State and Local Government Workers

A Social Security issue of particular relevance to state and local government workers is universal coverage.

About 93 percent of American workers participate in Social Security. That is, they pay Social Security payroll taxes on their earnings. These covered workers include those in the private sector as well as all federal government employees hired after 1983. Most state and local government workers also participate in Social Security. However, about 25 percent of them remain outside the Social Security system. They do not pay payroll taxes and thus are not eligible for Social Security benefits based on these noncovered earnings. Nevertheless, most state and local government workers have access to a government pension. 

Universal participation in Social Security is desirable. It would ensure that all workers and their families receive the program’s protections. Some of those protections are missing in existing government plans. For example, many state and local government workers are not currently eligible to receive death or disability benefits. But they would receive them if their employers participated in the Social Security program. There are concerns that funding for state and local government pension benefits would be in jeopardy if these employers began participating in Social Security.

Another pertinent issue concerned rules that affected individuals who worked outside the Social Security system at some point. The Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO) were designed to treat workers who didn’t participate in Social Security comparably to workers who contributed to Social Security throughout their entire careers. The WEP adjusted Social Security benefits to account for the time that public employees spent in noncovered work. Due to Social Security’s progressive benefit formula, two workers with similar lifetime earnings could receive different benefits. A worker with earnings outside the Social Security system would receive a higher benefit than a worker who spent an entire career within the system. The GPO lowered Social Security spousal or widow(er) benefits for people who were receiving a pension for noncovered work. These provisions were repealed in early 2025.

Back in the late 1970s and early 1980s when GPO and WEP were implemented, the Social Security Administration (SSA) did not have data on noncovered earnings. As a result, they had to use complex formulas to calculate the adjustments. These calculations were difficult to understand and sometimes produced inexact results. However, before the provisions were repealed, SSA had the necessary data to calculate the adjustments in a fair, accurate, and straightforward way. This would have allowed SSA to comply with the original intent of the provisions—to ensure Social Security benefits were provided equitably to all workers.