How the Social Security Fairness Act elevates retirement benefits for public employees

On January 5, 2025, President Joe Biden signed the Social Security Fairness Act into law. This important change improves retirement benefits for public sector workers in the U.S. by ending the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO).

These rules used to cut Social Security benefits for people with pensions from non-Social Security jobs. About 3 million retirees, like teachers, firefighters, and police officers, will feel the impact. The law has received both praise and criticism for addressing these long-standing fairness issues.

The legislation marks a big win for retirees who have long fought against these rules. But, many are worried about Social Security’s financial health now that these changes are in place. This article looks at what the old rules were, the benefits and issues of the new law, and what it means for retirees and the future of Social Security.

Understanding the repealed provisions

The WEP and GPO were put in place to fix the way Social Security benefits were counted for some public sector workers. These rules were often unfair to government workers who got pensions from jobs not paying into Social Security, like teachers, firefighters, and state or local employees.

The #SocialSecurityFairnessAct was signed into law, eliminating the Windfall Elimination Provision and the Government Pension Offset. Now what? Ensure your information is up-to-date with the Social Security Administration. The agency will handle the rest. pic.twitter.com/PoZeR91Gwf

— Rep. Emilia Strong Sykes (@RepEmiliaSykes) January 7, 2025

The Windfall Elimination Provision, or WEP, was introduced in 1983 to stop what was seen as an unfair advantage for some workers. Social Security benefits are designed to give more support to lower-earners. Public workers with both government and private jobs sometimes got extra benefits because of how these were calculated. WEP reduced the benefits for those with government pensions to make it more fair, which often cut down their Social Security payments significantly.

The GPO, started in 1977, affected benefits for spouses and survivors who received pensions from government jobs. Specifically, the GPO cut their benefits by two-thirds of their government pension. The goal was to prevent “double dipping,” where people would get a full pension and Social Security benefits. However, many retirees felt this rule was unfair, as it left some with very little or no spousal benefits.

Over the years, these provisions have been criticized for their complexity and the financial hardship they imposed on retirees. Advocacy groups, including unions and senior organizations, have long campaigned for their repeal, arguing that the provisions disproportionately impacted middle- and lower-income retirees and their families.

Implications of the Social Security Fairness Act

The repeal of the WEP and GPO through the Social Security Fairness Act is poised to enhance the financial well-being of numerous retirees. According to the Congressional Budget Office (CBO), the elimination of these provisions will result in an average monthly benefit increase of $360 for individuals previously affected by the WEP. Those impacted by the GPO stand to receive even more, with average increases of $700 per month for those with a living spouse and $1,190 for surviving spouses.

For many retirees, these additional funds represent a substantial improvement in their quality of life. Public sector employees who were previously penalized for their career choices can now enjoy greater financial security. This is especially significant for retirees in professions such as teaching, firefighting, and law enforcement, where salaries are often modest compared to private sector roles. With higher Social Security benefits, retirees can better afford essential expenses such as healthcare, housing, and transportation.

The benefits of the legislation extend beyond individual retirees. Advocacy groups argue that the increased financial support will reduce reliance on public assistance programs, such as Supplemental Nutrition Assistance Program (SNAP) benefits. While some retirees may experience a reduction in SNAP benefits due to their higher Social Security income, the overall financial impact is expected to be positive.

For instance, HealthView Services, a company that projects healthcare costs for retirees, calculated that a worker affected by the WEP could gain over $330,000 in additional Social Security benefits over a 25-year retirement. This significant financial boost underscores the transformative potential of the act for millions of households.

However, the legislation’s benefits come at a cost. The CBO estimates that repealing the WEP and GPO will increase federal expenditures by approximately $196 billion over the next decade. This additional spending is projected to accelerate the depletion of the Social Security Trust Fund by about six months, moving the expected insolvency date to 2033. Critics argue that without additional measures to strengthen the program’s financial foundation, the increased benefits could exacerbate Social Security’s fiscal challenges.

Balancing benefits and financial sustainability

While the Social Security Fairness Act addresses longstanding inequities, it also raises critical questions about the future of the Social Security program. As it stands, the program’s Old-Age and Survivors Insurance Trust Fund faces significant financial strain. Without intervention, the fund is projected to be depleted by 2033, at which point benefits would be automatically reduced by about 20%.

The financial impacts of the act have intensified calls for broader reforms. Policymakers and economists emphasize the need to balance benefit enhancements with fiscal responsibility. Potential solutions include raising the cap on taxable earnings, increasing payroll tax rates, or modifying the benefit formula to ensure long-term solvency.

One proposal that has gained traction is “scrapping the cap” on taxable earnings. Currently, only income up to a certain threshold ($160,200 in 2023) is subject to Social Security taxes. Eliminating or raising this cap could generate substantial additional revenue for the program, helping to offset the costs of the act and shore up the trust fund. However, such proposals face political resistance, particularly from lawmakers and constituents who oppose tax increases.

Another potential avenue for reform involves revisiting the retirement age. Proponents of this approach argue that gradually increasing the retirement age to reflect rising life expectancies could help reduce the program’s financial burden. However, critics contend that such changes could disproportionately affect lower-income workers and those in physically demanding jobs.

Despite these challenges, advocates argue that the legislation represents an important step toward equity and fairness. They emphasize that public sector employees affected by the WEP and GPO have been penalized for too long and that repealing these provisions is a matter of justice. While the financial sustainability of Social Security remains a pressing concern, supporters believe that the benefits of the new law outweigh its costs.

Final thoughts

The enactment represents a pivotal moment for public sector retirees, rectifying benefit reductions that have affected millions over the past several decades. By repealing the Windfall Elimination Provision and the Government Pension Offset, the legislation restores financial security and dignity to retirees who dedicated their careers to public service.

As the provisions of the act take effect, retirees can anticipate increased Social Security benefits, enhancing their ability to meet essential expenses and enjoy a more comfortable retirement.

However, the legislation also underscores the need for continued attention to the financial sustainability of the Social Security program.

Looking ahead, the Social Security Fairness Act serves as both a triumph for equity and a reminder of the complex challenges facing the nation’s retirement system. By addressing the inequities of the past while preparing for the needs of the future, policymakers have an opportunity to uphold the promise of Social Security for generations to come.