More State and Local Employees, But Social Security Coverage Not Growing Apace

The number of state and local government employees has been increasing at a greater rate than the number of such employees covered by Social Security, says a recently released study. 

More specifically, says the Social Security Administration (SSA) in “Trends in Noncovered Employment and Earnings Among Employees of State and Local Governments, 1994 to 2018,” while the proportion of U.S. workers that state and local governments employed fell during that time, the absolute number of people they employed rose; at the same time, number of state and local government employees not covered by Social Security increased as well. 

The SSA says that California, Colorado, Georgia, Illinois, Louisiana, Massachusetts, Ohio and Texas account for almost four-fifths of all state and local government employees not covered by Social Security, and that California, Ohio and Texas together account for about half of the noncovered state and local government employees in 1994 and 2018. The report also cautions that demographic trends may accentuate these state-by-state differences.

The SSA also says that the effects of these findings are more acute for men than women: it says that in both 1994–1998 and 2014–2018, the real median annual earnings of state and local government employees were higher among men than among women in both covered and noncovered employment. 

Implications for the Windfall Elimination Provision and the Government Pension Offset 

SSA believes that the increase in the number of state and local government employees who are not covered by Social Security suggests that it will have more to do in administering the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO). 

The purpose of the WEP is to remove an unintended advantage or “windfall” that these workers would otherwise receive as a result of the interaction between the regular Social Security benefit formula and the workers’ relatively short careers in Social Security-covered employment. For purposes of the WEP, the amount of substantial earnings in covered employment or self-employment needed for a year of coverage (YOC) is adjusted annually by the growth in average earnings in the economy, provided a cost-of-living adjustment is payable

The WEP applies to most people who receive both a pension from noncovered work (including certain foreign pensions) and Social Security benefits based on fewer than 30 years of substantial earnings in covered employment or self-employment. The WEP affects retired or disabled-worker beneficiaries and their eligible dependents. However, it does not affect survivor beneficiaries.

The Congressional Research Service has reported that in 2021, the amount of substantial earnings in covered employment or self-employment needed for a YOC is $26,550.

Earlier this summer, the Office of the Inspector General (OIG) called on the SSA to further investigate some instances of overpayment of benefits and recommended that the SSA perform the follow-up needed to make WEP applicability determinations for the four beneficiaries they identified and collect overpayments, if appropriate.