proper to take a new look at the provisions. With Social Security reform back on the table in Washington, there's no excuse for continuing to dodge their obvious inequities.
They're also obstacles to achieving one overdue reform: Making Social Security a truly universal program by bringing in all state and local employees, the last large category of uncovered workers. States can voluntarily place their employees in Social Security, but more than half of the public employees in 13 states, including California, are still uncovered.
The change would improve the program's fiscal balance and distribute its historical liabilities, which date back to the 1930s, more broadly and fairly. But GPO/WEP helps give Social Security an undeserved bad name among public workers, which makes the change politically difficult.
California has the largest number of potential victims of the offsets — between 75,000 and 100,000 members of the California State Teachers Retirement System, according to estimates by the California Teachers Assn. and other sources. The vast majority are women, mostly widows.
"What this does to people in their time of need is just wrong," says Steve DePue, a retirement consultant to the CTA's state council.
There are some legitimate rationales for the offsets. Pension plans in private industry, unlike the public sector, often have a built-in offset for Social Security. GPO/WEP aims to equalize their treatment.
Moreover, Social Security is a progressive system — it provides a comparatively larger retirement benefit to low-wage workers than to the better-paid. But the benefit formula tends to award some workers who have worked both under Social Security and outside the program higher relative benefits than they deserve.
Whether you think the offsets are fair or unfair depends partially on whether you're in line to experience the impact, but also on what you think Social Security is designed to do.
Public employee groups complain that the offsets deprive them of benefits they have paid for. Ellis put it this way, speaking of her soon-to-be husband: "When I retire, I would not receive a spousal benefit from his Social Security. But if I die first, he gets all of mine." (All her pension's spousal benefits, that is.)