Could you potentially be among the 2.8 million U.S. residents who might profit from the Social Security Fairness Act?
The United States Senate recently voted to advance the Social Security Fairness Act, a bipartisan piece of legislation that could enhance Social Security benefits for around 3 million residents. The bill was approved in the House of Representatives in November and now heads to President Biden's desk for signing.
If agreed upon, this groundbreaking legislation could bring about substantial changes in retirees' benefits. Who might stand to gain the most from these modifications?
What is the Social Security Fairness Act?
The Social Security Fairness Act seeks to eliminate two federal regulations: the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO).
The WEP can impact people who have earned sufficient employment to qualify for Social Security benefits from one job, while also being eligible for a non-Social Security-contributing pension from a different job. This category includes numerous state and local government workers, including educators, postal service employees, and law enforcement agents.
Typically, working and paying Social Security taxes for a decade is enough to qualify for retirement benefits. However, if you've worked less than 30 years in eligibility-providing jobs and also qualify for a non-Social Security pension, your benefits might be reduced significantly.
The GPO targets individuals entitled to dependent or survivor benefits as well as a pension. Under this policy, your benefit could be reduced by two-thirds of the pension amount you're receiving.
For example, if you are entitled to $1,000 per month from your pension, your dependent or survivor benefit could be decreased by two-thirds of that amount, equating to $660 per month. The average monthly Social Security benefit for the spouse of a retired worker as of November 2024 is approximately $900. As a result, it's possible that the majority or even all of your benefit might be withheld if you fall under this policy.
Roughly 2.1 million Americans are affected by the WEP, while the GPO impacts more than 700,000 people. If these two policies are repealed under the Social Security Fairness Act, around 2.8 million Americans might see their benefits improved.
A potential disadvantage
Critics of the Social Security Fairness Act caution that increasing benefits could exhaust the program's trust funds sooner, potentially exacerbating problems down the line. Currently, both of Social Security's trust funds, covering retirement and disability benefits, are projected to run out by 2035. At that point, the program will rely solely on payroll taxes and other revenue sources to fund benefits.
If the trust funds are depleted, the available income sources will only cover around 83% of future benefits, according to the latest estimates from the Social Security Administration's Board of Trustees. A 2024 report from the Congressional Budget Office suggests that the Social Security Fairness Act may result in both trust funds being depleted approximately six months earlier than anticipated. With the deadline for 2035 quickly approaching, this could put pressure on Congress to find a solution more urgently.
Regardless, owing to the immediate impact that the repeal of the WEP and GPO could have on millions of Americans, this legislation is a step forward for many. Although it is not yet law, if passed, the Social Security Fairness Act has the potential to increase your benefits by hundreds or even thousands of dollars per month.
If the Social Security Fairness Act is signed into law, individuals affected by the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO) could potentially see significant improvements in their retirement benefits. These two policies, which reduce benefits for those earning Social Security from multiple jobs or receiving dependent or survivor benefits while also having a pension, impact over 2.8 million Americans combined. However, some critics raise concerns that enhancing benefits could expedite the depletion of Social Security's trust funds, potentially leading to reduced benefits in the future.
