The Social Security Fairness Act Explained

In December 2024, Congress passed the “Social Security Fairness Act” which allows some retirees who receive a public pension to collect higher Social Security benefits. This bill repeals the Windfall Elimination Provision and the Government Pension Offset, which will lead to higher Social Security benefits for some public employees.

In this article, we’ll explain:

• The Windfall Elimination Provision (WEP) 
• The Government Pension Offset (GPO)
• Who Will Be Affected by the Social Security Fairness Act

Understanding the Social Security Fairness Act (H.R. 82)

Retirees who worked in “non-covered” jobs and did not pay into the Social Security system for most (or all) of their careers are typically not eligible to receive Social Security benefits for the years they spent working those jobs. “Non-covered” employees are most commonly state and local government employees, as well as some federal government employees. These workers, including firefighters, law enforcement and public educators, typically receive public pensions instead of Social Security benefits.

But what about employees who worked some years in a “non-covered” position and some years in a “covered” position? For example:

• A retired federal employee who starts a consulting practice
• A firefighter who has a second job
• A teacher who works at a tutoring center every summer

Prior to the Social Security Fairness Act, these workers would pay Social Security taxes on their “covered” jobs but receive a reduced Social benefit because of the Windfall Elimination Provision and Government Pension Offset. 

What are the WEP and the GPO?

The Windfall Elimination Provision (WEP) was enacted in 1977. It reduces Social Security benefits for individuals who receive pension or disability benefits from an employer that was not required to withhold Social Security payroll taxes.

Social Security has a progressive benefit structure, which means low earners (people who worked many years at a low income) receive a higher income replacement rate when calculating their benefits. Benefits are calculated by applying three different percentages to a person's lifetime average indexed monthly earnings (AIME) and adding them up to obtain the worker's monthly benefit at full retirement age. 

In 2024, benefits for most qualified (“covered”) retirees were calculated by adding up:

1. 90% of the first $1174 of AIME
2. 32% of AIME between $1174—$7078
3. 15% of AIME over $7078

Retirees who worked in “non-covered” jobs were subject to a slightly different benefit calculation. For the first $1174 of AIME, the calculation could be 90% or as low as 40%. Someone with 30 or more years working a “covered” job could receive the full 90%. But a retiree who only worked a handful of years in a covered job might receive only 40%. 

The Government Pension Offset (GPO), enacted in 1983, reduces benefits for spouses, widows and widowers who have their own government pensions. For example:

One Spouse Has a Pension, The Other Paid Into Social Security
Imagine a married couple where one spouse worked a “non-covered” government job for their entire career and the other spouse worked in a “covered” job where they paid into Social Security. If the spouse who worked the “covered” job were to pass away, the surviving spouse would typically not be eligible to receive full surviving spouse Social Security benefits (and maybe not be eligible for any survivor benefits at all) simply because the surviving spouse also has a government pension. If, instead, the surviving spouse did not have a government pension, they would be eligible for full survivor benefits in most circumstances.

Scenarios like the one described above have been criticized as being unfair to surviving spouses. After all, the deceased spouse paid into the Social Security system for many years. Critics of the GPO would argue the surviving spouse should be eligible to receive the surviving spouse Social Security benefits regardless of whether they also have a government pension.

The Social Security Fairness Act aims to remedy these types of scenarios by eliminating the GPO and the WEP. 

Who Qualifies for the Social Security Fairness Act?

The WEP affects an estimated two million social security beneficiaries and the GPO impacts an estimated 750,000 retirees. Both have complex rules and they do not apply to all public workers. 

• The WEP does not affect beneficiaries with 30 or more years of Social Security earnings and it does not apply to federal employees hired after December 31, 1983.
• The GPO typically does not apply to spouses or surviving spouses who are public sector employees but did pay into the Social Security system. 

There are calculators on the Social Security Administration website to help navigate all of the various complexities of the WEP and GPO. 

Is the Social Security Fairness Act Retroactive?

President Biden signed the Social Security Fairness Act (H.R. 82) into law on January 5, 2025. It took effect immediately and covers benefits after December 2023. 

The Social Security Administration will owe back payments for 2024 for eligible retirees who were impacted by the WEP and GPO (but not for years prior to 2024). 

• If your benefits are partially reduced or completely offset and you have previously filed for Social Security benefits, you will not need to take any action at this time to receive higher benefits, according to the Social Security Administration’s website. 
• If you haven’t filed for Social Security benefits, you can file online at ssa.gov/apply or schedule an in-person appointment to apply for benefits.

Consult Your Financial Advisor

Planning for Social Security is a critical component of financial planning and is especially crucial for retirees who will depend on Social Security for a significant portion of their retirement income. A financial advisor can help you understand how these changes impact your monthly benefits, your taxable income and your retirement plan as a whole.

Questions? We’re here to help. Contact us online or give us a call at (415) 541-7774

Related Reading:

• When to Take Social Security: 5 Key Considerations
• Multiple Retirement Accounts? Here’s What To Consider…
• Are You Prepared for These Common Financial Challenges?

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