Two little known Social Security Administration rules reduce the benefit paid to government workers who retire in Alaska, and as baby boomers reach retirement age, the rules are starting to open some eyes.
Soldotna Mayor Dave Carey, who retired this year after a 20-year career in teaching, told the city council recently he met with a staff assistant of Sen. Lisa Murkowski at the Conference of Mayors in Skagway to discuss his recent discovery, among other things.
"This impacts the city in its trying to hire new employees," Carey said.
He also is impacted personally because Alaska is one of 15 states that elected to have their own retirement programs for civic employees rather than collect Social Security from government workers.
Known as the Government Pension Offset and the Windfall Elimination Provision, the rules were passed by Congress in 1977 and 1983, respectively, but because many were unaware of the effects the rules would have on their pensions many years in the future, little was done to lobby against the rules.
Carey, who worked in the private sector for about 12 years before becoming a public school teacher and paid into Social Security, said all along the annual statements he got in the mail from Social Security showed the amount he would receive from it upon retirement.
"The statements did not say the amount would be reduced by the Social Security offset," Carey said.
Because Carey accepted a state pension after 20 years of teaching, the Social Security benefit he would have received from his private sector working years is being reduced by two-thirds because of the WEP, he said.
"I've got over a decade of work during which Social Security was paid," Carey said.
"Now, that will be offset because I accepted a teacher's pension. I will get one-third of the Social Security benefits based on the previous 12 years," he said.
In addition to previous earned benefits being reduced, if Carey were to take a private sector job after accepting the teacher's pension, he would be required to pay the full amount of Social Security on the earnings, knowing any benefit he would receive down the road would be reduced by two-thirds of his teacher's pension.
"That's fraud," he said.
The same two-thirds reduction would apply to those going to work for municipalities in Alaska, such as the city of Soldotna, if the employees had previously worked somewhere where they contributed to Social Security, or if they work in a private sector job after taking a city or state pension.
The GPO reduces public employees' Social Security spousal or survivor benefits by two-thirds of their public pension.
Spousal and survivor benefits are normally available to any person whose retired or deceased spouse worked at a job in which he or she earned Social Security benefits.
Carey described a scenario to illustrate the effects of GPO.
If a person goes to college to become a teacher and works as a teacher until retirement, and the person's spouse works in a private sector job covered by Social Security, the teacher's Social Security survivor benefit would be offset by his or her teacher pension.
"I spoke with Sen. Murk-owski two years ago when she was running for election," Carey said.
"She understood (Social Security offset) was a problem, it was unfair and it should be corrected, but where would we get the money?" he said.
Carey said for states such as Alaska to reverse their decision and go back to having retirements covered by Social Security, the cost would be in the billions of dollars.
While he said some states are attempting to amend the situation, he is not aware of Alaska doing anything at this time.
He said the Conference of Mayors meets again in November.
"Usually that's when resolutions are passed," he said.
"Then the Alaska Municipal League presents issues to the Legislature," Carey said.
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