Millions of Americans celebrated when former President Joe Biden signed a groundbreaking bill into law, designed to enhance Social Security benefits for about 3.2 million retirees and their spouses. Given that Social Security affects tens of millions of Americans and is fraught with financial challenges, it often becomes a contentious issue, leading to partisan disagreements.
Achieving bipartisan support for Social Security legislation is no small feat, making the passage of the Social Security Fairness Act a significant achievement. However, retirees who stand to gain from this law recently discovered an unexpected twist accompanying their benefits.
What the new legislation can do for your Social Security check
The Social Security program is intricate, filled with numerous regulations about who is eligible to claim benefits, the timing of these claims, and the amount they can receive. The Social Security Fairness Act aims to simplify this by eliminating two key provisions: the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO).
- Windfall Elimination Provision (WEP): This rule often reduced the Social Security benefits of individuals who also received a pension from a job not covered by Social Security.
- Government Pension Offset (GPO): This provision reduced the Social Security spousal or survivor benefits for those who worked in jobs with pensions not covered by Social Security.
The removal of these provisions is expected to bring relief to many who felt penalized under the previous system. Yet, as with any legislation, the devil is in the details, and those poised to benefit must navigate these changes carefully.
The Windfall Elimination Provision (WEP) is a regulation that affects Social Security benefits for retirees who are eligible for these benefits and also receive a noncovered pension. This type of pension is an employer-sponsored plan that does not deduct Social Security taxes from an individual’s salary.
The Social Security program relies on workers contributing taxes throughout their careers, which in turn entitles them to benefits upon retirement or when they are close to retiring. The purpose of WEP is to prevent those who receive noncovered pensions from obtaining disproportionately higher benefits. This provision primarily affects a specific group of workers, including state and local municipal employees, federal workers, and teachers. As of 2022, WEP had an impact on over 2 million Americans.
Understanding the Government Pension Offset (GPO)
The Government Pension Offset (GPO) functions similarly to WEP but targets spouses or widowers who receive noncovered pensions. In 2022, GPO affected more than 734,000 individuals, representing about 12.6% of those receiving Social Security spousal benefits. The removal of WEP and GPO would influence retirees based on the specific benefits they are eligible for and the amounts they receive from their noncovered pensions.
The potential changes in Social Security benefits have caught the attention of many retirees. The Social Security Administration (SSA) estimates that eliminating the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO) could potentially increase a retiree’s benefits by as much as $1,000 or more each month.
This is a substantial boost, especially considering that the average monthly benefit for retirees in December 2024 was approximately $1,926. It’s worth noting that these benefits have already seen an increase this year due to a 2.5% cost-of-living adjustment.
The Unwelcome Surprise
Despite the promising potential for increased benefits, many retirees affected by WEP and GPO might face a wait of over a year to actually see any changes in their SSA benefits. According to a recent statement from the SSA, implementing this new law will be challenging and time-consuming. The main issue is that the law’s passage did not include funding for its execution, and its provisions are more complex than they initially appear.
The SSA is now tasked with recalculating the benefits for over 3 million individuals. Furthermore, the law mandates that benefits be adjusted retroactively to the start of 2024, adding another layer of complexity to the process.
While the agency has begun addressing these changes and helping retirees navigate the situation, it is also grappling with significant challenges: staffing shortages, and a hiring freeze that’s been in effect since last November. These issues are expected to persist, complicating the SSA’s ability to implement the changes swiftly.
