Millions of retired teachers, firefighters, police officers, and others with public pensions will soon reap the benefits of the recently passed Social Security Fairness Act. Federal officials announced on Tuesday that the Social Security Administration (SSA) will start paying retroactive benefits and increase monthly payments beginning in April for over 3.2 million people affected by the law signed in January. The new legislation expanded benefits by eliminating two federal provisions that barred employees with public pensions from collecting their full benefits under the federal retirement program.
These same policies also affected benefits for such workers’ surviving spouses and family members. The SSA stated that payment increases will vary depending on the type of benefit and pension. While some benefits will see modest increases, others may see over $1,000 more each month.
Most beneficiaries will start receiving updated payments in April for their March benefits. The benefits hike is retroactive to December 2023, meaning eligible recipients who previously received only partial benefits will get a full payment retroactive to a year ago. “Social Security’s aggressive schedule to start issuing retroactive payments in February and increase monthly benefit payments beginning in April supports the priority to implement the Social Security Fairness Act as quickly as possible,” Lee Dudek, acting commissioner of Social Security, said in a statement.
However, Dudek also cautioned that those affected might have to wait up to a year or longer for their benefits due to a lack of additional financing or staff to help implement the law.
Benefits for retirees from new law
Most eligible Social Security recipients will get their one-time retroactive payment by the end of March, deposited into their bank accounts on record with the SSA.
The agency is asking beneficiaries to wait until April to inquire about the status of their retroactive payment. The push to enhance Social Security payments for public pension recipients has been in the works for decades, with the first Senate hearings on the policies held in 2003. The Senior Citizens League expressed satisfaction with the accelerated timeline for implementing the new law, given the high cost of living affecting many members.
However, the group remains concerned that the law could speed up the depletion of the Social Security trust fund. The new law had bipartisan support but faced last-minute objections from some Republicans due to its cost. According to the Congressional Budget Office, the law is projected to add an estimated significant amount to the federal deficit over a decade.
While the Social Security boost is good news for millions, advisors warn it may come with additional taxes. People have about a year before the tax implications kick in, and the amount of tax owed will depend on their total income plus one-half of their Social Security benefits for the taxable year. To reduce taxes from the Social Security bump, people can elect to spread the payments over the years they were owed, make qualified charitable distributions from IRAs, manage withdrawals from retirement accounts, and harvest tax losses in brokerage accounts.
Experts also suggest investing the retroactive Social Security check into a small business or using some of the boost for enjoyable activities while paying down high-interest debt and investing part of it for future opportunities.
Image Credits: Photo by Samuel Schroth on Unsplash
