Social Security Fairness Act: The FAQs for Retirement Planning

Before he left office, President Biden signed the Social Security Fairness Act, which repealed the Windfall Elimination Provision and the Government Pension Offset. The new law will recalculate Social Security (SS) benefits for certain groups, with potentially significant impacts on retirement income planning. If you’ve been seeing this topic in the news and wonder if you’re affected, we’ll explain the new law and what steps, if any, you should take.

What Were the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO)?

The WEP and GPO were enacted over 40 years ago to help make SS benefits more equitable among employees. Specifically:

• Windfall Elimination Provision (WEP): The provision significantly reduced the amount of SS benefits an employee would be eligible for if they had a mixed career history, with some jobs covered by SS and others not. For example, this could include teachers and other government workers with a separate retirement system or pension rather than SS. The original intention was to limit these employees from disproportionately high SS benefits in retirement.
• Government Pension Offset (GPO): Similarly, the GPO provided a different calculation for spousal and survivor benefits for people with a pension in a non-SS-covered job. The provision reduced their benefits by two-thirds of the pension they were receiving.

What Is the Social Security Fairness Act?

The new law repealed the WEP and GPO provisions, with supporters reasoning they were unfair. For impacted people, SS benefits will be recalculated for future distributions with retroactive pay starting from January 2024.

Who Is Impacted by the Social Security Fairness Act?

While the topic has been in the headlines, the Social Security Fairness Act will only impact about 3% or 3.2 million workers and retirees. Still, if you fall into any of the following categories, you could be eligible for increased or new benefits:

• If you worked in a job where SS wasn’t taken out. If unsure, view your SS records and identify any zeroed-out or significantly lower earning years. In these cases, you were probably subject to the WEP.
  • If you’re already receiving SS, there is no action. You will receive the newly calculated and retroactive payments over the next few months.
  • The new formula will automatically apply to your calculated benefits if you’ve yet to claim your benefits.
  • Work with your advisor to determine when and how to leverage this new income into your retirement plan.
• If you’re married or were married (divorced or widowed) to someone eligible for SS benefits and receive a pension from a non-SS-covered job.
  • You may be eligible for spousal and survivor SS benefits on your spouse’s work record.
  • Whether married or divorced, the marriage must have lasted at least 10 years.
  • Consult your advisor to learn more about when and how to claim and how the new income plays into your overall financial strategy.

How CCMI Can Help

We’re always here to inform you of new legislation that could affect you and your family’s finances. If you have questions about the Social Security Fairness Act and how it may impact your situation, please contact our team. We’d be happy to help you determine your eligibility, strategies for claiming, and how new benefits can help you reach your goals.

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