On January 5, 2025, President Joe Biden signed the Social Security Fairness Act into law, introducing major reforms to improve retirement benefits for public sector employees (including firefighters, police officers, and teachers) just weeks before the end of his presidency.
The House had approved the bill in November, and it passed the Senate on December 21 with a vote of 76-20. Some Republican members had expressed concern about its cost, estimated at $195 billion over the next decade.
This legislation addresses what some have considered long-standing inequities in the Social Security system caused by the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO).
- WEP reduced the Social Security benefits of a person who also received a pension from a job not covered by Social Security. For example, teaching jobs in some states do not pay into the Social Security system, but these workers may have second jobs that qualify them for Social Security benefits. Under WEP, their Social Security benefits were reduced due to their teacher pension.
- GPO is similar to WEP, but it affected the Social Security benefits available to spouses and survivors of someone receiving a non-covered pension.
Enacted in the late 70's and early 80's, these provisions were designed to address perceived fairness issues in the Social Security calculation for those who had worked in non-covered jobs.
Since the income from those jobs is excluded when calculating Social Security benefits, it often made these workers appear to have lower average incomes, which would entitle them to disproportionately higher benefits. The WEP and GPO adjustments were meant to correct the discrepancy.
However, the WEP and GPO proved unpopular and difficult to manage in practice. The penalty calculations were complex, and the provisions were poorly communicated to those that were affected.
Key Provisions of the Act:
- Repeal of the Windfall Elimination Provision (WEP):
- Approximately 2 million retirees were affected by this provision (3.1% of beneficiaries), often receiving significantly lower Social Security payouts.
- The Congressional Budget Office estimated that eliminating the WEP would increase monthly payments to affected Social Security recipients by an average of $360
- Repeal of the Government Pension Offset (GPO):
- Nearly 800,000 retirees (including widows and widowers) faced reduced or no benefits under this rule. This amounted to 13% of spousal and survivor beneficiaries.
Financial Impact on Retirees:
With the repeal of the WEP and the GPO, individuals whose Social Security benefits were reduced by either provision can expect to have their full benefits restored.
- Repealing the WEP:
- Former president Biden estimated this change will increase monthly Social Security benefits by an average of $360 by December 2025.
- Repealing the GPO:
- Spouses currently receiving reduced benefits will see an average monthly increase of $700.
- Widows and widowers affected by the GPO will experience an average increase of $1,190 in monthly benefits.
- Retroactive Benefits:
- Eligible recipients will receive lump-sum payments to compensate for benefits lost in the prior year.
While the bill passed with wide support, it was not without its critics. As you may have read, the Social Security Trust Fund is dangerously underfunded already, and facing an impending insolvency crisis.
Recent estimates put the date as 2038, at which point there will only be enough money to pay out roughly 80 percent of what recipients are owed from their time in the workforce. The Congressional Budget Office projects that this change could accelerate the fund’s insolvency by approximately six months.
Others have stated that the law gives workers who earn salaries not covered by Social Security disproportionately generous benefits compared to workers covered under the system for all their earnings.
Next Steps:
In a recent update, the Social Security Administration said it is evaluating how to implement the act. Beneficiaries don't need to take any action to receive the enhanced payments other than verifying that the agency has their current mailing address and direct deposit information. Most people can do that online with their "my Social Security account" without having to call or visiting SSA.
I’ll provide additional information as we receive it. If you have questions about how this may impact you or your family, give our office a call and we’ll do our best to help.