LACERS BOARD UPDATE
By Michael R. Wilkinson, LACERS Commissioner
WEP and GPO Provisions are harmful to your financial health:
If you are receiving a pension from LACERS, you probably know that there are two provisions of federal law that can greatly reduce the amount of your Social Security payments you might otherwise receive for yourself and spousal benefit. These provisions are called the Windfall Elimination Provision (WEP) (reducing your Social Security benefit) and the Government Pension Offset (GPO) (reducing Social Security spousal or widow(er) benefit).
For Social Security, there is not space here to explain fully how the WEP and GPO work. However, I helped drive the Board’s action to urge the City Council to support federal legislation, Congressional bill HR 82: Social Security Fairness Act of 2021, which repeals the unfair provisions reducing Social Security benefits for individuals who also receive a pension or disability benefit from an employer that did not withhold Social Security taxes.
The LACERS Board report on the WEP illustrated an example of a single person who paid into Social Security for 15 years and then went on to work 20 years for the City and retired at 67 with a monthly pension of $4,662 (approximately the average service retirement pension). The WEP would reduce their Social Security Benefit from $1,911 to $1,374, representing a 28 percent cut, or a loss of $537 per month.
Another illustrated example was that of an expected Social Security monthly spousal benefit of $1,500 cut to zero because of the GPO.
The WEP and GPO are both unfair to government employees who have earned these benefits and paid Social Security taxes while working but are unfairly denied. LACERS will be submitting a request to the Mayor and City Council to make the pending federal HR 82 congressional bill a priority in changing federal law to eliminate these reductions. I will follow this closely and strongly urge our City Council to support elimination of these harmful provisions.
IRMAA Surcharge Reimbursement:
Your medical expenses are partially covered by Medicare Part A if you qualify by either your employment, or that of your spouse. If you are a member of LACERS’ health plans and qualify for Medicare Part A, LACERS will reimburse you for the basic Medicare Part B premium, but not for the additional fees called IRMAAs (Income Related Monthly Adjustment Amount) charged by Medicare, which are income-based surcharges on Medicare Part B that can add hundreds of dollars to your monthly costs.
IRMAA fees are calculated using your modified adjusted gross income (MAGI). While IRMAA fees are greater for higher- income workers, IRMAA fees impact more than 2,000 LACERS Retirees solely based on a LACERS’ staff estimate of pension incomes. However, an even greater number of Retirees are and will be impacted because they have additional income sources that must be added to determine their IRMAA-specific MAGI.
The LACERS Board has directed staff to contact the City Council to consider an ordinance to allow the reimbursement of the IRMAA fees as well as the basic Part B premium for those not currently eligible for reimbursement. While this is only the first step and will likely face challenges, this is a positive development that I will also follow closely and strongly urge our City Council to support.