Workers with reduced or eliminated Social Security payments will regain their benefits with a new law that passed just days before congress adjourned. The Social Security Fairness Act of 2023 cleared its final hurdles passing the Senate on December 27, 2024, and was signed into law on January 5, 2025. The law repeals two rules, the Windfall Elimination Provision and the Government Pension Offset, that previously reduced or eliminated Social Security benefits for workers and eligible spouses who have certain government pensions from their public sector work.
Following you will find information on:
- The Windfall Elimination Provision (WEP) and Government Pension Offset (GPO):
- What were they?
- Who does this repeal benefit?
- Benefit reductions due to government pension
- How to Plan for the Benefit Change
- How to Start Getting Your Benefit
The Windfall Elimination Provision (WEP) and Government Pension Offset (GPO)
What were they?
The two rules are often confused. The WEP reduced Social Security benefits for a public sector employee who also would have been eligible for Social Security benefits through their private sector work.
EXAMPLE: In the case of a government worker who also earned Social Security benefits through a private employer, the WEP reduced their Social Security benefits by changing the percentages applied to their average monthly wages. For example, for a retiree otherwise receiving 90% of the average wages that were subject to Social Security, their benefit could have ranged from 85% down to 40% of that amount.
The GPO reduced spousal and survivor Social Security benefits for a person who received benefits from a non-covered pension. These are benefits that are paid out based on their spouse’s Social Security earnings. The reduction was two-thirds of the non-covered pension benefit.
EXAMPLE: A retired teacher who receives a $4,000 government pension would have had their spousal benefits reduced by $2,667. This applied to benefits based on their living spouse’s benefit or as a widow.
Who does this repeal benefit?
The repeal of these two rules provides for increased benefits for certain workers (like teachers in some states) who have government pensions but also earned Social Security benefits through their private sector employment. It also benefits retirees who would normally be eligible for spousal or survivor benefits based on their spouses’ earnings but saw those benefits reduced by existing rules.
Likewise, this repeal also applies to benefits a worker can receive as a divorced spouse. Divorced spouses who are eligible for spousal or survivor benefits will no longer have their benefits reduced due to their government pensions.
Benefit reductions due to government pension:
Some employees work for organizations that do not withhold Social Security taxes and do not pay the employer portion of that tax. Instead, they participate in what is called a “non-covered pension.” This applies to many public servants such as teachers, firefighters, police officers, and other public sector employees. Those same public servants may also have private sector wages from other employers. They may also have a private sector spouse, making them eligible for a spousal or survivor benefit. In those circumstances, their Social Security benefits would have been reduced under the WEP and GPO rules.
How to Plan for the Benefit Change
If this new law changes your benefits, this could be a good time to reach out to your financial professionals. Social Security benefits are partially taxable and are included in income calculations that determine your Medicare premiums, among other things. The increased cash flow may even improve your portfolio’s withdrawal rate and risk tolerance.
How to Start Getting Your Benefit
This law repeals the rules retroactively to 2024. The Social Security Administration is likely to release more information soon about how workers can claim their benefits. In the meantime, a press release on the Social Security Administration website recommends that people log into their accounts to verify and update their address and direct deposit information.
The financial planning team at F.L.Putnam is staying abreast of developments and welcomes the opportunity to answer any questions you may have.