On January 5, 2025, President Biden signed the Social Security Fairness Act into law. The Act addressed two rules that for decades, have reduced or eliminated Social Security benefits for many public servants. The two rules that were eliminated were the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO).
How we got here.
Social Security taxes are collected from most workers in the United States. An individual’s Social Security benefits are then calculated based on their career earnings, and the payroll taxes paid into the system on their behalf. However, there are some individuals who worked in “non-covered” positions where Social Security taxes were not collected from their wages. These are most commonly state and local government employees, who are eligible for pensions from their employers, but were not paying into Social Security during portions (or all) of their careers.
Windfall Elimination Provision
Congress created the WEP in 1983 to address the individuals that receive a pension from “non-covered” positions and that also had “covered” employment in their career. This prevented people from receiving what they considered an unfair “windfall” from Social Security. The idea was that if you were already getting a pension from a non-Social Security job, you shouldn’t get the full benefit intended for lower-income workers who rely solely on Social Security. Effectively, the Windfall Elimination Provision reduced Social Security benefits for workers who had one job that did not withhold Social Security taxes and another job that did.
Government Pension Offset
Second, the Government Pension Offset (GPO) reduced Social Security spousal or survivor benefits for people who received a pension from a government job where they did not pay Social Security taxes. If an individual was eligible for spousal or survivor benefits but also received a pension from a government job where they did not pay Social Security taxes, the GPO reduced the Social Security benefit by two-thirds of the amount of the government pension being received. This often led to otherwise qualified individuals receiving little to no Social Security benefits, even if their spouse paid into Social Security for years.
What will change?
As a result of the Social Security Fairness Act, an estimated 3 million public-sector workers will receive larger Social Security benefits, with the average increase estimated to be $460 per month. Additionally, the law applies to benefits payable for months after December 2023, meaning eligible individuals may also receive a lump sum to compensate for benefits they missed in 2024.
The Social Security Administration is still evaluating how to implement the changes of the Act, and are expected to provide updates over the next few months. To keep Americans informed, they have created a webpage with further instructions on applying for benefits. If you think this may apply to you or have any additional questions on how the changes might impact your personal situation, please feel free to reach out to our team.
