The Senate has passed the Social Security Fairness Act, which President Joe Biden is expected to sign into law soon. The bill aims to provide relief to individuals who earned a pension from work outside Social Security and also performed other work where they paid FICA taxes. Starting retroactively from January 2024, individuals who have at least 10 years of wages covered by Social Security and who receive a pension from non-Social Security work will see a significant increase in their Social Security benefits.
The bill repeals two provisions: the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO). The WEP currently reduces Social Security benefits for individuals receiving a pension from work not covered by Social Security. The GPO reduces spousal and survivor benefits by two-thirds of the pension received from non-Social Security work.
For example, an employee entitled to a survivor benefit of $1,500 per month, but receiving a pension of $1,800 per month from non-Social Security work, would have their survivor benefit reduced to $300 per month. Under the new law, the survivor benefit would be restored to $1,500 per month.
Senate acts on Social Security changes
The repeal of WEP and GPO will significantly impact more than 3 million retired teachers, law enforcement workers, firefighters, and others. Critics of the bill highlight that it will increase Social Security benefits by approximately $196 billion over 10 years without providing new income for Social Security. States including Texas, Illinois, Ohio, Massachusetts, Colorado, Nevada, Alaska, Hawaii, and Maine will see a significant impact on their Social Security beneficiaries.
It is well known that by 2033, there will be a significant deficit in funding Social Security benefits. So far, Congress has taken no action to address this deficit. If no action is taken, benefits might need to be reduced by approximately 25% on average by 2033.
Many employees will see their benefits increase significantly in 2025. Hopefully, Congress will act in time to ensure Social Security benefits do not have to be reduced substantially in the future.
