Understanding the Social Security Fairness Act
Social Security is constantly evolving in an effort to better support Americans. Most of those changes tend to be gradual, such as the usual cost-of-living adjustments (COLA), but bigger changes are on the horizon in 2025. The newly signed Social Security Fairness Act has already introduced major changes that will impact an estimated 3.2 million retirees. Here’s what you need to know:
What is the Social Security Fairness Act?
The Act eliminates two provisions that have impacted Social Security benefits for certain individuals: the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO).
These provisions reduced or eliminated Social Security benefits for those who worked in jobs where they didn’t pay into Social Security but contributed to other pensions systems (“non-covered pensions”). More specifically, WEP reduced or eliminated Social Security benefits for those with a non-covered pension, while GPO lowered their spousal or survivor benefits.
The goal of the Act is to restore fairness by no longer penalizing retirees for their participation in non-covered pensions and increasing their Social Security benefits.
Who is Impacted by this Act?
- The Act affects a specific group of workers, which includes:
- Teachers, firefighters, and police officers in many states
- Federal employees covered by the Civil Service Retirement System
- Individuals whose work was covered by a foreign Social Security system
As of December 2023, WEP and GPO will no longer apply to benefits payable from January 2024 onward. Beneficiaries due retroactive benefits will receive a onetime payment, with higher monthly benefit payments expected to begin in April 2025.
It’s important to note that not everyone who falls under one of the above categories will see an increase in Social Security benefits, nor is the list exhaustive. The Act affects those receiving a “non-covered” pension. According to the Social Security Administration (SSA), about 72% of state and local employees pay into Social Security, so they haven’t been impacted by WEP or GPO and will not see any increases.
What Should You Do Now?
With any major change, questions and challenges are expected. To minimize unnecessary calls or visits, the Social Security Administration is providing regular updates as they roll out this new plan.
If you’re impacted by the Act, the actions you need to take will depend on your specific situation and eligibility for benefits. Actions could range from doing nothing at all to filing an application. For guidance, visit the Social Security Fairness Act webpage and scroll down to the question, “What should people do now that the Social Security Fairness Act is law?”
For additional information, you can also call the SSA’s National 800 number at 1-800-772-1213 and mention "Fairness Act" when prompted.
Why This All Matters
If you’re among those impacted by these changes, it could affect your retirement strategy. Whether you're nearing retirement or already receiving benefits, understanding these adjustments will help you make informed decisions and plan for the future.
As always, please reach out to your trusted advisor with any questions.
Disclosures & Important Information
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All data as of 09/19/24
