President Joe Biden signed the Social Security Fairness Act into law on Jan. 5, significantly impacting nearly 3 million public-sector workers with government pensions. The average increase in benefits is estimated at $360 per month for these workers, but the law brings troubling news for all Social Security beneficiaries.
The Social Security trust fund, which pays benefits to retired workers, spouses, and survivors, was already projected to be depleted by 2033, leading to automatic benefit cuts if Congress does not intervene. The new law accelerates this timeline by increasing program spending, which means these potential benefit cuts may now occur even sooner. The Social Security Fairness Act eliminates two existing rules: the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO).
The WEP reduced benefits for workers who had one job that did not withhold Social Security taxes and another job that did. It primarily affected public-sector workers such as firefighters, police officers, and teachers who also held private-sector jobs.
Social Security funding shortfall concerns
The GPO reduced Social Security benefits for spouses and survivors who also receive pensions from federal, state, or local governments. The aim was to treat government employees who do not pay Social Security taxes similarly to those in the private sector who do. While some policy experts argue that WEP and GPO were unfair as they reduced benefits for those serving their communities, others believe they were necessary to prevent double-dipping from Social Security and government pensions.
Before the act was signed, the Social Security Old-Age and Survivors Insurance (OASI) Trust Fund was projected to be insolvent by 2033, at which point only 79% of scheduled benefits would be payable. However, the new law requires increased benefit payouts, hastening the trust fund’s depletion and increasing the projected cuts. The Congressional Budget Office estimates that the Social Security Fairness Act will deplete the trust fund about six months earlier than previously expected and increase the necessary benefit cut to 26% once the fund is insolvent.
The Social Security Fairness Act raises the stakes for Congress to find a solution to the program’s financing issues. The law increases program spending, meaning Congress now faces an even greater funding shortfall. While immediate relief is coming for public-sector workers, retirees and other beneficiaries may face expedited and larger benefit cuts unless action is taken.
