To correct this disparity, legislation, which provides a similar tax break for pensions, is currently pending in the Congress. One such bill is HR 2462, introduced by Representative Robert Brady (D-PA) and known as the Public Pension Parity Act of 2001.

HR 2462 provides that a public pensioner would be entitled to the same tax break that he would receive if his pension was SS instead, up to the maximum SS benefits payable. For 2001, the maximum SS benefits, payable to an individual retiring at 65, is $1,536 monthly or $18,432 annually.

The maximum $18,432 would be reduced by any SS benefits that the public pensioner actually receives and is able to exclude from federal tax. To illustrate, if a public retiree also receives $6,000 annually in Social Security and pays no federal tax on this amount, then he could exclude at most $12,432 of his pension ($18,432-$6,000).

If HR 2462 became law, a retiree, receiving an $18,000 pension and no SS, could possibly exclude his entire pension from federal tax as long as one half of that amount, or $9,000, plus his other income does not exceed $25,000.

According to Legislative Chairman Bill Hill, "Our long-standing ally on Social Security - the National Association of Retired Federal Employees (NARFE) - backs HR 2462, which is now in the House Ways and Means Committee. Since federal revenues appear to be dropping because of the soft economy, prospects for quick action, on this or similar bills, appear unlikely at this time."