If You’re a Public School Teacher, There’s Something You Should Know About Your Social Security (2024)

This 40-year-old provision may change your retirement plans.

About a year before Pam Alexandroff planned to retire from teaching, she decided to check in with Social Security, just to get an idea of the budget she’d be working with in her golden years. Before teaching in the Chicago public school system for over two decades, Alexandroff had worked in human resources —and spent years paying into Social Security. She figured she’d be receiving a not-insignificant monthly check in addition to her pension. She was wrong.

She sat shell-shocked, Alexandroff recalls, as a Social Security agent explained that because of a policy passed 40 years ago, called the windfall elimination provision (WEP), she’d be receiving a paltry $200 a month.

“It was a mind-boggling experience,” she tells us.

Some 2 million Americans are currently impacted by the WEP, the Congressional Research Service estimates. Here’s what you need to know about the policy —and why some are pushing to repeal it.

What is the Windfall Elimination Provision?

The policy was established in 1983 as a way to shore up Social Security. It was sold as a way to prevent the so-called Social Security “windfall” some employeeswere thought to receive on top of what they’d already be collecting from their non-covered pensions (typically state or local government pensions, where workers pay directly into a fund and not into Social Security). These types of plans aren’t common, but in some states —like California, Massachusetts, Illinois, and Louisiana, among others —a high percentage of public servants rely on them.

Of course, not all of these workers are impacted by the WEP — just the ones like Alexandroff, or say a cop who retires from the force and then picks up a job working security. These folks, who’ve spent a good chunk of time in the private sector paying Social Security taxes, will collect quite a lot less than they may expect because of the WEP.(It’s also important to note that, if you’ve paid into Social Security for 30 years, you’re exempt from the WEP.)

Now, according to Jean-Pierre Aubry, associate director of state and local research at the Center for Retirement Research, the WEP exists to fix a flaw in the Social Security scheme. The program, he explains, was designed to be “progressive,” meaning that “those who earn less throughout their careers are supposed to get proportionately more.” So someone who makes less — let’s say 45 percent of the average wage — should get about half of their earnings in Social Security benefits. While someone who makes a lot more — say 160 percent — should see around 30 percent of their income replaced.

The problem, as Aubry sees it, is that many employees who split time between the private and public sectors end up being classified as “low-wage” workers even though that might not be the case — meaning they’ll get more in Social Security than they’re entitled to. That’s because of how benefits are calculated. Wages are averaged across 35 years, so if you pay Social Security taxes for a decade and then transition to a job with a non-covered pension, your salary looks a lot smaller than it actually was.

“The provision is designed to adjust for that,” Aubry says.

But critics say the WEP is far from a perfect fix —and many characterize it as downright unfair. For one, it wasn’t until 2005 that employers were required to inform workers that they’d be impacted. That means that there are a lot of teachers, firefighters, cops, and other public servants who, like Alexandroff, started their careers before that and felt blindsided when they learned that they’d have a good chunk less to retire on than they anticipated, says Susan Dixon, the head of the California Retired Teachers Association.

Kathy Smith, an Ohio teacher who spent the back half of her career working in public schools, says that leading up to her retirement her Social Security statements always showed that she’d be getting about $1,000 per month. It wasn’t until she stopped working that she learned she’d be getting only a sliver of that because of the WEP.

“My statements never changed. They always told me I’d be getting a set amount,” Smith claims. “It’s almost like you’re being punished for working.”

Data also shows that the WEP’s rigid formula actually penalizes lower earners. Here’s how: Let’s look at two workers who’ve both made an average of $45,000 a year over 20 years in the private sector. One has an uncovered pension and the other doesn’t. The public servant can expect just 34 percent of their wages to be replaced by Social Security, while the other would get 45 percent replaced, according to the financial planner and author Devin Carroll.

“It’s really like being punished for working,” Smith says. That’s why some experts consider the WEP a bit of a blunt instrument that could be better tailored to serve retirees more fairly, instead of dispensing this form of rough justice.

On top of that, these government workers also have to contend with a companion policy —the Government Pension Offset (GPO). The GPO cuts the Social Security they’d receive when their spouse dies. About 700,000 Americans are affected by this —83 percent of whom are women.

Will the Windfall Elimination Provision be repealed?

Given the sad state of Social Security funding, a full repeal would be a tough sell. But that hasn’t stopped lawmakers from trying. One 2021 bill would have replaced the WEP with a new formula that would be fairer, particularly for the lower-income employees affected by it. Another, the Social Security Fairness Act of 2021, would have eliminated both the WEP and GPO. That legislation had over 300 co-sponsors from both sides of the aisle but was never brought to a vote. But even with that bipartisan support, it faces some strong headwinds — particularly because of its cost. An analysis by the Congressional Budget Office found that nixing the WEP and GPO would cost the U.S. $183 billion from 2022 to 2032.

This year, legislators backed by teachers’ unions from across the country, have brought the issue back to Congress. In February, Rep. Abigail Spencer (D-Virginia) and Rep. Garret Graves (R-Louisiana) introduced the Social Security Fairness Act of 2023, which would repeal both provisions. And as you’d imagine, thousands of retirees and public servants are rallying behind it. (More than 100,000 people have signed a recent online petition backing the bill.) Dixon and Betty Marino, who leads the Connecticut Alliance for Retired Americans, say they’ve heard from dozens of their members about how these laws have completely upended their retirement plans.

“WEP and GPO only provide a disincentive or penalize thousands of Louisiana’s public servants,” Graves said in a statement. “We will keep fighting to get them the full retirement benefits they paid for, including those who have already retired. We’re not giving up.”