Impact of the Social Security Fairness Act

Nate WuthrichBlog, Retirement

On January 5, 2025, the Social Security Fairness Act of 2023 (the “Act”) was signed into law, eliminating the Public Sector pension penalty that reduced the Social Security benefits of Public Sector retirees, spouses, and surviving spouses. Foster & Foster is providing this alert to assist you with questions from your retirees.

The Social Security Fairness Act of 2023 amends Social Security by repealing two provisions: the Windfall Elimination Provision (“WEP”) and the Government Pension Offset (“GPO”). The WEP reduced the Social Security benefits of retired or disabled employees who 1) received a pension from a state or local government, and 2) had fewer than 30 years of employment outside of the Public Sector.  Social Security benefits are calculated by multiplying a person’s lifetime average indexed monthly earnings by three different percentages and then adding the results to determine the monthly benefit. The WEP reduced the first percentage from 90% to 40%. The GPO functioned similarly, except that it reduced the Social Security benefits available to spouses (generally 50% of the Social Security benefit) or surviving spouses (100% of the Social Security Benefit) by two-thirds of their monthly Public Sector pension benefit, which often eliminated the Social Security benefit entirely.

Repealing these Social Security reductions will have a significant impact on roughly 3 million Public Sector retirees. Repeal of the WEP will result in an average monthly Social Security increase of $360 dollars, according to the Congressional Budget Office (“CBO”). The CBO also estimates significant increases in Social Security benefits to spouses ($700 per month) and surviving spouses ($1,190 per month), on average.

The increased Social Security benefits will be implemented this year. Retirees previously affected by the WEP or GPO do not need to do anything at this time, except verify that their mailing address and direct deposit information on file with the Social Security Administration (“SSA”) is correct. This repeal is effective retroactively to December 31, 2023, meaning that affected Public Sector pensioners will receive retroactive benefits to account for the reductions applied in 2024. The SSA has not announced when the provisions of the Act will be implemented; however, in developing its estimates, the CBO assumed that the majority of the increases and retroactive payments would occur sometime in 2025.

Retirees can check the SSA’s website for updates at https://www.ssa.gov/benefits/retirement/social-security-fairness-act.html.

Feel free to reach out to your Foster & Foster consultant with any questions you may have.