SOCIAL SECURITY

Office of the Chief Actuary

October 4, 2018 

The Honorable Kevin Brady 

House of Representatives 

Washington, D.C. 20515 

Dear Chairman Brady:

I am writing in response to your request for our estimate of the financial effects on 

the Social Security Trust Funds of H.R. 6933, the “Equal Treatment of Public Servants Act of 

2018,” which you introduced on September 27, 2018 with Ranking Member Neal. This Bill would 

generally replace the windfall elimination provision (WEP) with a new formula that you have 

referred to as the “Public Servant Fairness Formula” (PSF) for individuals becoming eligible for 

OASDI benefits in 2025 or later. The proposal would also provide for a rebate payment starting in 

2020 for individuals affected by the current WEP. Our analysis and estimates provided for this 

proposal reflect the efforts of many in the Office of the Chief Actuary, but particularly Jacqueline 

Walsh, Chris Chaplain, and Karen Glenn. 

The balance of this letter provides our understanding of the intent of the sections of the Bill with 

direct effects on Social Security program cost, followed by estimates of the OASDI program cost 

effects assuming enactment of the Bill. Over the period 2019 through 2028, we estimate the net 

program cost for the OASDI program would be increased by about $25.0 billion. Over the longrange 75-year period, we estimate that enactment of the Bill would increase (improve) the OASDI 

actuarial balance by 0.04 percent of taxable payroll. All estimates reflect the intermediate 

assumptions of the 2018 Trustees Report. 

Bill Specifications

The proposal reflects your prior bills in concept, replacing the current complex WEP with a more 

straightforward approach. The PSF provides retired-worker and disabled-worker beneficiaries 

(and their dependents) with a modified benefit computed reflecting all past earnings (including 

earnings in employment that was not covered under the OASDI program in our records starting 

with 1978), then multiplied by the ratio of the average indexed monthly earnings (AIME) 

computed without non-covered earnings to a modified average indexed monthly earnings 

(AIME′) that includes both covered and non-covered earnings in our records. As with OASDI 

covered earnings, potential beneficiaries would be asked to review the non-covered earnings we 

have in our records so that they would have the opportunity to make corrections. Another way to 

describe the new PSF approach is that beneficiaries will receive a benefit that reflects the

replacement rate applicable for a worker with the same career earnings, where all earnings had 

been covered. Effectively, the PSF formula would compute the worker’s PIA as the ratio of PIA 
Page 2 – The Honorable Kevin Brady

based on all earnings (covered and non-covered) to the AIME′ computed based on all earnings, 

multiplied by the AIME based on covered earnings only. These two ways of describing the new 

approach are mathematically equivalent.

Importantly, for workers becoming eligible for OASDI benefits in 2025 or later, the proposal

would eliminate the requirement for receipt of a pension based on earnings not covered by the

OASDI program in order to apply the new PSF. However, because SSA does not have foreign 

earnings in workers’ records, the PSF would not apply for disabled-worker and retired-worker 

beneficiaries who are entitled to receive periodic payments based on foreign employment not 

covered under a totalization agreement. Instead, the current WEP would be utilized for such 

beneficiaries, with regard to any periodic payments received based on the foreign and/or any 

domestic non-covered earnings. 

For retired or disabled workers and their auxiliary beneficiaries who receive a Social Security 

benefit after December 2019 that is reduced by the current-law WEP, a monthly rebate will be paid 

starting in January 2020. The amount of the rebate will be $100 for each month of benefit 

entitlement affected by the WEP in 2020 for retired-worker and disabled-worker beneficiaries, and 

will be $50 for each month of benefit entitlement affected by the WEP in 2020 for spouse and 

child auxiliary beneficiaries. The level of rebate amounts for months of entitlement affected by the 

WEP in years after 2020 will be increased by the annual cost of living adjustments.

The rebate amount would not be subject to benefit adjustments, such as for the GPO, RET, 

early/late claiming, and dual entitlement. Further specifications relating to the rebate include: (1) 

individuals whose benefits are offset (to zero) due to the government pension offset (GPO), 

retirement earnings test (RET), workers’ compensation (WC) offset, family maximum, etc. still 

receive a rebate; (2) if a worker’s benefit is suspended, then a spouse or child in receipt of an 

auxiliary benefit on the worker’s account would still receive the rebate; (3) individuals whose 

benefits are suspended due to incarceration or return to work would not receive the rebate; and (4) 

individuals with an outstanding overpayment would be eligible for the rebate but would have it 

withheld to help repay the overpayment

OASDI Program Cost Effects

The proposal will result in added program cost for workers newly eligible for an OASDI benefit 

after 2024 whose benefit amount would be reduced less by the PSF than by the WEP. However, 

because the PSF does not require receipt of a pension based on non-covered earnings, and 

eliminates most exemptions from adjustments based on non-covered earnings for workers 

becoming newly eligible for OASDI benefits after December 2024, our estimate reflectssmall 

benefit reductions from the PSF for a relatively large number of workers who would not be 

reduced by the WEP. The net OASDI program benefit savings are estimated at $1.4 billion total 

for calendar years 2019 through 2028 for those newly eligible for OASDI benefits after 2024 who 

are affected by the PSF. The cost for the rebate applied for beneficiaries affected by the WEP in

2019 through 2028 is estimated to be $26.4 billion. Over the long-range period, the net effect of 

the proposal on the 75-year actuarial balance would be an increase (improvement) of 0.04 percent 

of payroll. Table 1, attached, indicates that the net effect of the changes in the Bill would reduce 

(worsen) annual balances for the OASDI program through 2032 and increase (improve) annual 

balances in all years thereafter. 
Page 3 – The Honorable Kevin Brady

The implications of the proposal would change over the long-range period. Eventually, the group 

affected by the proposal will be limited principally to the roughly 25 percent of all state and local

government employees with earnings that are not covered by OASDI, because the closed group of 

Federal government employees whose earnings are not covered by OASDI were all hired before 

1984. 

Our estimates for the proposal reflect extensive innovative analysis of data for individuals born in 

1950 with experience through May of 2018, including SSA records of earnings not covered by 

OASDI back to 1978, with adjustments for over-recording of non-covered earnings for years 

1978 through 1981. This analysis has allowed us to model the potential effect of the proposal for 

2018 as if it were fully in effect for all retired and disabled workers at that time. Based on these 

results, we are able to model the expected effects of the PSF for benefit payments starting in 2025. 

Effects of the Proposal on Beneficiaries Becoming Newly Eligible after 2024

In order to meaningfully illustrate the effects of the new PSF on workers who will become eligible 

starting in 2025 under this proposal, we provide here estimates of the effects of the PSF for all 

current beneficiaries in 2018, assuming the new approach were fully phased in and had applied for

them since their initial benefit eligibility. 

If applied to them, the PSF formula would affect the benefits of roughly 1.6 million retired-worker 

and disabled-worker beneficiaries in 2018 whose primary benefit is reduced under the current 

WEP. About 1.1 million (about 69 percent) of these beneficiaries would receive a higher average 

benefit (on average, $74 higher) with application of the PSF. Under the PSF, this group would 

receive an average benefit of $548, while under the current WEP their average benefit is $474. The 

remaining 0.5 million (about 31 percent) of these beneficiaries would receive a lower average 

benefit (on average, $55 lower) with application of the PSF. For these beneficiaries, the PSF would 

provide an average benefit of $588, while under the current WEP their average benefit is $643.

For 2018, we estimate that there are roughly 18 million retired-worker and disabled-worker 

beneficiaries with some non-covered earnings who are not reduced under the current WEP

(assuming adjustments for erroneous recording of non-covered earnings for some workers in years 

1978 through 1981). Again, we illustrate how this group would be affected if the new PSF had 

been in effect for them since their initial benefit eligibility. We estimate that for about 4.5 million 

(about 25 percent) of these beneficiaries in 2018, the new PSF would not change their primary 

benefit. For the other 13.5 million beneficiaries, the average benefit under the PSF would be 

$1,453 per month (about $29 less than would be payable under current law). For the half of this 18

million that would be least affected by the PSF, the average primary benefit under the PSF would 

be $1,487, less than $1 per month below the level payable under current law. For the half that 

would be most affected by the PSF, the average benefit under the PSF would be $1,402 (about $43 

lower than their average benefit payable under current law). About 52 percent of the 18 million, or 

roughly 9 million beneficiaries, qualify now for exemption from the current WEP because they 

have 30 or more years of substantial OASDI covered earnings. Because these 9 million retiredworker or disabled-worker beneficiaries have relatively few years of non-covered earnings, their 

reduction under the new approach would be relatively small if the PSF were applicable for them.

In addition, more than 75 percent of these 18 million workers have fewer than 5 years with any 

non-covered earnings. 
Page 4 – The Honorable Kevin Brady

We hope these estimates will be helpful. Please let us know if we may provide further assistance.

Sincerely,

 

Stephen C. Goss, ASA, MAAA

Chief Actuary

Enclosure
Year Cost Rate

Income

Rate

Annual

Balance Cost Rate

Income

Rate

Annual

Balance

2018 13.81 12.64 -1.17 288 0.00 0.00 0.00

2019 13.95 12.87 -1.08 272 0.00 0.00 0.00

2020 14.16 12.89 -1.26 255 0.03 0.00 -0.03

2021 14.30 12.92 -1.38 239 0.03 0.00 -0.03

2022 14.47 12.95 -1.52 222 0.03 0.00 -0.03

2023 14.65 12.97 -1.68 205 0.03 0.00 -0.03

2024 14.83 13.00 -1.84 187 0.03 0.00 -0.03

2025 15.01 13.01 -2.00 170 0.03 0.00 -0.03

2026 15.19 13.13 -2.05 153 0.03 0.00 -0.03

2027 15.39 13.15 -2.23 136 0.03 0.00 -0.02

2028 15.61 13.17 -2.43 119 0.02 0.00 -0.02

2029 15.81 13.19 -2.62 102 0.02 0.00 -0.02

2030 16.00 13.20 -2.80 85 0.02 0.00 -0.01

2031 16.17 13.22 -2.95 67 0.01 0.00 -0.01

2032 16.32 13.23 -3.10 50 0.01 0.00 -0.01

2033 16.45 13.24 -3.22 31 0.00 0.00 -0.00

2034 16.56 13.25 -3.32 12 -0.00 -0.00 0.00

2035 16.64 13.25 -3.39 ---- -0.01 -0.00 0.01

2036 16.71 13.26 -3.45 ---- -0.01 -0.00 0.01

2037 16.77 13.27 -3.50 ---- -0.02 -0.00 0.02

2038 16.80 13.27 -3.53 ---- -0.02 -0.00 0.02

2039 16.81 13.27 -3.54 ---- -0.02 -0.00 0.02

2040 16.80 13.27 -3.53 ---- -0.03 -0.00 0.03

2041 16.78 13.27 -3.51 ---- -0.03 -0.00 0.03

2042 16.74 13.27 -3.47 ---- -0.04 -0.00 0.03

2043 16.70 13.27 -3.43 ---- -0.04 -0.00 0.04

2044 16.65 13.27 -3.38 ---- -0.04 -0.00 0.04

2045 16.61 13.27 -3.35 ---- -0.05 -0.00 0.04

2046 16.58 13.27 -3.31 ---- -0.05 -0.00 0.05

2047 16.55 13.27 -3.28 ---- -0.05 -0.00 0.05

2048 16.52 13.26 -3.26 ---- -0.06 -0.00 0.05

2049 16.50 13.26 -3.23 ---- -0.06 -0.00 0.06

2050 16.48 13.26 -3.22 ---- -0.06 -0.00 0.06

2051 16.47 13.26 -3.20 ---- -0.06 -0.00 0.06

2052 16.47 13.27 -3.20 ---- -0.07 -0.00 0.06

2053 16.47 13.27 -3.21 ---- -0.07 -0.00 0.07

2054 16.49 13.27 -3.22 ---- -0.07 -0.00 0.07

2055 16.52 13.27 -3.24 ---- -0.07 -0.00 0.07

2056 16.55 13.27 -3.27 ---- -0.08 -0.00 0.07

2057 16.59 13.28 -3.31 ---- -0.08 -0.00 0.07

2058 16.63 13.28 -3.35 ---- -0.08 -0.00 0.07

2059 16.68 13.29 -3.39 ---- -0.08 -0.00 0.08

2060 16.73 13.29 -3.44 ---- -0.08 -0.00 0.08

2061 16.78 13.29 -3.48 ---- -0.08 -0.00 0.08

2062 16.83 13.30 -3.53 ---- -0.08 -0.00 0.08

2063 16.88 13.30 -3.58 ---- -0.09 -0.00 0.08

2064 16.93 13.31 -3.62 ---- -0.09 -0.00 0.08

2065 16.98 13.31 -3.67 ---- -0.09 -0.00 0.08

2066 17.04 13.31 -3.72 ---- -0.09 -0.00 0.08

2067 17.10 13.32 -3.78 ---- -0.09 -0.00 0.08

2068 17.15 13.32 -3.83 ---- -0.09 -0.00 0.08

2069 17.22 13.33 -3.89 ---- -0.09 -0.00 0.08

2070 17.28 13.33 -3.95 ---- -0.09 -0.01 0.08

2071 17.33 13.33 -4.00 ---- -0.09 -0.01 0.08

2072 17.38 13.34 -4.04 ---- -0.09 -0.01 0.08

2073 17.42 13.34 -4.08 ---- -0.09 -0.01 0.08

2074 17.46 13.34 -4.12 ---- -0.09 -0.01 0.09

2075 17.50 13.35 -4.15 ---- -0.09 -0.01 0.09

2076 17.52 13.35 -4.17 ---- -0.09 -0.01 0.09

2077 17.53 13.35 -4.18 ---- -0.09 -0.01 0.09

2078 17.54 13.35 -4.18 ---- -0.09 -0.01 0.09

2079 17.53 13.35 -4.18 ---- -0.09 -0.01 0.09

2080 17.51 13.35 -4.16 ---- -0.09 -0.01 0.09

2081 17.50 13.35 -4.15 ---- -0.09 -0.01 0.09

2082 17.48 13.35 -4.13 ---- -0.09 -0.01 0.09

2083 17.46 13.35 -4.12 ---- -0.09 -0.01 0.09

2084 17.45 13.35 -4.10 ---- -0.09 -0.01 0.09

2085 17.44 13.35 -4.09 ---- -0.09 -0.01 0.09

2086 17.44 13.35 -4.09 ---- -0.09 -0.01 0.09

2087 17.44 13.35 -4.10 ---- -0.09 -0.01 0.09

2088 17.45 13.35 -4.11 ---- -0.09 -0.01 0.09

2089 17.48 13.35 -4.13 ---- -0.09 -0.01 0.09

2090 17.51 13.35 -4.16 ---- -0.09 -0.01 0.09

2091 17.54 13.35 -4.19 ---- -0.09 -0.01 0.09

2092 17.59 13.36 -4.23 ---- -0.09 -0.01 0.09

2093 17.63 13.36 -4.27 ---- -0.09 -0.01 0.09

Cost Rate Income Rate

Actuarial 

Balance

Change in 

Cost rate

Change in 

Income Rate

Change in 

Actuarial

Balance

16.64% 13.84% -2.80% 2034 -0.04% -0.00% 0.04%

Office of the Chief Actuary

Based on Intermediate Assumptions of the 2018 Trustees Report. Social Security Administration 1 Under present law the year of combined Trust Fund reserve depletion is 2034.

Expressed as a percentage of present-law

taxable payroll Trust Fund

Ratio

1-1-year

Expressed as a percentage of present-law

taxable payroll

Table 1 - OASDI Cost Rate, Income Rate, Annual Balance, and Trust Fund Ratio

H.R.6933, the "Equal Treatment of Public Servants Act of 2018"

Proposal Change from Present Law

Summarized Rates: OASDI

Year of reserve 

depletion1

Summarized Rates: OASDI

2018 - 2092

October 4, 2018