The Social Security Administration is in the process of recovering $23 billion in over-payments made in the past to beneficiaries, many of whom are now struggling to repay the bill at a time when their benefit checks from the agency are shrinking. That announcement should serve as a wake-up call for policy makers in Georgia because its employees are among a group of beneficiaries that are more likely to receive a notice from the agency.
There are more than 100,000 state and local workers who participate in an employer pension in lieu of participating in Social Security. As a result of their job, these workers may be subject to the Windfall Elimination Provision (“WEP”) and the Government Offset Provision(“GPO”) provisions of Social Security, both of which cause a significant amount of improper payments.
For background, not everyone in America participates in Social Security. About 25 percent of those working for a state and local government have opted-out of Social Security. Instead of contributing to the nation’s pension, they have an employer pension which comes with special rules when it comes time to collect benefits from Social Security.
The employer’s decision to run pensions independent of Social Security is legal and fine, but that decision exposes the workers to the hazards in retirement. The key thing to understand is under current law the worker is legally responsible for any improper payment made related to these rather obscure rules.
Maybe the retiree shouldn’t be at fault, but legally the person who received the inaccurate payment is entirely at fault. As the laws are written, those workers who do not fill-out their claim benefits correctly are subject to massive bills in retirement. As for the rest of us, the Social Security program suffers when those retirees are unable to repay the cost of the mistake.
The Hazards of Retirement
To illustrate the hazards of retirement, a north Texas woman received a bill in 2023 for $40,000 for overpayments because her benefit check was subject to the Government Pension Offset. She of course asserts that she told the agency in 2020 that she was eligible for a pension from her job as a teacher, but there aren’t any firm records to say.
While the woman doesn’t live in Georgia, local state policy makers should consider how the hazard occurred so that state officials can ensure that no state worker winds up in the same predicament.
The Cause of the Hazard
In the case of WEP/GPO, the entire benefits process depends upon the person who is least familiar with the rules: the retiree. This person, who may not even know what these rules are, serves as both the trigger of the faulty payment and the trip-wire to detect the mistake.
According to the Social Security Administration, claimants who file for benefits over the phone receive a summary of their claim by mail for their review and have the responsibility to notify the agency if the information is inaccurate. Further, the person would receive an Award Letter along with a publication of the beneficiary’s responsibilities.
In the case above, a grieving widow likely filled-out the paperwork wrong, and subsequently didn’t know that the check was too large. So, the mistaken payments went on for years quietly generating an ever-growing hidden obligation to repay. Georgia has more than 100,000 workers, any of which could end up spending a lifetime trying to make amends.
Predictable Outcome of a Misguided Plan
Given the potential losses, one might assume that the federal government has added layers of regulations to protect the worker from the employer’s decision to run a pension outside of Social Security. Surprisingly the answer is no. The employer’s only obligation to inform the employee of the risks in retirement is the provision of a form (Form 1945) to the worker at the time of employment. It tells the employee that the job comes with a pension that will put their benefits from Social Security at risk.
Essentially, the plan for all these workers is: they will read the warnings and remember over a period of decades that their benefits from Social Security might be compromised by taking a job with the state. The safe guard against over-payments is the retiree (who may never have heard of the WEP or GPO) will know when the amount of the check is in error.
While that plan may sound fairly irresponsible, the informed consent statute has only been in place for 20 years. So, there will be a few more decades of retirees subjected to the hazards of retirement.
Maybe Your First-Grade Teacher
In total, there will be people who worked for the state of Georgia, maybe your first-grade teacher for example, who will receive a life altering balance due notice from the Social Security Administration because “the plan” isn’t working very well.
Georgia needs to be a leader here, not a warrior of the status quo. Before we can fix the problem, someone in the state leadership would have to acknowledge that what we are doing is not working.
The author, an Atlanta resident, is policy advisor on Social Security to the Heartland Institute.
