Social Security: The Public Servant Retirement Protection Act (H.R. 2772/S. 1647)

Congressional research reportJul 9, 2007

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Order Code RL32477

Social Security: The Public Servant Retirement

Protection Act (H.R. 2772/S. 1647)

Updated July 9, 2007

Laura Haltzel

Specialist in Social Security

Domestic Social Policy Division

Social Security: The Public Servant Retirement

Protection Act (H.R. 2772/S. 1647)

Summary

A worker is “covered” by Social Security if he or she pays into Social Security

through the Old-Age, Survivors, and Disability Insurance (OASDI) payroll tax.

Currently 96% of all workers are covered by Social Security. The majority of noncovered positions are held by federal, state, and local government employees.

The current-law Windfall Elimination Provision (WEP) reduces the Social

Security retirement or disability benefits of workers who also receive a pension from

employment not covered by Social Security. The goal of the WEP was to remove an

unintended advantage that the regular Social Security benefit formula provided to

employees who divided their careers between covered and non-covered positions.

As of December 2006, approximately 971,300 beneficiaries (approximately 2% of

the entire beneficiary population at that time) had their benefits reduced as a result

of the current-law WEP.

On June 19, 2007, Representative Kevin Brady introduced H.R. 2772, the Public

Servant Retirement Protection Act (PSRPA), which would alter the current-law WEP

formula for those who first enter non-Social Security-covered employment one year

after the bill’s enactment. The PSRPA would maintain the current-law WEP for

workers who have worked in non-covered employment prior to this date except in

cases where the PSRPA WEP provides them with a higher benefit. On June 19,

2007, Senator Kay Bailey Hutchison introduced the sister bill, S. 1647. Both bills

would replace the current-law WEP formula with a new WEP formula that provides

a benefit in rough proportion to the percentage of earnings worked in Social Securitycovered employment.

When compared to current-law, the effect of the PSRPA WEP on a worker’s

benefit levels varies both by earnings level and the number of years of Social Security

covered-earnings. The current-law WEP generally provides a benefit that increases

with additional years of Social Security coverage. By contrast, the key determinant

of the new proportional benefit amount is the percentage of the highest 35 years of

covered and non-covered earnings that can be attributed to Social Security covered

work — the higher the value of these covered earnings compared to the highest 35

years of covered and non-covered earnings, the larger the benefit under the PSRPA.

Thus, the PSRPA WEP provides a benefit that increases with a rise in the proportion

of Social Security covered earnings relative to overall earnings, regardless of the

number of years worked in Social Security covered employment.

This report will be updated as legislative activity warrants.

Contents

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Current-Law Windfall Elimination Provision (WEP) . . . . . . . . . . . . . . . . . . . . . 1

Rationale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Social Security-Covered and Non-Covered Work . . . . . . . . . . . . . . . . . . . . . 4

Who is Currently Affected by the WEP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

The “Public Servant Retirement Protection Act” (PSRPA) . . . . . . . . . . . . . . . . 10

Future Non-Covered Workers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Applies a New, Proportional PIA Formula to Those Who First Begin

Non-Covered Employment One Year after the Bill’s Enactment 10

Current and Past Non-Covered Workers . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Holds Harmless Individuals Who Already Work or Have Worked

in Non-Covered Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

How Will the PSRPA Affect Benefits? . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Earnings Levels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Number of Years of Covered Earnings . . . . . . . . . . . . . . . . . . . . . . . . 17

Assumptions and Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Appendix: Benefit Amounts Under Current-Law and PSRPA by

Earnings Level and Years of Social Security Covered Earnings . . . . . . . . . 20

List of Figures

Figure 1. Current-Law WEP, Scaled Average-Wage Earner . . . . . . . . . . . . . . . . 3

Figure 2. Current-Law WEP and PSRPA WEP,

Scaled Average-Wage Earner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Figure 3. Current-Law WEP and PSRPA WEP,

Minimum Wage Earner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Figure 4. Current-Law WEP and PSRPA WEP,

Scaled Low-Wage Earner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Figure 5. Current-Law WEP and PSRPA WEP,

Scaled High-Wage Earner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Figure 6. Current-Law WEP and PSRPA WEP,

Maximum-Wage Earner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Figure 7. Percent Change in WEP Benefit Under PSRPA Compared

to Current Law, by Earnings Level . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Figure 8. Percent Change in WEP Benefit Under PSRPA Compared

to Current Law, by Years of Covered Earnings . . . . . . . . . . . . . . . . . . . . . . 17

List of Tables

Table 1. Estimated Social Security Coverage of Workers with

State and Local Government Employment, 2005 . . . . . . . . . . . . . . . . . . . . . 4

Table 2. Number of Beneficiaries in Current Payment Status

with Benefits Affected by Windfall Elimination Provision (WEP),

by State and Type of Benefit, December 2006 . . . . . . . . . . . . . . . . . . . . . . . 6

Table 3. Number of Beneficiaries in Current Payment Status

with Benefits Affected by the Windfall Elimination Provision (WEP),

by Gender and Type of Benefit, December 2006 . . . . . . . . . . . . . . . . . . . . . . 8

Table 4. Number of Individuals Affected by the Windfall Elimination Provision,

by Gender and Number of Years of Coverage, December 2006 . . . . . . . . . . 8

Table 5. Minimum-Wage Worker . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Table 6. Scaled Low-Wage Worker . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Table 7. Scaled Average-Wage Worker . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Table 8. Scaled High-Wage Worker . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Table 9. Maximum-Wage Worker . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Social Security: The Public Servant

Retirement Protection Act

(H.R. 2772/S. 1647)

Background

The Windfall Elimination Provision (WEP) reduces certain Social Security

benefits of workers who also have pension benefits from employment not covered

by Social Security. On June 19, 2007, Representative Kevin Brady introduced H.R.

2772, the Public Servant Retirement Protection Act (PSRPA), which would alter the

current-law WEP formula for those who first enter non-Social Security-covered

employment one year after the bill’s enactment. The PSRPA would maintain the

current-law WEP for workers who have worked in non-covered employment prior

to this date except in cases where the PSRPA WEP provides them with a higher

benefit. On June 19, 2007, Senator Kay Bailey Hutchison introduced the sister bill,

S. 1647. Both bills would replace the current-law WEP formula with a new WEP

formula that provides a benefit in rough proportion to the percentage of earnings

worked in Social Security-covered employment.

Current-Law Windfall

Elimination Provision (WEP)

The current-law WEP reduces the Social Security retirement or disability

benefits of workers who also receive a pension from employment not covered by

Social Security.1 The base Social Security benefit, the Primary Insurance Amount

(PIA), is the amount that a worker would receive as a Social Security retirement

benefit if he or she retired exactly at the full retirement age (65 years and eight

months in 2007). The PIA formula applies three progressive factors — 90%, 32%,

and 15% — to three different levels, or brackets, of a worker’s average indexed

The WEP is sometimes confused with the Government Pension Offset (GPO), which

reduces the Social Security spousal benefits of individuals who receive a pension from

employment not covered by Social Security. For more information on the GPO, please see

CRS Report RL32453, “Social Security: The Government Pension Offset (GPO)” by Laura

Haltzel.

CRS-2

monthly covered earnings (AIME).2 In 2007, for those who reach age 62 or who

become disabled, the PIA formula is

90% of the first $680 of the AIME, PLUS

32% of the AIME between $680 and $4,100, PLUS

15% of the AIME exceeding $4,100.

Under current-law, this regular PIA formula is modified for those receiving

pensions from non-Social Security covered employment by adjusting the 90% factor

based on the number of years the worker had “substantial” employment covered by

Social Security (i.e., having earned at least one quarter of the “old-law” Social

Security maximum taxable wage base for each year).3 The higher the number of

years of substantial Social Security coverage, the higher the first formula factor used

in the WEP PIA formula. The lowest formula factor is 40%, which applies to those

with 20 or fewer years of substantial Social Security covered employment. For each

additional year of substantial Social Security coverage over 20, the formula factor

increases by five percentage points until it reaches 90% for those with 30 years of

substantial Social Security covered employment — the same first formula factor as

under the regular PIA formula. Thus, a worker who would otherwise be subject to

the WEP would be exempt from any benefit reduction if he or she had at least 30

years in covered employment. The 32% and 15% PIA formula factors continue to

apply as under the regular PIA formula. Figure 1 demonstrates how the benefit level

resulting from the current-law WEP formula varies by years of covered earnings for

The AIME is a dollar amount that represents the average monthly earnings from Social

Security-covered employment over most of the worker’s adult life indexed to the increase

in average annual wages. To calculate the AIME for a retired worker, a worker’s earnings

prior to age 60 are first indexed to the year that the worker reaches age 60. The highest 35

years of indexed yearly earnings are used to compute the AIME. The sum of the indexed

earnings in these 35 years is divided by the number of months in these 35 years to obtain the

average indexed monthly earnings.

For determining years of coverage after 1978 for individuals with pensions from noncovered employment, the amount is 25% of what the contribution and benefit base otherwise

would have been if the 1977 Social Security Amendments had not been enacted. In 2007,

the “old-law” taxable wage base is equal to $72,600 and, thus, to earn credit for one “year

of coverage” under the WEP, a worker would have to earn at least $18,150 in Social

Security-covered employment.

CRS-3

a worker with average earnings.4 In no case can the reduction in benefits under the

WEP exceed more than half of the pension based on non-covered work.

Figure 1. Current-Law WEP, Scaled Average-Wage Earner

$3,500

Benefit Level

(Constant 2007 Dollars)

$3,000

Current Law WEP

$2,500

$2,000

$1,500

$1,000

$500

10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35

Years of Covered Earnings

Rationale

The goal of the WEP was to remove an unintended advantage that the regular

Social Security benefit formula provided to employees who divide their careers

between covered and non-covered positions. The regular Social Security formula is

intended to replace a higher proportion of earnings for those workers who spend their

working years in low paying jobs relative to those who have high earnings.

However, the regular formula cannot differentiate between those who work their

whole lives in low-paying jobs and those who simply appear to be low paid because

they work for many years in jobs not covered by Social Security. Because those who

work in non-Social Security covered positions do not contribute to Social Security

through the payroll tax, each year of non-covered employment is recorded as a year

A “year of coverage” should not be confused with a “year of covered earnings.” In 2007,

to earn credit for one “year of coverage” under the WEP, a worker would have to earn at

least $18,150 in Social Security-covered employment. A “year of covered earnings” is any

year in which the worker had earnings from Social Security-covered employment, regardless

of the amount earned. Because the PSRPA does not rely on the current-law definition of

“years of coverage”in calculating WEP benefits (as determined by measuring “substantial

earnings”), the common denominator of “years of covered earnings” is used in all charts.

For example, in 2007, a minimum-wage worker in Social Security covered-employment

would earn $10,712. Although this minimum-wage worker has a year of Social Securitycovered earnings, he or she would not have earned a “year of coverage” towards the currentlaw WEP formula that requires a worker to earn at least $18,150 in Social Security coveredemployment. Any attempt to graphically represent a minimum-wage worker’s current-law

benefit under the WEP by “years of coverage” would have been impossible as the minimumwage worker never qualifies for a single “year of coverage.”

CRS-4

of zero earnings in the calculation of a worker’s AIME. Thus, workers in noncovered Social Security positions received the advantage of the progressive Social

Security formula because their few years of covered earnings were averaged over

their entire working career to determine the average covered earnings on which their

Social Security benefits were based. The WEP formula is intended to remove this

advantage for these workers.

Social Security-Covered and Non-Covered Work

A worker is in a position “covered” by Social Security if he or she pays into

Social Security through the Old-Age, Survivors, and Disability Insurance (OASDI)

payroll tax. Approximately 96% of all workers are covered. The majority of noncovered positions are held by government employees: most federal employees hired

before 1984 and 29% of current state and local government employees. The latest

available information on the Social Security coverage of state and local workers is

for the year 2005. Nationwide, approximately 71% of state and local government

employees are covered.5 However, coverage varies from state to state. For example,

approximately 97% of state and local employees in Vermont are covered by Social

Security, while only 3% of state and local employees in Ohio are covered.6 Table

1 provides a breakdown of Social Security covered and non-covered employees by

state.

Table 1. Estimated Social Security Coverage of Workers with

State and Local Government Employment, 2005

(in thousands)

State

Alabama

Alaska

Arizona

Arkansas

California

Colorado

Connecticut

Delaware

District of Columbia

Florida

Georgia

Hawaii

Idaho

Illinois

Indiana

Iowa

Kansas

All

Workersa

377

425

194

2,493

409

287

1,173

694

129

140

1,021

493

286

Covered

Workers

350

383

172

1,045

116

193

1,011

498

129

527

441

254

256

Non-Covered

Workers

1,448

293

162

196

494

Percent

Non-Covered

53%

10%

11%

58%

72%

33%

32%

14%

28%

40%

48%

11%

10%

Social Security Administration, Estimated Social Security Coverage of Workers with State

and Local Government Employment, 2005.

Ibid.

CRS-5

Kentucky

Louisiana

Maine

Maryland

Massachusetts

Michigan

Minnesota

Mississippi

Missouri

Montana

Nebraska

Nevada

New Hampshire

New Jersey

New Mexico

New York

North Carolina

North Dakota

Ohio

Oklahoma

Oregon

Pennsylvania

Puerto Rico

Rhode Island

South Carolina

South Dakota

Tennessee

Texas

Utah

Vermont

Virginia

Washington

All

Workersa

373

359

127

443

457

802

445

254

469

155

149

111

685

210

1,725

698

868

305

292

815

291

358

488

1,749

220

650

528

Covered

Workers

271

399

712

408

232

340

144

635

185

1,665

643

268

266

742

256

338

440

827

199

611

468

Non-Covered

Workers

102

260

441

129

116

846

922

Percent

Non-Covered

27%

72%

50%

10%

97%

11%

28%

12%

78%

13%

12%

16%

97%

12%

17%

10%

53%

10%

11%

West Virginia

Wisconsin

Wyoming

Other b

Total

156

478

23,741

140

421

16,940

6,801

10%

12%

13%

67%

29%

State

Source: Social Security Administration, Continuous Work History Sample, 1% sample.

Notes: Workers with more than one state and local employer during the year are counted for each

employer.

a. Includes seasonal and part-time workers for whom state and local government employment was not

the major job.

b. Includes persons employed in American Samoa, Guam and Virgin Islands, U.S. citizens employed

abroad by American employers, and persons employed on oceanborne vessels.

CRS-6

This variation in coverage occurs because, although Social Security originally

did not cover any state and local government workers, over time the law has changed.

Most state and local government employees became covered by Social Security

through voluntary agreements between the Social Security Administration and

individual states.7 Beginning in July 1991, state and local employees who were not

members of a public retirement system were mandatorily covered by Social Security

because they had no alternative retirement or disability protection.8

Who is Currently Affected by the WEP

Individuals who work or who have worked in positions where they did not pay

into Social Security are potentially affected by the WEP. As of December 2006,

approximately 971,300 beneficiaries (approximately 2% of the entire beneficiary

population at that time) had their benefits reduced as a result of the current-law WEP.

As Social Security coverage varies by state, so does the number of individuals

affected by the WEP. Table 2 below provides a detailed breakdown by state of the

number of beneficiaries affected by the WEP.

Table 2. Number of Beneficiaries in Current Payment Status

with Benefits Affected by Windfall Elimination Provision (WEP),

by State and Type of Benefit, December 2006

State

Alabama

Total Number

of WEP

Beneficiaries

13,477

Retired

Workers

Disabled

Workers

11,912

261

Spouses

Percent of All

and

Beneficiaries

Children

in the Statea

1,304

Alaska

4,600

4,270

250

Arizona

17,579

15,978

296

1,305

Arkansas

7,788

7,010

200

578

California

120,458

109,715

1,588

9,155

Colorado

27,957

25,669

316

1,972

Connecticut

8,742

8,199

134

409

Delaware

2,191

1,994

145

District of Columbia

5,995

5,629

108

258

Florida

56,471

51,346

712

4,413

Georgia

27,497

25,361

380

1,756

Hawaii

6,214

5,580

548

Idaho

4,147

3,750

337

Illinois

49,565

46,288

506

2,771

Indiana

9,805

8,847

216

742

Iowa

5,712

5,254

394

Kansas

6,100

5,564

438

These agreements are known as “Section 218 agreements” because they are authorized by

Section 218 of the Social Security Act.

P.L. 101-508, The Omnibus Budget Reconciliation Act of 1990, H.Rept. 101-881, p. 358.

CRS-7

Spouses

Percent of All

and

Beneficiaries

Children

in the Statea

906

Kentucky

Total Number

of WEP

Beneficiaries

12,283

Louisiana

18,299

16,090

443

1,766

Maine

8,644

7,908

143

593

Maryland

30,674

28,247

428

1,999

State

Retired

Workers

Disabled

Workers

11,109

268

Massachusetts

32,140

30,165

471

1,504

Michigan

12,139

10,930

221

988

Minnesota

12,114

11,206

133

775

Mississippi

6,624

5,906

146

572

Missouri

20,342

18,832

330

1,180

Montana

3,545

3,188

295

Nebraska

3,664

3,376

247

Nevada

12,230

11,401

181

648

New Hampshire

4,326

3,959

276

New Jersey

14,984

13,621

289

1,074

New Mexico

8,428

7,362

162

904

New York

21,889

19,854

363

1,672

North Carolina

17,855

16,321

300

1,234

North Dakota

1,810

1,641

155

Ohio

70,599

64,752

876

4,971

Oklahoma

12,397

11,068

259

1,070

Oregon

9,643

8,788

137

718

Pennsylvania

23,640

21,284

482

1,874

Rhode Island

3,017

2,757

189

South Carolina

11,114

10,075

169

870

South Dakota

2,645

2,437

175

Tennessee

12,642

11,371

176

1,095

Texas

80,990

73,749

1,054

6,187

Utah

8,556

7,607

124

825

Vermont

1,715

1,559

134

Virginia

32,442

29,325

412

2,705

Washington

18,575

16,486

289

1,800

West Virginia

4,305

3,762

105

438

Wisconsin

8,028

7,418

511

Wyoming

1,620

1,483

114

Outlying areas and

53,094

40,696

484

11,914

Total

971,310

878,099

14,058

79,153

Source: Social Security Administration, Office of Research, Evaluation and Statistics, May 23, 2007.

a. CRS calculations based on Social Security Administration, Office of Research, Evaluation and

Statistics, Congressional Statistics Factsheets, May 2007.

CRS-8

Of this group affected by the WEP, about 90% were receiving retired worker

benefits, about 1% were receiving disabled worker benefits, and about 9% were

receiving benefits as spouses or children of insured workers. Spouses and children

may have their benefits indirectly reduced as a result of the WEP since their benefits

are based on the reduced PIA of the worker. However, the WEP reduction is

removed for the calculation of survivor benefits. Of those receiving retirement or

disability benefits, approximately 35% were women and 65% were men (see Table

3).

Table 3. Number of Beneficiaries in Current Payment Status

with Benefits Affected by the Windfall Elimination Provision

(WEP), by Gender and Type of Benefit, December 2006

Gender

Total

Type of Benefit

Women

Men

312,955

579,202

Retired Workers

308,099

570,000

Total

892,157

878,099

Disabled Workers

4,856

9,202

14,058

Source: Social Security Administration, Office of Research, Evaluation and Statistics, May 23, 2007.

The number of affected individuals also varies by years of coverage (years of

substantial Social Security covered earnings) that count towards the WEP formula.

Table 4 demonstrates that approximately 73% of all individuals currently affected

by the WEP had 20 or fewer years of coverage and 19% had 21 or more years of

coverage, while the information on years of coverage is not available for about 8%

of those affected. Thus, for about 73% of all beneficiaries affected by the current-law

WEP, the first formula factor used in the WEP PIA never exceeds 40%.

Table 4. Number of Individuals Affected by the Windfall

Elimination Provision, by Gender and Number of Years of

Coverage, December 2006

Years of

Coverage

Women

Men

Total

Percent of Total

by Years of

Coverage

Information

Not Available

36,534

36,251

72,785

8.2%

3,045

1,334

4,379

0.5%

4,525

3,309

7,834

0.9%

6,556

5,751

12,307

1.4%

8,719

8,389

17,108

1.9%

10,791

11,629

22,420

2.5%

12,747

15,282

28,029

3.1%

14,600

18,940

33,540

3.8%

16,191

22,380

38,571

4.3%

CRS-9

Years of

Coverage

Women

Men

Total

Percent of Total

by Years of

Coverage

17,858

26,041

43,899

4.9%

18,547

29,150

47,697

5.3%

18,359

31,383

49,742

5.6%

17,290

31,758

49,048

5.5%

15,731

29,882

45,613

5.1%

13,930

27,550

41,480

4.6%

12,413

25,597

38,010

4.3%

10,915

23,998

34,913

3.9%

9,794

22,308

32,102

3.6%

8,891

20,828

29,719

3.3%

7,804

19,748

27,552

3.1%

6,813

18,616

25,429

2.9%

6,169

18,867

25,036

2.8%

5,701

19,885

25,586

2.9%

4,932

19,034

23,966

2.7%

4,548

17,433

21,981

2.5%

4,111

15,711

19,822

2.2%

3,684

13,834

17,518

2.0%

3,419

12,624

16,043

1.8%

2,956

11,313

14,269

1.6%

2,721

10,179

12,900

1.4%

2,625

10,138

12,763

1.4%

30+

0.0%

Total

312,955

579,202

892,157

100.0%

Source: Unpublished table, Social Security Administration, Office of Research, Evaluation and

Statistics, May 23, 2007.

Notes: A “year of coverage” should not be confused with a “year of covered earnings.” Under the

current-law WEP, the number of years the worker had “substantial” employment covered by Social

Security (i.e., having earned at least one quarter of the “old-law” Social Security maximum taxable

wage base for each year) qualifies as a “year of coverage.” In 2007, the “old-law” taxable wage base

was equal to $72,600 and, thus, to earn credit for one “year of coverage” under the WEP, a worker

would have to earn at least $18,150 in Social Security-covered employment. A “year of covered

earnings” is any year in which the worker had earnings from Social Security-covered employment,

regardless of the amount earned.

CRS-10

The “Public Servant Retirement Protection Act”

(PSRPA)

The PSRPA would treat future non-covered workers differently from current or

past non-covered workers when calculating Social Security retirement or disability

benefits.

Future Non-Covered Workers

Applies a New, Proportional PIA Formula to Those Who First Begin

Non-Covered Employment One Year after the Bill’s Enactment. The

PSRPA legislation establishes a new PIA formula that takes into account the

proportion of a worker’s career earnings attributable to Social Security-covered

employment. First, to represent the PIA that a worker would receive if he or she had

worked a full career in Social Security-covered employment, a PIA is calculated

using the worker’s highest 35 years of earnings from both covered and non-covered

employment. Second, this career-based PIA is multiplied by a ratio that reflects the

portion of the worker’s lifetime earnings attributable to covered employment. This

ratio is equal to the current-law AIME, which is based on the worker’s highest 35

years of Social Security-covered earnings, divided by an AIME based on the worker’s

highest 35 years of earnings from both covered and non-covered employment. The

new PIA is therefore equal to the portion of the career PIA that the worker is eligible

to receive based on his or her Social Security-covered earnings. Thus, the new PIA

formula for future non-covered workers is as follows:

New PIA = PIA using covered

X (AIME using highest 35 years covered earnings)

and non-covered earnings (AIME using highest 35 years covered and noncovered earnings)

Current and Past Non-Covered Workers

Holds Harmless Individuals Who Already Work or Have Worked in

Non-Covered Employment. Those individuals currently working in non-Social

Security-covered employment, those who have worked in non-covered employment

in the past, and those who begin work in non-covered employment within one-year

of the bill’s enactment would not experience any reduction in benefits and could

potentially experience a benefit increase. The PSRPA legislation retains the currentlaw WEP formula for these individuals as well as the guarantee that the reduction in

benefits caused by the current-law WEP cannot exceed more than half of the pension

based on non-covered work. However, if the PIA calculated under the proportional

WEP formula would be higher than that provided under current-law, the worker

would receive the higher PIA.

Figure 2 demonstrates the basic relationship between the current-law WEP

formula and the PSRPA proportional benefit formula for a scaled average-wage

worker whose years of Social Security covered earnings occur at the end of his

career.

CRS-11

Figure 2. Current-Law WEP and PSRPA WEP,

Scaled Average-Wage Earner

$3,500

Benefit Level

(Constant 2007 Dollars)

$3,000

$2,500

Current Law

WEP

PSRPA WEP

$2,000

$1,500

$1,000

$500

10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35

Years of Covered Earnings

The straight line represents benefits under the PSRPA, while the line with bend

points at 20 and 30 years of covered earnings and shifting slopes represents the

current-law WEP. The area between these two lines represents the estimated change

in benefits between current-law and the PSRPA. Most of the following analysis of

the results deals with explaining the difference in the gaps for workers with varying

levels of earnings and years of covered earnings.

How Will the PSRPA Affect Benefits?

Under the current-law WEP, benefits are driven by the number of

“years of coverage,” while under the PSRPA benefits are driven by

the value of covered earnings relative to overall earnings, regardless

of the number of years spent accruing those covered earnings.

While the current-law WEP formula provides no increase in the first

PIA formula factor of 40% for those with between 10 and 20 years

in covered employment, the PSRPA uses a 90% formula factor and

thus would provide a higher percent increase in benefit levels for

each year of covered earnings.

Future non-covered workers who spend 30 years or more in Social

Security covered employment would not be exempt from a reduced

Social Security benefit as are workers under current-law.

CRS-12

On the basis of estimates for future hypothetical workers using the

PSPRA formula:

—

Minimum-wage workers and low-wage workers would receive

the greatest percent increase in Social Security benefits under

the PSRPA relative to current-law, regardless of the number of

years of covered earnings.

Average-wage workers with up to 27 years of covered earnings

would receive benefits greater than what they would receive

under current law.

High-wage workers with up to 23 years of covered earnings

would receive benefits greater than what they would receive

under current law.

Maximum-wage workers would experience a decrease in Social

Security benefits under the PSRPA relative to current-law,

regardless of the number of years of covered earnings.

The remainder of this report uses the Congressional Research Service (CRS)

Social Security case-simulation model to analyze how the PSRPA would affect the

Social Security benefits of hypothetical workers with various earnings levels who

spend differing numbers of years working in Social Security-covered employment.

In the case-simulation model, it is necessary to specify not only the number of years

of covered employment, but also when those years occurred. Because we are relying

on hypothetical earnings patterns for workers, in all of our examples higher earnings

levels come towards the end of the worker’s career. Therefore, individuals whose

years of covered earnings occur later in their career experience slightly higher benefit

levels under the PSRPA than those individuals who have covered earnings earlier in

their career. While the relative importance of the timing of covered earnings holds

true for individuals with earnings histories that start low and increase throughout the

career, it would not necessarily hold true for other earnings patterns.

The appendix provides a series of tables with examples of how the PSRPA

would affect future non-covered workers based on differences in earnings levels and

years of Social Security covered earnings. For these examples, each worker’s

covered earnings are assumed to fall towards the end of his or her career. The output

for each scenario includes information on the PIA based on all earnings, the new

PSRPA PIA, the current-law WEP PIA, and the percent increase or decrease under

the PSRPA proposal compared to current-law. The main results based on these

examples and a preliminary explanation of these results are summarized below.

Earnings Levels. Figures 3, 4, 5 and 6 demonstrate the relationship between

current-law and the PSRPA for minimum-wage workers, scaled low-wage workers,

scaled high-wage workers and maximum-wage workers, respectively, who have

covered earnings at the end of their careers.9 These figures illustrate features of the

The projected earnings histories for these workers are those used by the Social Security

Administration to produce the Annual Trustees Report. It is assumed that they follow

(continued...)

CRS-13

current-law and the PSRPA WEP formulas, with respect to years of covered

earnings, by earnings levels. In all cases, the WEP benefit level, under both currentlaw and the PSRPA, increases with years of covered earnings. However, the currentlaw WEP generally increases at a varying rate with years of covered earnings,

whereas the PSRPA WEP increases at a constant rate.10 Also, the slope of both the

current-law WEP and PSRPA WEP, with respect to years of coverage, increases as

earnings increase (e.g., compare Figure 3 with Figure 4). These formula features

account for the differences in benefits illustrated in subsequent figures, with respect

to years of covered earnings and earnings levels.

Given our assumed earnings histories, the PSRPA provides a strictly

proportional benefit. However, the current-law WEP formula replaces a higher

proportion of the AIME of higher-wage workers than lower-wage workers. Higherwage workers tend to have larger AIMEs, and a larger portion of their benefit is

based on the 32% and 15% formula factors under the current-law WEP PIA. Lowerwage workers tend to have smaller AIMEs, and a larger portion of their benefit is

based on the first PIA formula factor which can be as small as 40% under the currentlaw WEP. Furthermore, under the current-law WEP, minimum-wage earners do not

have high enough earnings to qualify for a “year of coverage” under the WEP.

Therefore, while their AIMEs increase with additional years of covered earnings,

their WEP “years of coverage” do not and so the first PIA formula factor remains at

40%.

(...continued)

typical lifetime earnings patterns that would produce a Social Security benefit equivalent

to that of workers with career earnings of either: (1) a “low”wage (45% of a wage equal to

Social Security’s “average wage series);” (2) an “average wage”(a wage equal to Social

Security’s “average wage series);” (3) a “high” wage (160% of a wage equal to Social

Security’s “average wage series);” or (4) the maximum wage creditable under Social

Security.

This constant rate is primarily a function of the assumptions used to generate the

hypothetical earners used in this analysis, particularly the long-term constant rate of growth

in the national average wage.

CRS-14

Figure 3. Current-Law WEP and PSRPA WEP,

Minimum Wage Earner

$3,500

Benefit Level

(Constant 2007 Dollars)

$3,000

Current LawWEP

$2,500

PSRPA WEP

$2,000

$1,500

$1,000

$500

10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35

Years of Covered Earnings

Figure 4. Current-Law WEP and PSRPA WEP,

Scaled Low-Wage Earner

$3,500

Benefit Level

(Constant 2007 Dollars)

$3,000

Current Law WEP

$2,500

PSRPA WEP

$2,000

$1,500

$1,000

$500

10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35

Years of Covered Earnings

CRS-15

The impact of this “year of coverage” requirement can be seen by comparing

Figure 3 (minimum-wage worker) with Figure 2 (scaled average-wage worker). The

pattern of current-law benefits by years of covered earnings for the minimum-wage

worker does not exhibit the typical bend-points one expects from the WEP formula

because the first PIA formula factor never rises with additional years of covered

earnings. This same pattern holds true for scaled low-wage workers (Figure 4), but

to a lesser degree. Scaled low-wage workers earn high enough wages in some years

to qualify for a “year of coverage,” but even then the first PIA formula factor only

reaches 60%. Thus, when the new proportional PIA is used, and the regular PIA

formula using the 90% first formula factor is put in place, minimum-wage and scaled

low-wage workers experience the greatest percent increase in benefits. Scaled

average-wage, scaled high-wage, and maximum-wage earners all have high enough

earnings in each year of covered earnings to qualify for a ‘year of coverage’ under the

WEP and thus their first PIA formula factors rise every year between 20 and 30 years

of covered earnings (Figure 2, Figure 5 and Figure 6). The difference in the

percentage increase or decrease by earnings level is highlighted in Figure 7.

Figure 5. Current-Law WEP and PSRPA WEP,

Scaled High-Wage Earner

$3,500

Benefit Level

(Constant 2007 Dollars)

$3,000

Current Law WEP

PSRPA WEP

$2,500

$2,000

$1,500

$1,000

$500

10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35

Years of Covered Earnings

CRS-16

Figure 6. Current-Law WEP and PSRPA WEP,

Maximum-Wage Earner

Benefit Level

(Constant 2007 Dollars)

$4,000

$3,500

Current Law WEP

$3,000

PSRPA WEP

$2,500

$2,000

$1,500

$1,000

$500

10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35

Years of Covered Earnings

Figure 7. Percent Change in WEP Benefit Under PSRPA Compared

to Current Law, by Earnings Level

120%

Percent Change in WEP Benefit

100%

Minimum wage worker

Scaled low-wage worker

Scaled average-wage worker

Scaled high-wage worker

Maximum wage worker

80%

60%

40%

20%

-20%

-40%

10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35

Years of Covered Earnings

CRS-17

Number of Years of Covered Earnings. Under the PSRPA, the key

determinant of the new proportional benefit amount is the percentage of the highest

35 years of covered and non-covered earnings that can be attributed to covered work

— the higher the value of covered earnings to career earnings, the larger the benefit

under the PSRPA. In order to separate out the effect of the number of years of

covered earnings, we examined workers with identical earnings histories, but with

different numbers of years of covered earnings. For example, Figure 8 highlights

how the percent change in benefit level for a scaled average-wage worker who has

covered earnings at the end of his career varies by the number of years of coverage.11

As seen in Figure 8, the average-wage worker who has between 10 and 20 years

of covered earnings experiences a large percent increase in Social Security benefit

level compared to the current-law WEP. The current-law WEP formula limits the

first PIA formula factor to 40% (instead of 90% for regular workers) no matter how

many additional “years of coverage” a worker earns between 10 and 20. With the

PSRPA PIA, workers would receive an increase in benefit proportional to the

increase in their earnings for each year of additional covered earnings.

Figure 8. Percent Change in WEP Benefit Under PSRPA Compared

to Current Law, by Years of Covered Earnings

Percent Change in WEP Benefit

30%

25%

20%

Scaled Average-Wage Worker

15%

10%

10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35

-5%

-10%

Years of Covered Earnings

For those workers with 21 to 29 years of covered earnings, the percent increase

in benefit under the PSRPA declines for each year of covered earnings gained.

Again, this pattern is due to the current-law WEP formula. Under the current-law

WEP, the first formula factor in the PIA increases by 5% for each additional “year

of coverage” at the same time the current-law AIME increases as a result of

For scaled average-wage workers, a year of covered earnings equals a “year of coverage”

under the current-law WEP.

CRS-18

additional covered earnings. For the average-wage worker, the percent increase in

the covered AIME per year of coverage (the base of growth for the PSRPA) doesn’t

keep pace with the 5% increase in the first PIA formula factor (the base of growth for

the current-law WEP). Thus, for the average-wage worker, the current-law WEP

provides a higher benefit than the PSRPA would once covered earnings exceed 27.5

years.

Relative to current-law, individuals who work 30 to 34 years of covered

earnings would experience the largest percent decrease in their Social Security

benefits. Under current-law, individuals who work 30 or more years in covered

employment are exempt from any reduction in benefits under the WEP because their

benefits are calculated using the regular PIA formula with the 90% formula factor.

Under the new PSRPA, these individuals would now be affected by the proportional

WEP PIA.

Individuals who work for 35 years in covered employment at the end of their

careers would experience neither an increase nor a decrease in benefit levels. Under

current-law these individuals would be exempt from the WEP PIA formula. Under

the PSRPA PIA formula, these individuals are still exempt from the proportional

WEP reduction because their AIME based on covered work is equal to the AIME

based on all earnings. Because the AIME takes the highest 35 years of earnings, and

in both cases the highest 35 years are covered earnings from the end of the career, the

AIMEs are equal and the 35 year covered worker receives a PIA identical to what he

would have received under the current-law WEP PIA.

Assumptions and Methodology

The results presented in this report were calculated using the intermediate

(Alternative II) assumptions of the 2007 Social Security Trustees Report. All dollar

figures are in constant 2007 dollars. In each scenario, the worker is born in 1984,

begins work at age 21 in 2005, and retires at the full retirement age of 67 in 2051.

As a result, our example worker has a career of 46 years, split between Social

Security covered and non-covered work. We provide estimates for minimum-wage

workers, scaled low-wage workers, scaled average-wage workers, scaled high-wage

workers and maximum-wage workers, as defined by the Social Security Office of the

Chief Actuary.12 It is assumed that these workers follow typical lifetime earnings

patterns that would produce a Social Security benefit equivalent to that of workers

with career earnings of either: (1) a “low”wage (45% of a wage equal to Social

Security’s “average wage series);” (2) an “average wage”(a wage equal to Social

Security’s “average wage series);” (3) a “high” wage (160% of a wage equal to Social

Security’s “average wage series);” or (4) the maximum wage creditable under Social

Social Security Administration, Office of the Actuary, Internal Rates of Return Under the

OASDI Program for Hypothetical Workers, Actuarial Note no. 144, June 2001. The pattern

in these “scaled” earnings histories shows relatively low earnings at the beginning of the

career, fairly rapid growth through the middle of the career, and a gradual tapering off of

earnings at the end of the career.

CRS-19

Security. The scenarios provided show individuals with between 10 and 35 years of

covered earnings, with the remaining earnings out of the 46-year career being

uncovered. These scenarios are for illustration only and are not meant to fully

represent every possible scenario that actual workers may experience. For example,

by relying on stylized workers, we have assumed no gaps in employment.

Furthermore, the CRS case-simulation model does not contain information on the

estimated level of non-covered pension each type of worker could be expected to

receive upon retirement. Therefore, we are unable to model the provision of the

current-law WEP that would limit the reduction in Social Security benefits to 50%

of the non-covered pension amount. The output for each scenario includes

information on the PIA based on all earnings, the PSRPA PIA, the current-law WEP

PIA, and the percent increase or decrease under the PSRPA compared to current-law.

CRS-20

Appendix: Benefit Amounts Under Current-Law

and PSRPA by Earnings Level and Years

of Social Security Covered Earnings

Table 5. Minimum-Wage Worker

(All benefit amounts in constant 2007 dollars)

Years of

Covered

Earnings

PIA Based on

All Earnings

Current-Law

WEP-PIA

PSRPA WEP

PIA

1,039.43

158.47

173.39

188.01

202.34

217.26

231.88

246.21

261.13

275.45

290.07

305.00

319.32

333.94

348.87

363.19

377.81

392.44

407.06

421.68

434.51

446.15

457.79

469.43

481.07

492.71

504.65

313.65

342.60

371.55

400.20

429.14

458.09

487.04

515.99

544.64

573.58

602.53

631.18

660.13

689.37

718.02

746.97

775.92

804.57

833.52

862.46

891.11

920.06

949.01

977.96

1,006.61

1,035.85

Percent

Change in

WEP Benefit

98%

100%

101%

102%

103%

104%

105%

Source: Congressional Research Service (CRS) calculations.

Notes: Assumes a worker is born in 1984, begins work at age 21 in 2005, and retires at the full

retirement age of 67 in 2051. This scenario is for illustration only and is not meant to fully represent

every possible scenario that actual workers may experience. For example, by relying on stylized

workers, we have assumed no gaps in employment. This scenario focuses on workers with between

10 and 35 years of covered earnings because a worker generally needs 40 quarters of coverage (10

years) to qualify for Social Security benefits and the highest 35 years of earnings are generally used

in calculating Social Security benefits. These estimates do not include the current-law WEP provision

that would limit the reduction in Social Security benefits to 50% of the non-covered pension amount.

CRS-21

Table 6. Scaled Low-Wage Worker

(All benefit amounts in constant 2007 dollars)

Years of Covered

Earnings

PIA Based on

All Earnings

Current-Law

WEP PIA

PSRPA

WEP PIA

Percent Change

in WEP Benefit

1,317.87

211.59

319.02

51%

1,317.87

236.36

356.62

51%

1,317.87

262.02

395.12

51%

1,317.87

288.28

435.11

51%

1,317.87

315.14

475.40

51%

1,317.87

342.30

516.28

51%

1,317.87

369.76

557.47

51%

1,317.87

397.21

599.25

51%

1,317.87

425.26

641.33

51%

1,317.87

447.65

683.11

53%

1,317.87

469.73

724.89

54%

1,317.87

492.11

766.67

56%

1,317.87

514.20

808.15

57%

1,317.87

535.98

849.33

58%

1,317.87

557.47

890.22

60%

1,317.87

578.96

930.51

61%

1,317.87

600.14

970.79

62%

1,317.87

621.03

1,010.19

63%

1,317.87

641.92

1,049.28

63%

1,317.87

662.52

1,088.08

64%

1,317.87

682.81

1,126.28

65%

1,317.87

756.22

1,163.88

54%

1,317.87

829.04

1,200.88

45%

1,317.87

848.44

1,237.29

46%

1,317.87

867.24

1,273.10

47%

1,317.87

886.04

1,308.32

48%

Source: Congressional Research Service (CRS) calculations.

Notes: Assumes a worker is born in 1984, begins work at age 21 in 2005, and retires at the full

retirement age of 67 in 2051. It is assumed that the “low” wage worker follows a typical lifetime

earnings pattern that would produce a Social Security benefit equivalent to that of workers with career

earnings equal to 45% of Social Security’s “average wage” series. This scenario is for illustration only

and is not meant to fully represent every possible scenario that actual workers may experience. For

example, by relying on stylized workers, we have assumed no gaps in employment. This scenario

focuses on workers with between 10 and 35 years of covered earnings because a worker generally

needs 40 quarters of coverage (10 years) to qualify for Social Security benefits and the highest 35

years of earnings are generally used in calculating Social Security benefits. These estimates do not

include the current-law WEP provision that would limit the reduction in Social Security benefits to

50% of the non-covered pension amount.

CRS-22

Table 7. Scaled Average-Wage Worker

(All benefit amounts in constant 2007 dollars)

Years of

Covered Earnings

PIA Based on

All Earnings

Current-Law

WEP PIA

PSRPA

WEP PIA

Percent

Change in

WEP Benefit

2,171.68

461.37

526.13

14%

2,171.68

505.54

587.61

16%

2,171.68

551.20

598.05

645.51

693.85

742.49

791.74

841.28

890.52

939.76

1,042.42

1,144.48

1,246.54

1,347.71

1,448.88

1,549.45

1,649.42

1,748.80

1,847.88

1,946.06

1,990.53

2,034.10

2,077.08

2,119.15

2,160.64

651.47

717.13

783.68

851.12

919.17

987.80

1,057.04

1,125.98

1,194.92

1,263.85

1,332.19

1,399.94

1,467.08

1,533.93

1,599.89

1,665.24

1,729.70

1,793.27

1,856.24

1,918.31

1,979.49

2,039.47

2,098.56

2,156.16

18%

20%

21%

23%

24%

25%

26%

27%

21%

16%

12%

-1%

-3%

-5%

-4%

-3%

-2%

-1%

-0%

Source: Congressional Research Service (CRS) calculations.

Notes: Assumes a worker is born in 1984, begins work at age 21 in 2005, and retires at the full

retirement age of 67 in 2051. It is assumed that the “average” wage worker follows a typical lifetime

earnings pattern that would produce a Social Security benefit equivalent to that of workers with career

earnings equal to Social Security’s “average wage” series. This scenario is for illustration only and

is not meant to fully represent every possible scenario that actual workers may experience. For

example, by relying on stylized workers, we have assumed no gaps in employment. This scenario

focuses on workers with between 10 and 35 years of covered earnings because a worker generally

needs 40 quarters of coverage (10 years) to qualify for Social Security benefits and the highest 35

years of earnings are generally used in calculating Social Security benefits. These estimates do not

include the current-law WEP provision that would limit the reduction in Social Security benefits to

50% of the non-covered pension amount.

CRS-23

Table 8. Scaled High-Wage Worker

(All benefit amounts in constant 2007 dollars)

Years of

Covered Earnings

PIA Based on

All Earnings

Current-Law

WEP PIA

PSRPA

WEP PIA

Percent Change

in WEP Benefit

2,876.57

686.99

757.42

830.83

905.74

981.84

1,058.83

1,137.02

1,215.51

1,294.59

1,373.38

1,452.46

1,584.37

1,715.97

1,846.99

1,977.10

2,106.62

2,235.54

2,363.57

2,490.70

2,616.94

2,707.36

2,740.79

2,773.61

2,805.54

2,837.18

2,868.21

696.54

778.31

863.06

949.90

1,037.94

1,127.47

1,217.60

1,308.62

1,400.24

1,491.56

1,582.88

1,673.90

1,764.32

1,854.45

1,943.38

2,031.71

2,119.15

2,205.40

2,291.05

2,375.51

2,458.77

2,540.84

2,621.71

2,701.39

2,779.28

2,855.98

-2%

-4%

-5%

-7%

-8%

-9%

-7%

-5%

-4%

-2%

Source: Congressional Research Service (CRS) calculations.

Notes: Assumes a worker is born in 1984, begins work at age 21 in 2005, and retires at the full

retirement age of 67 in 2051. It is assumed that the “high” wage worker follows a typical lifetime

earnings pattern that would produce a Social Security benefit equivalent to that of workers with career

earnings equal to 160% of Social Security’s “average wage” series. This scenario is for illustration

only and is not meant to fully represent every possible scenario that actual workers may experience.

For example, by relying on stylized workers, we have assumed no gaps in employment. This scenario

focuses on workers with between 10 and 35 years of covered earnings because a worker generally

needs 40 quarters of coverage (10 years) to qualify for Social Security benefits and the highest 35

years of earnings are generally used in calculating Social Security benefits. These estimates do not

include the current-law WEP provision that would limit the reduction in Social Security benefits to

50% of the non-covered pension amount.

CRS-24

Table 9. Maximum-Wage Worker

(All benefit amounts in constant 2007 dollars)

Years of

Covered Earnings

PIA Based on

All Earnings

Current-Law

WEP PIA

PSRPA

WEP PIA

Percent Change

in WEP Benefit

3,529.84

1,260.57

1,069.87

-15%

3,529.84

1,368.90

1,168.06

-15%

3,529.84

1,476.93

1,266.54

-14%

3,529.84

1,584.96

1,365.02

-14%

3,529.84

1,693.00

1,463.20

-14%

3,529.84

1,801.03

1,561.69

-13%

3,529.84

1,909.06

1,659.87

-13%

3,529.84

2,017.39

1,758.65

-13%

3,529.84

2,125.42

1,856.83

-13%

3,529.84

2,185.41

1,955.32

-11%

3,529.84

2,236.14

2,053.50

-8%

3,529.84

2,340.29

2,151.98

-8%

3,529.84

2,444.15

2,250.46

-8%

3,529.84

2,548.30

2,348.65

-8%

3,529.84

2,652.15

2,447.13

-8%

3,529.84

2,756.30

2,545.61

-8%

3,529.84

2,860.16

2,643.80

-8%

3,529.84

2,964.31

2,742.28

-7%

3,529.84

3,068.16

2,840.46

-7%

3,529.84

3,172.32

2,938.94

-7%

3,529.84

3,276.17

3,037.42

-7%

3,529.84

3,326.90

3,135.91

-6%

3,529.84

3,377.64

3,234.09

-4%

3,529.84

3,428.37

3,332.57

-3%

3,529.84

3,479.10

3,431.05

-1%

3,529.84

3,529.54

Source: Congressional Research Service (CRS) calculations.

Notes: Assumes a worker is born in 1984, begins work at age 21 in 2005, and retires at the full

retirement age of 67 in 2051. It is assumed that the “maximum” wage worker follows a typical

lifetime earnings pattern that would produce a Social Security benefit equivalent to that of workers

with career earnings equal to the maximum wage creditable under Social Security. This scenario is

for illustration only and is not meant to fully represent every possible scenario that actual workers may

experience. For example, by relying on stylized workers, we have assumed no gaps in employment.

This scenario focuses on workers with between 10 and 35 years of covered earnings because a worker

generally needs 40 quarters of coverage (10 years) to qualify for Social Security benefits and the

highest 35 years of earnings are generally used in calculating Social Security benefits. These estimates

do not include the current-law WEP provision that would limit the reduction in Social Security

benefits to 50% of the non-covered pension amount.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.