Over the weekend, Congress did something that’s pretty unusual these days: A lopsided bipartisan majority voted to address an issue related to spending and benefits. The Senate passed the Social Security Fairness Act by a vote of 76 to 20. The House had passed it by a similar margin last month. To become law, it must be signed by the president.
The legislation addresses an issue faced by about 3 million former state and local government workers, including teachers, firefighters and police. They have been receiving reduced Social Security retirement and survivor benefits because they also get separate government pensions. The act also applies to a much smaller group of former federal workers.
The fix will restore full benefits. It will also cost the Social Security system a whole lot of money.
Those 3 million former government workers get reduced Social Security benefits — alongside their government pensions — under a cost-saving reform enacted during the Ronald Reagan administration, said Daniel Horowitz at the American Federation of Government Employees.
“So even if you paid into both systems, under current law you stand to lose most of your Social Security benefits. Fortunately, Congress has finally righted this and people will get their full Social Security benefit,” he said.
But Social Security is “progressive,” meaning lower-income workers get relatively higher benefits in retirement.
Some state and local government workers look like low earners — because they aren’t required to pay much into the system — which means they can end up with bigger Social Security checks.
Congress tried to fix this 40 years ago, said Alicia Munnell at the Boston College Center for Retirement Research. But the result reduced benefits too much for some retirees, not enough for others.
“So the fury of state and local workers persuaded Congress that they should eliminate the provision altogether. It’s a step backwards. We should have fixed it, not eliminated it,” she said.
So now, some retired government workers will again get outsize Social Security checks, said Maya MacGuineas at the Committee for a Responsible Federal Budget.
And Congress, she said, “created a very expensive benefit — about $200 billion, did not pay for it, leading to the program becoming insolvent even sooner than it already is going to be.”
About six months sooner, she said, meaning Congress will have to either cut benefits or raise Social Security revenue in an estimated 8½ to nine years.
