Social Security Fairness Act Could Increase Your Monthly Benefit
President Biden signed the Social Security Fairness Act (SSFA) on 05 JAN 2025, eliminating the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO)—two provisions that reduced Social Security benefits for millions of Americans. The WEP reduces a worker’s own Social Security retirement benefit while the GPO reduces a worker’s spousal benefit, based on the work of their spouse.i
In addition, the SSFA included a provision stating that changes are retroactive to JAN 2024. This means not only will impacted workers receive a higher monthly benefit, but they could also be entitled to a one-time lump sum payment as a catch-up for past reductions!
Who is impacted by WEP and GPO?
The WEP reduces the benefits of a worker who is entitled to
a. Their own Social Security benefit, based on their covered work from which Social Security taxes were paid, and at the same time,
b. A pension from non-covered work where Social Security taxes were not paid.
The GPO reduced the Spousal benefit a worker could have been entitled to, based on the work of their spouse. A worker is generally entitled to either their own benefit, based on their own work record, or the Spousal benefit—50% of their spouse’s Social Security benefit—whichever is higher.
What impact does the WEP and GPO have on benefits?
The WEP reduction changed the formula used to calculate benefits from 90% at the first bend point calculation to 40%. For 2025, this reduction could have been as high at $613/per month.
For example, suppose Worker A’s Average Indexed Monthly Earnings (AIME) were calculated at $5,000/mo. His Primary Insurance Amount (PIA) would be calculated as follows:
a. Without WEP: (0.90)*($1,226) + (0.32)*($3,774) = $2,311.08 per month
b. With WEP: (0.40)*($1,226) + (0.32)*($3,774) = $1,698.08 per month
The GPO, even more draconian than the WEP, cut the Spousal benefit, dollar-for-dollar, by 2/3 of the non-covered pension amount.
For example, suppose Worker B has a non-covered pension benefit of $2,000 per month. In addition, Worker B is entitled to a Spousal benefit, based off Worker A’s Social Security benefit above. Her Spousal benefit would be calculated as follows:
a. Without GPO: (0.5)*($2,311.08) = $1,155.54
b. With GPO: (0.5)*($2,311.08) – (2/3)*($2,000) = $0
The GPO completely wiped out the Spousal benefit in this example!ii
Changing Your Benefit Claiming Strategy Could Increase Your Monthly Take-Home
With the WEP and GPO in force, many workers and couples decided upon a strategy for claiming Social Security using the reduced benefits calculations. This could mean claiming benefits earlier than they otherwise would have done so or not claiming at all (in the case where the GPO reduced the Spousal benefit to $0). Now, however, it makes sense to reevaluate those decision in light of the WEP/GPO repeal. Doing so could mean increased benefits and more take-home money for workers!
Updated Benefits Are Now Being Paid - What To Do Now
As mentioned there are potential payments a worker could receive due to the passage of the SSFA: a one-time lump sum payment to catch up on retroactive reductions to JAN 2024 and an increased monthly benefit.
On 25 FEB 2025 the Social Security Administration announced retroactive (lump sum) payments will begin paying the week of 24 FEB 2025. In addition, monthly benefits will begin reflecting the new, higher amounts in APR 2025.iii For those who are not changing their claiming strategy, no action is required—retroactive payments and increased monthly benefit payments will occur automatically.
For those who DO need to adjust their claiming strategy, you should contact the Social Security Administration or apply online at www.ssa.gov/apply. Keep in mind all other Social Security policies apply, such as application of any reductions/credits for claiming before/after Full Retirement Age, retirement earnings test, etc.
What If I Pay Medicare Premiums Directly?
If you pay Medicare premiums directly, and because of the changes brought by passage of the SSFA you will now receive a Social Security benefit, you should continue to pay the bill until you receive notice from SSA that your record has been updated and that Medicare premiums will be deducted from your monthly benefit.iv
Don't Forget To Update Your Retirement Income Plan To Reflect These Changes
Your increased benefits can add to your taxable income, creating a higher tax bill for you at the end of the year. You should review your retirement income plan to review what impact any benefit increases will have on your cash flow and tax planning, such as Roth conversion strategies, benefit claiming strategies, and other cash flow activities dependent on income.
WealthBridge Capital Management is ready to help you update your plan. If you don’t have a retirement income plan, or your need to update or review your current plan, please reach out to us at 614-591-4515 or email us at info@wealthbridgecm.com to schedule an appointment.
i Public Law 98-21, Social Security Amendments of 1983, enacted 20 APR 1983.
ii In practice, the actual Spousal benefit would be calculated first using the reduced PIA for Worker A. So the Spousal benefit without the GPO would be (0.5)*($1698.08) = $849.04.
iii https://www.ssa.gov/benefits/retirement/social-security-fairnes-act.html
iv Ibid.
Social Security Fairness Act Could Increase Your Monthly Benefit