For decades, public-sector retirees with state-backed pensions have faced reductions in their Social Security benefits due to the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO).
These provisions were designed to adjust Social Security payments for those receiving government pensions. But now, that’s all changed.
With the passage of the Social Security Fairness Act (SSFA), both WEP and GPO have been repealed. This brings significant financial implications for millions of public-sector retirees.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The Social Security Fairness Act, summarized
By eliminating both WEP and GPO, the SSFA guarantees that pension-eligible retirees who paid into the Social Security system will receive their full benefits, rather than having them reduced due to their public pension.
This correction helps level the playing field for teachers, firefighters, police officers and other public servants who spent part or all of their careers contributing to Social Security.
Now that we’ve covered the basics, let’s unpack the details.
What the Social Security Fairness Act means for retirees
The SSFA, which was signed into law by President Joe Biden on January 5, 2025, increases Social Security payments for those previously affected by WEP and GPO:
- Employees subject to WEP will see an average increase of $360 per month
- Spouses impacted by GPO can expect an average boost of $700 per month
- Widows or widowers affected by GPO will receive an average increase of $1,190 per month
The new law is retroactive to benefits payable after December 2023, which means that retirees affected by the law will receive a lump sum equal to the value they would’ve received since the start of 2024.
Who benefits from the SSFA?
This change in policy is intended to ensure that public-sector retirees who paid into Social Security during part or all their careers receive the full Social Security benefits they’ve earned, without reductions from the WEP or the GPO.
For example, let’s say Sam is a federal employee who is eligible for a pension, but who also paid into Social Security prior to becoming a federal employee. Previously, WEP would’ve reduced his Social Security benefits to account for this pension income. With the passage of the SSFA, this offset is eliminated.
Similarly, Amanda has just retired after 30 years of teaching. Her husband is a high-earning construction contractor. Previously, she would’ve seen any spousal and survivor benefits reduced by the GPO due to her teacher’s pension. Now, under the new law, she will receive the full benefit amount.
What should you do?
For those who’ve received reduced benefits due to WEP or GPO, the Social Security Administration is automatically adjusting payments and issuing retroactive payments.
Beneficiaries do not need to reapply for Social Security, but they should ensure their mailing address and direct-deposit details are up to date through the SSA website.
Key financial planning considerations for public-sector retirees
Having more money is a good problem to have, but affected retirees need to consider these five potential implications of the SSFA’s passage:
- Tax brackets. Social Security benefits are partially taxable based on income. Higher Social Security payments may push some retirees into a higher tax bracket, or increase the taxable portion of their benefits. Retirees could also move into a higher capital gains tax bracket.
- Medicare costs. Medicare Part B and D premiums are based on income and have a two-year look-back period. Higher Social Security benefits today could push retirees into a higher premium bracket in the future.
- Tax mitigation strategies. The additional income may impact required minimum distributions (RMDs) and Roth conversion strategies.
- Investment taxes. An increase in income may trigger the net investment income tax (NIIT) for individuals with a modified adjusted gross income (MAGI) above $200,000 (single) or $250,000 (married filing jointly).
- Income-based programs. Retirees who were previously eligible for Supplemental Nutrition Assistance Program (SNAP) or other programs could lose their eligibility due to increased income.
Looking ahead: The future of Social Security
The repeal of WEP and GPO represents a major shift in Social Security policy. While this change increases benefits for some public-sector employees, it could also place additional financial strain on Social Security’s trust funds, potentially accelerating the timeline for depletion if no new revenue sources are introduced.
Regardless of the future, the SSFA is law today. Affected individuals should take action as soon as possible by reassessing their retirement plans with the help of an experienced financial adviser.
Related Content
-
Is Your Social Security Earnings Record Wrong? Here's How to Fix ItYour Social Security benefits are based on your Social Security earnings record. It's important to review your records to avoid having your benefits reduced.
-
Stock Market Today: Markets Discount Another U.S. DowngradeAfter Friday's closing bell, Moody's followed Standard & Poor's and Fitch and cut its rating on U.S. government debt.
-
Is Your Social Security Earnings Record Wrong? Here's How to Fix It
Your Social Security benefits are based on your Social Security earnings record. It's important to review your records to avoid having your benefits reduced.
-
Stock Market Today: Markets Discount Another U.S. Downgrade
After Friday's closing bell, Moody's followed Standard & Poor's and Fitch and cut its rating on U.S. government debt.
-
Eight Ways To Save on Your Next Luxury TripLooking for ways to stretch your retirement dollars? Follow these tips to get a deal on your next vacation.
-
Donating Complex Assets Doesn't Have to Be ComplicatedIf you're looking to donate less-conventional assets but don't know where to start, this charity executive has answers, such as considering a donor-advised fund (DAF) for its tax benefits and ease of use.
-
What's Next for Stocks After a Chaotic SpringA chaotic tariff policy buffets investors looking for clarity on the economy and inflation.
-
Think a Repeal of the Estate Tax Wouldn't Affect You? WrongThe wording of any law that repeals or otherwise changes the federal estate tax could have an impact on all of us. Here's what you need to know, courtesy of an estate planning and tax attorney.
-
In Your 50s? We Need to Talk About Long-Term CareMany people don't like thinking about long-term care, but most people will need it. This financial professional recommends planning for these costs as early as possible to avoid stress later.
-
Where to Invest in an Uncertain MarketIn an uncertain market, you can still pocket juicy payouts ranging from 4% to 14%, depending on risk.
