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Lawmakers Push to Fix Controversial Tax Rule Affecting Federal Retirees

A new bill would set up a new formula to calculate how much retirees get in Social Security benefits if they also receive a defined benefit pension, in some cases replacing the controversial Windfall Elimination Provision.

A group of more than 100 House lawmakers on Thursday introduced legislation to effectively get rid of a controversial rule that reduces the Social Security benefits that federal employees are eligible to receive when they retire.

The windfall elimination provision reduces the Social Security benefits of retired federal, state and local government employees who worked in private sector jobs in addition to a government job where Social Security is not intended as an element of their retirement income, like employees in the Civil Service Retirement System.

The Public Servants Protection and Fairness Act (H.R. 4540), introduced by House Ways and Means Committee Chairman Richard Neal, D-Mass., would introduce an alternate “public servant protection” formula to calculate Social Security benefits for those who retire beginning in 2022 and would be affected by the windfall elimination provision.

“The PSP formula will apply to workers who are receiving a pension based on noncovered earnings and who have less than 30 years of substantial work in Social Security covered employment,” the bill’s sponsors wrote in a document explaining its provisions. “Individuals will receive the higher of the two formulas, PSP or the current windfall elimination provision. This approach ensures both fairness (an equitable benefit formula based on actual earnings) and protection (no benefit cuts relative to current law) for all public servants.”

In addition, the legislation authorizes the payment of up to $150 each month to retirees already impacted by the windfall elimination provision but who are ineligible for the new formula because they have already retired.

“The WEP negatively impacts nearly 2 million retired public servants across the country, including 83,000 in Massachusetts,” Neal said in a statement. “Public employees like firefighters, teachers and police officers should not miss out on the Social Security benefits they earned over decades of hard work.”

In a statement, National Active and Retired Federal Employees National President Ken Thomas said he supports the bill, although his organization would prefer legislation to get rid of the windfall elimination provision altogether, like the Social Security Fairness Act, introduced by Reps. Rodney Davis, R-Ill., and Abigail Spanberger, D-Va., earlier this year.

“NARFE continues to support full repeal of the WEP, as the status quo has harmed too many hardworking and dedicated public servants for too many years,” Thomas said. “While this bill does not provide WEP-affected individuals the full repeal they are due, it represents a good first step in allowing some relief from this unreasonable penalty.”