Key Questions: Does the Social Security Fairness Act Affect Me?

On Jan. 5, 2025, President Joe Biden signed the Social Security Fairness Act of 2023, H.R. 82. This legislation eliminates two provisions that previously reduced Social Security benefits for public servants and other retirees. The act repeals the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO). The repeal is retroactive to Jan. 1, 2024. 

Many people worked in public service jobs where they earned a pension instead of paying into Social Security. However, they also may have had other jobs where they did pay into Social Security. This means they could be eligible for their pensions and Social Security benefits. If they qualified for both, however, their Social Security checks might have been reduced by the WEP or the GPO (which affected spouses). 

Some saw these provisions as unfair penalties that punished public servants by reducing their Social Security benefits. The new law affects any retirees who were receiving reduced Social Security benefits because of WEP or GPO.

Let’s take a closer look at each provision.

The Windfall Elimination Provision

State or local government employees are often covered by their own retirement (pension) programs. Public employers are referred to as non-covered for Social Security because they didn’t pay into Social Security. If someone was eligible for Social Security because they have other Social Security-covered earnings and a pension plan through a non-covered employer, their income from the non-covered state or local government job was excluded from the Social Security benefit calculation.

As a result, Social Security provided a higher replacement rate for these employees, basically treating them as longtime low-wage earners. In 1983, Congress established the Windfall Elimination Provision to adjust the Social Security benefits more fairly for non-covered workers. This WEP penalty was a reduction to the Social Security benefit, which was capped at one-half of the monthly non-covered pension. Note that this was not reflected on the Social Security statement. The Social Security Administration (SSA) had an online calculator that could tell you how your benefits would be affected.

The Social Security Fairness Act eliminates this reduction of Social Security benefits due to a public pension from work not covered by Social Security. It restores the full retirement and disability benefits for those previously subject to the WEP penalty.

This change affects:

• Teachers in 15 states – Alaska, California, Colorado, Connecticut, Georgia, Illinois, Kentucky, Louisiana, Massachusetts, Maine, Missouri, Nevada, Ohio, Rhode Island and Texas. There are exceptions in some of these states.
• State, county, city, and special district employees (such as police officers and fire fighters) in 26 states.
• Federal employees in every state who are on the Civil Service Retirement System (CSRS), which means they were hired before 1984. Those hired after 1983 are covered by Social Security. 
• Foreign pension earners who also qualified for Social Security.

The Government Pension Offset 

This provision was originally enacted in 1977 and modified in 1983. The GPO reduced the Social Security benefits for spouses and surviving spouses by two-thirds of the public pensions they received from non-covered employment. The new law affects spouses, widows, and widowers (and maybe even qualifying divorced spouses) whose Social Security survivor or spousal benefits were reduced or eliminated because of this offset. 

The Impact of These Changes

For those receiving Social Security benefits that are partially or completely offset, the Social Security website says you do not need to take any action at this time except to verify that the agency has your correct mailing address and direct deposit information. The SSA will provide updates about implementation on its website.

For those who had not previously filed for Social Security benefits, you should apply for them if you are currently receiving a public pension and are now eligible for Social Security. You can file online at ssa.gov or schedule an appointment.

If you are affected by either of these two provisions, you should eventually see increases in your monthly Social Security benefits. Since the law is retroactive to Jan.1, 2024, many recipients will also eventually receive a lump-sum payment for the backdated benefits for 2024.

Manage expectations, though! The Social Security Administration will need time to implement the changes. Again, SSA will provide updates on its website.

One more question: How will this affect the Social Security Trust funds?

The 2024 Social Security Trustees Report determined it would be able to pay retirement and survivor scheduled benefits until 2033. At that time, the Old Age and Survivors Insurance Trust fund's income would be sufficient to pay 79% of scheduled benefits. Only time will tell. It will take a few years for the impact of the Social Security Fairness Act to be reflected in the assumptions used in making future projections of the fund’s solvency.

These changes can be complicated for some, so you may want to consult with a financial advisor or visit the SSA website for further guidance on how the changes affect you.

For more information, please contact your advisor.