Public Employers Not Participating in Social Security Need To Tell Their Employees About the Windfall Elimination Provision and The Government Pension Offset

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By Jeff Chang

Previously, we explained that California alone has thousands of public agency employers (i.e., cities, counties, special districts, school districts and JPAs) that do not contribute to Social Security, but instead provide a Social Security Replacement Plan (SSRP). We also explained how many government retirees could receive a rude awakening from Uncle Sam, through the application of the Windfall Elimination Provision (WEP) and/or the Government Pension Offset (GPO), which can adversely affect retirees (and their spouses) who participated in both Social Security and an SSRP. Many of these public employers are unaware that they are required to warn their employees of a possible reduction in their future Social Security benefits because of the WEP or GPO.

A provision of the Social Security Protection Act of 2004 (Act) requires State and local governments to notify newly-hired employees of the potential impacts of the WEP and GPO if the employees are being hired into positions not covered by Social Security. This requirement can be met by giving new hires after January 1, 2005, a copy of the Form SSA-1945, Statement Concerning Your Employment in a Job Not Covered by Social Security. As one can see, the form briefly explains how an affected employee’s Social Security benefits (or those of a surviving spouse) could be reduced by a WEP/GPO adjustment.

According to the Social Security Administration (SSA), the Act mandates that employers notify new hires by using Form SSA-1945 or other appropriate notification, obtain the employee’s signature on the completed form and keep copies of the completed forms prior to the start of employment. If an affected public agency has not complied with this requirement, the SSA indicates that the failure should be remedied as soon as possible by sending out the notice to all relevant employees who did not receive the notice when they should have.

Based on informal information from the SSA, it is not clear what, if any, sanctions or penalties might apply for failure to provide (and obtain) Form SSA-1945 or other appropriate notification documents. However, given the frequency by which public agency employees are affected or surprised by the WEP and GPO, it only makes sense to incorporate this important disclosure into your new hire onboarding process.

Jeff Chang is a partner at Best Best & Krieger LLP. He has four decades of experience skillfully evaluating benefit and retirement plan compliance to achieve maximum outcomes for public agency clients throughout California. He can be reached at jeff.chang@bbklaw.com or (916) 329-3685.

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