On January 5, 2025, President Joe Biden signed the Social Security Fairness Act into law. The new law, which had bipartisan support, ended two harmful provisions that reduced retirement benefits for millions of former public employees: the Windfall Elimination Provision and the Government Pension Offset. The law applies to Social Security benefits beginning in 2024 and moving forward.
The Windfall Elimination Provision (WEP) reduced benefits for public employees, such as firefighters, police officers, teachers, and other public servants, who received pensions not covered by Social Security payroll taxes. It prevented individuals from receiving a “windfall” by getting a full Social Security benefit on top of a non-Social Security pension. This law applied even if the individual did not intentionally try to “double dip.” The WEP calculated a lower Social Security benefit based on a formula that considered the number of years worked in jobs subject to Social Security taxes. As a result, individuals with significant non-covered pension income were penalized if they also worked in jobs subject to Social Security payroll taxes.
The Government Pension Offset (GPO) was similar to the WEP, but instead of reducing a worker’s benefit, it reduced Social Security benefits for a spouse or former spouse who claimed benefits based on a spouse or former spouse’s earning record.
For example, if an individual worked in a job subject to Social Security payroll taxes and then became a public-school teacher, the old law would reduce Social Security benefits because of the teacher’s pension. Under the new law, the teacher would be entitled to full Social Security benefits based on earnings subject to Social Security payroll taxes.
The implementation of this new law will be a massive and unexpected undertaking for the Social Security Administration. Not only will affected individuals have their future benefits increased, but they will also receive retroactive benefits for 2024. It is estimated that the law impacts about two million beneficiaries who have had their earned Social Security benefits reduced by the WEP, and close to 750,000 individuals who have had spousal and widow’s benefits reduced based on the Social Security work record of their current, former, or deceased spouse. The Social Security Administration will need to check everyone’s records to identify affected individuals and determine their entitlements. Add to that number all the unknown individuals who never filed for Social Security benefits because they knew WEP or GPO would reduce any benefit to zero.
When and how the new law will be implemented remains to be seen. If an individual had their benefits reduced by either the WEP or GPO, they do not need to take any action at this time, except to ensure that the Social Security Administration has their current mailing address and direct deposit information. The good news is that the law is retroactive for all of 2024, so no matter how long the process takes, everyone will eventually receive what they are owed. However, one thing is certain, it is going to take a while.
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