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On September 19, 2023, the Congressional Research Service (CRS) published its report, The Windfall Elimination Provision (WEP) in Social Security: Proposals for a New Proportional Formula. The WEP affects Social Security benefits paid to individuals that earn Social Security benefits from Social Security covered employment, but also earn pension benefits from state or local government employment not covered by Social Security. In these cases, Social Security benefits are lowered by the WEP. 

Social Security benefits are designed to replace a larger percent of pre-retirement income for lower-paid workers than for higher-paid workers. This is done by: 1) calculating an employee’s average indexed monthly earnings (AIME) from employment covered by Social Security; and 2) calculating the employee’s primary insurance amount (PIA) using a formula that applies a higher replacement percentage to lower earnings than to higher earnings. 

In 2023, two legislative bills were introduced that would replace the current-law WEP approach with a proportional formula for certain individuals that would become eligible for Social Security benefits in 2025 or later. The bills include: 1) the Public Servants Protection and Fairness Act of 2023 (H.R. 4260); and 2) the Equal Treatment of Public Servants Act of 2023 (H.R. 5342).

The proportional formula for the WEP provides workers that have some earnings from noncovered employment the same replacement rate as those workers that worked their entire careers in covered employment, whereas the current-law WEP can only approximately do so.

According to the report, “in 1983, the Social Security Administration (SSA) lacked the data on noncovered earnings needed to make the benefit adjustment under the proportional formula so Congress adopted the current WEP formula instead. As of 2017, SSA has 35 years of data on earnings from both covered and noncovered employment. This data’s availability means that the proportional formula is now an option for Congress to consider.”

The report also compares the current WEP and the proportional formula. In addition, it provides the SSA’s Office of the Chief Actuary (OCACT) cost estimates and funding rules for each of the legislative bills.

The report is available here.