The Social Security Fairness Act

By: Wade D. Egmon, CPA, CFP® | Senior Financial Advisor

On January 5, 2025, President Joe Biden signed the Social Security Fairness Act (“The Act”) into law. This legislation, which passed the House and Senate with substantial bipartisan support, repeals two contentious provisions—the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO)—which reduced or eliminated Social Security benefits for millions of public sector workers who received government pensions.

UNDERSTANDING WEP AND GPO
The WEP adjusted the complex Social Security benefit formula for individuals who earned pensions from non-Social Security-covered employment, such as certain federal, state, and local government positions. This adjustment often resulted in reduced benefits for retirees who had split their careers between covered and non-covered employment.
Similarly, the GPO reduced Social Security spousal or survivor benefits for individuals who received a government pension from a non-Social Security-covered job. If applied, the spousal or survivors Social Security benefit was reduced by 2/3 of the non-covered pension benefit.

The original intention behind the enactment of the provisions was to address inequities in the calculation of Social Security benefits that favored employees who had worked non-covered jobs. However, the uniform application of the WEP and GPO provisions impacted some workers disproportionately (perhaps unintentionally), the calculations were very complex, and the impacts were poorly communicated to current and future recipients. The Social Security Fairness Act and the elimination of WEP and GPO was crafted in response to these issues.

IMPACT OF THE REPEAL
The Act is fairly straightforward – it simply removes the section of the law that governed the WEP and GPO. It also states that this amendment will retroactively apply to any payments made after December 31, 2023. This will allow Social Security recipients who would have been subject to the WEP and GPO provisions to receive their full benefits moving forward and will also provide affected recipients with payments for any reduction in benefits dating back to January 1, 2024.

The repeal of these provisions will impact approximately 3.2 million public sector retirees, including some teachers, firefighters, police officers, and federal employees covered by the Civil Service Retirement System. The impact on monthly benefits will vary greatly depending on a number of different factors – type of Social Security benefit received, pension amount, number of years and amount of covered income, etc.

PAYMENT LOGISTICS AND UNANSWERED QUESTIONS
Currently, the Social Security Administration is working on providing clarity in a number of areas where questions remain. The SSA has published a WEP/GPO website that is being updated regularly as they have new information to relay – https://www.ssa.gov/benefits/retirement/social-security-fairness-act.html. As of the most recent update on February 25, 2025, retroactive benefits are expected to be sent as a one-time payment to the bank account on file for eligible recipients starting in March 2025. For adjusted future payments, most affected recipients will begin receiving their new monthly benefits in April 2025 (for their March 2025 benefit). Statements explaining the adjustments and retroactive payments are expected to be mailed to recipients, though they may receive the statements after receiving the retroactive and/or adjusted payments. Some remaining questions yet to be answered are:

Expanded Eligibility: Can individuals who previously did not apply for spousal or survivor benefits due to GPO restrictions receive retroactive payments?

Deceased Recipients: Will retroactive payments apply for Social Security recipients affected by WEP or GPO who have passed away since January 2024?

Taxability: Will retroactive payments be taxed similarly to current Social Security benefits (up to 85% taxable when received)?

It is anticipated that it may take longer to address the questions above and to process more complex cases. Check the SSA’s WEP/GPO website for real-time updates as they address these issues.

LONG-TERM IMPACT
While The Act rectifies disparities in benefits, it also underscores continued concerns about the financial sustainability of the Social Security Trust Fund. Currently, Social Security expects to be able to pay full benefits from the existing Trust Fund for the next 10 years to 2035, at which point they would only be able to pay out approximately 83% of scheduled benefits absent legislative intervention. Some estimates project that the increased payouts of The Social Security Fairness Act could accelerate that timeline by six months, adding approximately $196 billion in costs over the next decade. While there are reasonable adjustments that can be made to the Social Security system to address the program’s long-term solvency, The Act may prompt addressing legislative actions sooner.

ACTION PLAN
While some people who have already applied for and are receiving benefits may simply need to wait until the SSA processes their benefit increase, others who did not file for benefits with the previous understanding that their benefit would be substantially reduced or eliminated by WEP/GPO may need to take action. Each situation is unique – you should work with your financial advisor to determine if any action should be taken as a result of this legislation.