Social Security benefits will soon increase for some government retirees. Over the weekend, President Biden signed the Social Security Fairness Act into law with the HR 82 bill. It abolished the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO), which reduced Social Security benefits for some state and local government retirees with pensions. What many government employees found unfair as their Social Security benefits were reduced due to their government pensions are now things of the past. 

But what were the WEP and GPO? As a state or local government employee or retiree with a government pension, how could their elimination affect you — and your retirement? And if you’re a private-sector employee or retiree, what do higher payments to government workers mean for your own Social Security benefit?

What were the WEP and GPO?

Simply put, the WEP reduced Social Security benefits for some workers who received government pensions alongside Social Security benefits. The GPO applied to some government workers with pensions who were eligible for Social Security based on their spouses’ working records.

WEP

Some state and local government employers paid into government pensions for their employees. While working for these employers, the employees did not pay Social Security tax. Therefore, they weren’t eligible for Social Security benefits based on this employment. 

However, not all of these employees worked exclusively for state and local governments throughout all of their working years. Their private-sector work before, during, and after governmental employment earned them Social Security credits, making them eligible for benefits. 

Due to their government pensions and the fact that they didn’t pay into Social Security from their government earnings, the WEP formula reduced their Social Security benefits. The aim was to avoid them receiving the “windfall” of both their full pensions and Social Security benefits.

GPO

The GPO also applied to some government workers, specifically those who weren’t eligible for Social Security benefits based on their own work history but who were eligible for benefits based on their spouses’ Social Security records. Here, their spousal and widower Social Security benefits were reduced according to their own government pension payments.

Many government employees found these reduction provisions unfair as they’d earned both benefits. After all, they or their spouses had completed the work necessary to receive both.

What does the WEP & GPO elimination mean for government workers?

As the majority of those who were affected are middle-class — think former teachers, firefighters, police officers, air traffic controllers, and postal workers — it could mean quite a lot. In short, $360 more per month on average in Social Security benefits for the two million or so affected retirees. That’s an average of an additional $4,320 per year. Not exactly a windfall, but it could add up quite a bit over a retirement.

It also means $700 to nearly $1,200 per month for government workers who receive benefits based on their spouses’ Social Security records. For more than 700,000 individuals, an additional $8,400 to $14,400 per year is quite a bit more substantial and will likely be meaningful for these individuals. 

The law is retroactive to January 2024, meaning that those who were previously impacted by the WEP or GPO could receive a mini one-time Social Security payment windfall. However, the timing is uncertain.

What does it mean for the Social Security Administration?

As you may know, the Social Security Administration’s trust fund was already strained with insolvency in its future. With additional dollars now to flow out from the SSA to the tune of nearly $200 billion over the next decade alone and no current plans to increase the Social Security tax that brings dollars into the trust fund, insolvency is very likely to come even sooner. How soon? The Administration expects to be unable to fulfill full Social Security payments by 2035 — a mere decade from now. And if lawmakers take no action, the trust fund could be completely empty by 2038. 

Less in Social Security funds to go around at some point in the future makes now a great time to review what your financial plan could look like with diminished Social Security income. And for those with decades of working years ahead, reviewing your plan with no Social Security income — however unlikely — is a good idea.

How could this impact your retirement in the short term?

Of course, there’s no change to your Social Security payments due to the Social Security Fairness Act if you’re a private-sector retiree. But if you’re a government retiree with a pension who was previously affected by the WEP or GPO, it likely means at least a slight increase in your monthly Social Security benefit. 

Additional dollars soon to be coming in every month brings an opportunity for you to re-evaluate your monthly cash flow. It’s also a chance to adjust your account allocation as well as distributions from your other sources of retirement income, specifically your investment accounts. 

Whether you’re a government employee or private-sector worker currently saving for retirement, you may not want to rely on Social Security payments to form the core of your retirement income. Or at least not count on the full amount of Social Security that you were expecting to be the basis of your retirement income plan. While Social Security was only ever meant to cover approximately 40% of an individual’s retirement income on average, this news may lead you to consider working longer, saving more during your working years, or spending less during your golden years. 

Are you a government employee who would like to see how the WEP or GPO being abolished could impact your retirement income? Or a private-sector employee who wants to see what your retirement could look like with less income from Social Security? January is financial plan refresh month here at FPFoCo, and we invite you to schedule your consultation today.