Social Security Issues Regarding the Coverage of Public Employees

U.S. Government Accountability Office
Publication Date: 
November 2007

Ninety-six percent of all Americans work in positions covered by Social Security. The remaining 4 percent of uncovered workers are primarily made up of state and local public sector workers, where a quarter of all public sector workers are uncovered. Uncovered workers, however, may still be eligible for Social Security benefits either from prior covered work or through a spouse. To address these inconsistencies, the federal government has created two main provisions that affect uncovered workers eligible for Social Security benefits: the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO).  

Under WEP, individual Social Security benefits for uncovered workers are reduced using a modified formula. Under GPO, an uncovered worker with a covered spouse will receive a reduction on spousal benefits equal to two-thirds of their government pension. 

GPO and WEP have been a source of frustration and confusion for public sector workers, and public sectors unions have advocated for the elimination of these provisions. The Government Accountability Office (GAO), however, estimates that such an elimination (without any other changes) would result in losses of over $80 billion over 10 years and increase Social Security's deficit. Administering GPO and WEP has also sometimes resulted in inaccurate enforcement of GPO and WEP, and the GAO recommends that the Internal Revenue Services (IRS) be allowed to collect pertinent pension and wage information on behalf of the Social Security Administration to ensure efficient and accurate reporting. 

Alternatively, extending mandatory coverage to all public sector workers would eliminate the need for GPO and WEP. The GAO estimates that extending mandatory coverage would reduce Social Security's 75-year actuarial deficit by 11 percent. Public sector workers would also gain inflation-protected, portable benefits under Social Security, without any WEP or GPO reductions. States, on the other hand, would need to shoulder the increased costs of benefits, and would need to modify existing retirement benefits to keep costs manageable.