Social Security Fairness Act Adds to Pressure on Safety Net

A Social Security card floats in rough water.

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Editor’s note: This is part two of a three-part series about making the most of the changes in Social Security benefits for federal employees brought about by the new Social Security Fairness Act (SSFA). Part one is Five Wins for Federal Employees in the Social Security Fairness Act. And part three is How Federal Retirees Can Make SSFA Repeals Work for Them.

The repeal of the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO) by the new Social Security Fairness Act (SSFA) is a significant development in the retirement planning space.

While it may initially appear as a boon to millions of retirees, this legislative change has created substantial challenges for the broader financial system, posing risks to Social Security’s long-term sustainability and introducing inequities in benefit distribution.

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The repeal of WEP and GPO removes provisions that previously reduced Social Security benefits for those receiving government pensions.

These provisions were originally implemented to address systemic imbalances in the Social Security benefit formula, which were exacerbated when individuals had income from both covered and non-covered employment.

While many retirees felt the direct impact of these provisions as unfair reductions in their expected benefits, their repeal now raises questions about the financial implications for Social Security and fairness for all contributors.

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WEP was designed to adjust Social Security benefits for retirees who worked in roles where they did not contribute to Social Security, such as certain state and local government positions, but who also earned Social Security credits from other employment.

Without WEP, these individuals would receive disproportionately high benefits due to the progressive nature of the Social Security formula.

By eliminating this adjustment, the repeal creates a situation where retirees who contributed less to Social Security can receive benefits comparable to those who contributed throughout their careers. This imbalance undermines the principle of equity that the Social Security system strives to uphold.

Similarly, the GPO aimed to prevent retirees with government pensions from collecting full spousal or survivor benefits on top of their pension income.

The provision reduced spousal benefits by two-thirds of the individual’s government pension, ensuring that Social Security was not subsidizing individuals who already had substantial retirement income from non-Social-Security-covered employment.

With the GPO now repealed, these spousal and survivor benefits will flow unadjusted to retirees with government pensions, leading to potential windfalls for some while increasing the financial strain on the Social Security system.

Far-reaching financial implications

The financial implications of these changes are far-reaching. According to the Congressional Budget Office, the repeal of WEP and GPO is projected to significantly increase the Social Security program’s costs, adding billions to its already precarious financial state.

The Social Security trust fund is projected to be depleted by 2033 under current trajectories, and the additional burden from these repeals could accelerate this timeline. This raises the stakes for policymakers, who must now grapple with the need for broader reforms to ensure the system’s solvency.

Beyond the financial strain, the repeal has also introduced disparities between different groups of retirees.

For instance, individuals who worked briefly in the private sector but spent most of their careers in government positions will now receive benefits far exceeding those of lifelong private-sector workers with comparable earnings.

This undermines the principle of proportionality, where benefits should reflect contributions.

The situation becomes even more contentious when considering the retroactive nature of the repeal, which mandates lump-sum payments to affected retirees. While this provides immediate financial relief to retirees, it further strains Social Security’s resources.

Critics have also highlighted the legislative process leading to these changes. The SSFA was driven largely by advocacy from special-interest groups and unions representing government workers.

While their efforts succeeded in highlighting the hardships faced by those impacted by WEP and GPO, the broader implications for Social Security’s sustainability were given insufficient attention.

The law’s enactment reflects a broader challenge in U.S. policymaking: the difficulty of balancing short-term political gains with long-term fiscal responsibility.

Moreover, the repeal of WEP and GPO sets a concerning precedent for future reforms. Social Security’s financial challenges are well-documented, and meaningful reform will require tough decisions, such as raising taxes, reducing benefits or both.

By choosing to repeal these provisions without addressing the underlying imbalances, policymakers have signaled a willingness to prioritize immediate relief over structural sustainability.

This approach risks creating a pattern where politically expedient solutions take precedence over comprehensive reform, leaving future generations to bear the consequences.

A big job for the SSA

The administrative burden of implementing these changes cannot be overlooked either. The Social Security Administration (SSA) now faces the daunting task of recalculating benefits for millions of retirees, issuing retroactive payments and communicating these changes to beneficiaries.

This adds complexity to an already strained system, increasing the likelihood of errors and delays. For retirees, the uncertainty surrounding these adjustments complicates financial planning, making it harder to achieve long-term stability.

Another critical issue stemming from the repeal is its impact on younger workers. Social Security operates on a pay-as-you-go basis, meaning current workers’ payroll taxes fund retirees’ benefits.

By increasing benefits for retirees without a corresponding increase in payroll taxes, the repeal shifts the financial burden onto younger generations. These workers already face a challenging economic landscape, with rising costs of living, student loan debt and stagnant wage growth.

The additional strain on Social Security risks further alienating younger workers, potentially undermining support for the program in the long run.

The repeal does have implications for public trust in Social Security. The system’s legitimacy rests on its perceived fairness and reliability. By creating new disparities and accelerating its financial challenges, the repeal risks eroding confidence in Social Security’s ability to deliver on its promises.

This could lead to increased skepticism about future reforms, making it even harder to build consensus around the difficult decisions needed to secure the program’s future.

My next article in this series will be about the opportunities that the recipients of the retroactive payments could harness.

For information on pension maximization and navigating future decisions, visit brianskrobonja.com to learn more.

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Brian Skrobonja is a Chartered Financial Consultant (ChFC®) and Certified Private Wealth Advisor (CPWA®), as well as an author, blogger, podcaster and speaker. He is the founder and president of a St. Louis, Mo.-based wealth management firm. His goal is to help his audience discover the root of their beliefs about money and challenge them to think differently to reach their goals. Brian is the author of three books, and his Common Sense podcast was named one of the Top 10 podcasts by Forbes. In 2017, 2019, 2020, 2021 and 2022, Brian was awarded Best Wealth Manager. In 2021, he received Best in Business and the Future 50 in 2018 from St. Louis Small Business.