What is the Social Security Fairness Act?

The act was signed into law on January 5, 2025, after Congress responded to concerns about the financial impact that decades-old Social Security retirement benefit provisions had on individuals who earned benefits from so-called non-covered pensions. This group includes certain workers who didn’t pay Social Security payroll taxes and instead contributed to some type of public sector pension system at the federal, state, or local level.

Most of these workers saw their Social Security benefits limited as a result of the Windfall Elimination Provision (WEP), which was enacted in 1983, while a smaller number were affected by the Government Pension Offset (GPO), enacted in 1977. The WEP in some instances reduced Social Security benefits for individuals who also received a pension or disability benefit from an employer that didn’t withhold Social Security taxes; the GPO in various instances reduced benefits for spouses, widows, and widowers who also received government pensions of their own.

The Social Security Fairness Act ends those two provisions and increases benefits for some―but not all―workers in these categories who had non-covered pensions:

• Teachers, firefighters, and police officers in many states
• Federal employees covered by the Civil Service Retirement System
• People whose work was covered by a foreign social security system

Not every current or future Social Security beneficiary in these worker categories is likely to qualify for increased benefit payments, as the increases only apply to those who receive a pension based on work not covered by Social Security. The Social Security Administration (SSA) estimates that about 72% of current state and local public employees work in Social Security-covered jobs where they do pay into the Social Security system and therefore weren’t affected by the WEP or GPO. Those individuals won’t be eligible to receive a benefit increase due to the new law, according to a government web page that explains the new law and its impact.   

For those who qualify, the benefit increases are retroactive, affecting payments earned beginning in January 2024 and beyond, so the SSA is calculating backdated payments.

How much of an impact might the law have on Social Security beneficiaries?

Last September, the Congressional Budget Office estimated that eliminating the WEP would boost monthly payments by an average of $360 by December 2025 for about 2.1 million Social Security beneficiaries―about 3% of all beneficiaries in the program. As for the GPO, its elimination is projected to increase monthly benefits by an average of $700 for 380,000 recipients getting benefits based on living spouses. The average increase would be $1,190 for 390,000 surviving spouses getting a widow or widower benefit.

How can beneficiaries determine what impact the law might have on them?

The SSA launched a web page to help address such questions. In addition, the agency’s beneficiary service phone number (800-772-1213) added an audio message offering details on the new law so that callers may not need to wait on hold to speak to a representative in hopes of getting their questions answered. Nevertheless, the SSA’s web page on the new law says that “more than 7,000 people each day still choose to wait to speak to a representative about the Act. These calls, as well as visitors and appointments in local offices, will continue to increase over the coming weeks and months.”

Meanwhile, the SSA has been processing the complex changes to millions of beneficiary accounts required as a result of the new law. The agency said its analysis “shows that much of the work must be done manually, on an individual case-by-case basis. SSA is currently processing pending or new claims involving future benefits and developing procedures and automated solutions for computing retroactive benefits.”

How financial professionals can help clients sort through it all

With many current Social Security beneficiaries wondering about the law’s impact on them, the uncertainty offers financial professionals an opportunity to notify clients about the new law, whether or not they may be affected directly. It’s a chance to help clients understand the elimination of the WEP and GPO, seek answers from the SSA about the new law’s impact on their finances, and address issues about claiming survivor benefits. In instances involving clients who may qualify for a benefit increase, it’s a chance to share good news and make any needed adjustments to their income expectations and savings plans. While some may need the additional money to meet living expenses, others may have more cash to consider investing.

In addition, financial professionals may wish to assist beneficiaries in considering any negative tax consequences that may result from seeing their Social Security income increase―a circumstance that could result in some clients moving up to a higher tax bracket, depending on their individual situation.