In April of 2021, Ways and Means Committee Chairman Richard Neal, (D-Mass.), reintroduced the Public Servants Protection and Fairness Act of 2021. This legislation was originally presented to Congress in 2019, but died without receiving a vote. But now that the balance of power has shifted in both houses of Congress, this proposal has a much higher likelihood of passage.
The goal of this Act is to provide an equitable Social Security formula for individuals with noncovered employment and to provide relief for individuals currently affected by Social Security’s Windfall Elimination Provision (also known as the WEP).
Repealing the WEP with a new formula should help ease the difficulty that individuals with noncovered pensions face when planning for retirement. Although it’s not widely known, the annual Social Security benefit estimate does not include the WEP penalty in the estimated benefit. Furthermore, most Social Security technicians – let alone financial advisors – fail to understand the nuances of how the WEP is applied. They cannot explain it adequately, and although they may be trying to help, too often only add to the confusion.
There’s no reason we need to keep going this way. It’s past time for this outdated rule to be reformed.