National Conference on Public Employee Retirement Systems

The Voice for Public Pensions


Fall Congressional Forecast for Public Pensions: What’s Next for HELPS and WEP?

What Public Pensions Should Know About the Healthcare Enhancement for Local Public Safety Act (HELPS) and the Windfall Elimination Provision (WEP) in Fall 2022

By Tony Roda, partner at the Washington, D.C. law and lobbying firm Williams & Jensen. Excerpted from NCPERS September 2022 issue of The Monitor.
Congress is moving toward final consideration of a measure to revise our nation's tax laws affecting retirement plans and their participants. Earlier this year, the full House approved H.R. 2954, which is that chamber's version of the SECURE Act 2.0. More recently, the Senate Committee on Finance and the Committee on Health, Education, Labor, and Pensions approved versions of the legislation. The original SECURE Act was enacted at the end of 2019.

A key provision in the Senate Finance Committee's bill would streamline an existing tax exclusion for retired first responders. NCPERS and many of its members have collaborated on this effort to improve the Healthcare Enhancement for Local Public Safety Act (HELPS). NCPERS has been in contact with committee counsels and leadership staff in the Senate and House.

What is Healthcare Enhancement for Local Public Safety Act (HELPS)?

The HELPS exclusion allows eligible retired public safety officers to exclude from gross income up to $3,000 in annual distributions from a governmental retirement plan to pay qualified health care insurance or long-term care premiums, provided the payment of premiums is made directly by the retirement plan to the provider of the health or long-term care plan. However, since its enactment, the direct payment requirement has caused administrative headaches for many retirement plans and has resulted in some plans choosing to not implement HELPS. Retired public safety officers covered by a plan that does not implement HELPS are ineligible for the tax benefit. 

The provision in the Senate bill, which was championed by Senators Sherrod Brown (D-OH), John Thune (R-SD), Mark Warner (D-VA), and Chuck Grassley (R-IA), would change the direct payment requirement from mandatory to optional and create an alternative to the current method, namely allowing the retirement system to make the distribution to the retired public safety officer. The retiree could then make the premium payment to the provider and remain eligible for the tax exclusion

Renewed Attention on the Windfall Elimination Provision (WEP)

There is also renewed attention in the House on a perennial issue for public employees – the Windfall Elimination Provision (WEP). The WEP penalty reduces your Social Security benefit if you also earn a retirement benefit from non-Social Security employment. Roughly 25 percent of state and local government employees across the U.S. are not covered by Social Security. Many of these workers will also separately earn a Social Security-covered benefit, particularly those in public safety and education, whose work schedules often allow them to hold a second job that is covered by Social Security.
Legislation has been introduced since the 1980s to fully repeal WEP and its sister penalty, the Government Pension Offset (GPO), which affects spousal and survivor benefits. In this current 117th Congress, the full repeal bills are H.R. 82 by Rep. Rodney Davis (R-IL) and S. 1302 by Sen. Sherrod Brown (D-OH).
H.R. 82 has reached the 290-cosponsorship threshold necessary for expedited floor consideration under the Consensus Calendar. However, the committee of jurisdiction, the Ways and Means Committee, could preempt the Consensus Calendar by taking certain actions. Committee leaders are currently analyzing their options.

Complicating matters is that other forms of WEP and GPO legislation are pending before the Committee. Congressman John Larson (D-CT), the Chairman of the Subcommittee on Social Security, has introduced H.R. 5723, Social Security 2100: A Sacred Trust, which would repeal both WEP and GPO for five years. This legislation is a comprehensive reform of the Social Security program, including increases in payroll taxes and benefit enhancements. The main challenge with the Larson bill is that it only has Democratic support, thereby making passage in the House difficult but, in the Senate, impossible.

Two other pieces of legislation deal only with WEP but, if reconciled, could gain enough traction for House passage and the possibility of approval by the Senate. House Ways and Means Committee Chairman Richard Neal (D-MA) has introduced H.R. 2337, and Committee Ranking Member Kevin Brady (R-TX) has introduced H.R. 5834. The bills take a similar approach – (1) provide current retirees who are being impacted by WEP a monthly rebate ($150 in Neal's bill; $100 in Brady's bill), and (2) begin utilizing a new proportional formula instead of WEP. The Brady bill would give future retirees ages 21 and over the better of the new formula or WEP. This type of provision is commonly referred to as a “hold harmless” provision. Chairman Neal's bill would extend the hold harmless treatment in perpetuity.

Discussions between Congressmen Neal and Brady are ongoing and, as mentioned earlier, finding a bipartisan compromise in the House is essential for the bill to have any chance of passage in the Senate. Congressman Brady is the key to achieving this bipartisanship, and his retirement at the end of the Congress places even greater urgency on the need to act this year.



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