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Top tax writers diverge on lame-duck Social Security fix

Ways and Means leaders wrangle over how to nix the windfall elimination provision

Rep. Richard E. Neal, D-Mass., left, chairman of the Ways and Means Committee, and ranking member Kevin Brady, R-Texas, had yet to agree on legislation as of Wednesday, but said they were getting close.
Rep. Richard E. Neal, D-Mass., left, chairman of the Ways and Means Committee, and ranking member Kevin Brady, R-Texas, had yet to agree on legislation as of Wednesday, but said they were getting close. (Tom Williams/CQ Roll Call file photo)

Key lawmakers aiming to fix a Social Security provision that cuts benefits for public workers who also get government pensions remain at odds on how to treat people who benefit more under the current formula.

With perhaps days left for tax writers to agree on any items that could catch a ride on a fiscal 2023 omnibus spending bill before Christmas, House Ways and Means Chairman Richard E. Neal, D-Mass., and the panel’s top Republican, Rep. Kevin Brady of Texas, had yet to agree on legislation as of Wednesday, but said they were getting close.

Both Neal and Brady have bills to eliminate the “windfall elimination provision” limiting benefits for about 2 million teachers, firefighters and other public employees who qualify for pensions from government service and Social Security from second jobs, earlier careers or other extra work.

They would introduce a “proportional formula” instead that would base benefits on the share of earnings over a full work history that came from Social Security “covered” employment. Those currently working but slated to see benefit cuts under the current formula could get about $500 a month extra, while current retirees could receive an additional $100 to $150 per month.

‘Hold harmless’ hangup

But there’s a critical difference between the two measures that the top Ways and Means leaders have yet to work out.

While they both include “hold harmless” provisions preventing benefit cuts for those who would receive higher payouts under the current formula, Neal’s bill would maintain that more generous treatment indefinitely while Brady’s would cut it off after 40 years, or for anyone aged 21 or younger today.

Stakeholders pushing for relief from the current law appear to be nudging negotiators in Brady’s direction.

Leaders of the Association of Texas Professional Educators, Texas Retired Teachers Association and Mass Retirees Association praised both lawmakers’ efforts in an unpublished op-ed provided to CQ Roll Call. But they added that Neal’s approach would “hold harmless all beneficiaries into perpetuity, even those not yet born.”

Representatives of those three groups led a news conference on the issue Wednesday featuring Neal, Brady and Texas Reps. Jodey C. Arrington, Lance Gooden and Sheila Jackson Lee.

Brady weighed in with his own letter to Neal urging him to support a “transition period” in any eventual compromise during which no public employees will see benefit cuts and “millions will receive a higher benefit.” He also pointed out in his Dec. 13 letter that future Congresses would have plenty of time to step in with tweaks to the formula before the four-decade transition period ends.

“Together we have an opportunity to provide our teachers, police, firefighters, and others with a real solution that can be agreed to in both the House and the narrowly divided Senate,” Brady said. “But we can only do that and get something signed into law if we can first agree on what that relief looks like.”

Neal’s office couldn’t immediately be reached for comment.

It’s unclear whether Neal and Brady can resolve the impasse in time to get legislation into the omnibus that appropriators are trying to pass before Christmas, and whether the Senate would accept their fix. With Brady retiring at the end of the year, advocates at the news conference urged lawmakers to deliver some form of relief by year’s end after a 40-year wait.

Neal said at Wednesday’s news conference that lawmakers were “close to something” but pointed to complications including cost and that there’s a lack of broad understanding pensioners affected by the windfall elimination provision are missing out after paying into the system.

“Our efforts have been sincere,” he said. “We continue to try.”

Brady said at the news conference that while his approach and Neal’s bill have “diverged a bit” in their latest iterations, they take similar approaches and are getting “closer and closer and closer” to agreement.

He’s said repeatedly that lawmakers should address the windfall elimination provision — which is cheaper to fix and impacts more people — and could then work to apply a similar approach to the government pension offset, which lowers Social Security benefits for spouses with pensions.

Advocates for retirees from states like Massachusetts and Texas prefer a full repeal of both provisions, which were intended to prevent people with government pensions from getting outsized Social Security payouts.

Bipartisan groundswell

There’s building, bipartisan consensus in the House that the provision unfairly docks benefits and should be scrapped — as shown by a push this year to force a vote on a bill with over 300 co-sponsors that would eliminate both.

Ways and Means took up that bill in a procedural move that stopped its backers from forcing it to the House floor amid concern about its cost. Neal and Brady pledged to advance a fix that wouldn’t worsen the Social Security trust funds’ already flagging finances.

Three lead backers of the repeal measure — Reps. Garret Graves, R-La., Rodney Davis, R-Ill., and Abigail Spanberger, D-Va. — wrote to Neal and Brady on Wednesday urging them to include a comprehensive fix for the windfall elimination provision and government pension offset in a year-end package, even if it’s short of full repeal.

They said while Ways and Means has made it a priority to include a bill to increase private retirement savings in the omnibus, “nothing provides retirement security like restoring benefits that workers paid for.”

The Senate could still pose its own challenge. Mass Retirees CEO Shawn Duhamel pointed to the Senate as the barrier to advancing a clean repeal.

“The problem with full repeal is that we do not have the national support nor the votes in the U.S. Senate to fully pass that legislation through Congress,” Duhamel said. “As much as we would like to achieve that goal, we do not believe that there’s a viable path forward.”

Maine Sen. Susan Collins, the lead Republican sponsor of the Senate’s version of the measure that boasts 42 co-sponsors, said full repeal has “always been a challenge” and that the biggest reasons are the cost and that most states aren’t fully affected by the benefit limits. States that include Social Security as part of public worker retirement plans don’t see the same impact for retirees.

She offered an option different than the Neal-Brady method for a fix, suggesting lawmakers could grant targeted relief from the windfall elimination provision and government pension offset for lower-income individuals.

“That may be a way to start,” she said. “It is so inequitable that you can work and earn your Social Security benefits and then not receive them.”

Neal has been wary of holding broader votes on options without the backing to make it through Congress. He said Wednesday he’d vote in favor of the bill for full repeal if advocates believed it would build momentum for the cause.

Neal added that after consensus fell apart at the last minute on a bipartisan plan he agreed on with Brady six years ago, they feared outright defeat of legislation in a vote would mean having to start over.

“Unlike Sisyphus, we want to make sure that we do get the boulder to the top of the hill and not continue in the effort to roll it up only to have it come back down,” he said, referencing the story from Greek mythology.

As lawmakers aim for agreement, they added that the price tag and concern about Social Security’s finances remain as barriers.

Outright repeal of the windfall elimination provision would cost about $88 billion through fiscal 2032, according to the Congressional Budget Office. The Social Security Administration estimated Neal and Brady’s bills would each cost less than $30 billion over a decade, though CBO hasn’t released an estimate.

Brady said lawmakers are dealing with trying to solve a problem regarding the hit to Social Security’s trust funds even though they’ll need to address the broader problem of approaching insolvency “in just a few years” regardless.

“We just got to grind it out to see if we can’t get this done,” Brady said. “And you know, we’ve spent a lifetime here in Congress to try to get this solution done and provide some relief. So we’re not gonna give up till … the clock strikes midnight.”

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