
Did You Get A Raise?
Understanding the New Social Security Fairness Act
Dear Clients & Friends,
I’m pleased to be writing with some good news for those of you retired or retiring from roles at public institutions. The new Social Security Fairness Act, signed into law by President Biden on January 5, 2025, removes a rule that often reduced Social Security amounts for those with that “federal pension” plus another pension from a public employer. In Ohio, the most common pensions impacted are STRS, OPERS (sometimes still called PERS), SERS, and Ohio Police & Fire.
Who This Impacts:
- If you are retired and had other jobs before or after your work with public employer, it’s possible you’re “fully insured” under Social Security and entitled to a retirement benefit. Create an account to check your status on the SSA website by clicking here.
- If you currently work in a job covered by the Ohio pensions above, or other public pension nationwide, it’s possible you just got a raise in what you should expect for retirement. Same advice, login to your SSA account to check your “insured” status.
- If you get a public pension later, are not “fully insured” with SSA, but do have some SSA credits, it’s possible that a little bit of earnings in an SSA-covered job could earn you a much larger retirement benefit later (including potential SSA Spousal Benefits). Talk to a tax and financial planning expert after reviewing your status on the SSA website.
- For any Ohioan, here is a good summary from the Columbus Dispatch on our local pension systems. Ohio Retirees To Get More Money
This new legislation repeals two Social Security Administration (SSA) provisions—the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO)—that previously reduced Social Security benefits for many public sector retirees, including teachers, firefighters, and police officers. The repeal is retroactive to January 2024, meaning affected individuals will receive back payments for the prior year in 2024.
The WEP and GPO were initially implemented to adjust Social Security benefits for individuals receiving pensions from employment not covered by Social Security taxes. However, these provisions often resulted in significant reductions in Social Security benefits for public servants. With the new law, it’s estimated that over 2.5 million Americans will see an average monthly increase of approximately $360 in their Social Security benefits.
While this development brings positive changes to those getting larger paychecks, it’s important to note that the Social Security Administration (SSA) is currently updating its systems to accommodate these adjustments. As a result, beneficiaries might experience delays in receiving increased payments and retroactive sums. The SSA advises ensuring your contact information is current to facilitate smooth communication during this transition. Your best bet is to have an online account set up with SSA (register here)
Additionally, this opens up a conversation about the funding of SSA in the future, which was already challenged. In roughly 10 years, the SSA program will run a deficit of approximately 15%. The program will have a choice similar to your household budgets, either lower spending (benefits) or increase income (taxes). Other so called “entitlement” programs like Medicare have seen additional funding come through new taxes, so a fair guess is that will be at least part of the solution to funding this future SSA deficit. The repeal of the SGO and WEP provisions in the benefit formula only increase that future funding need. This has been a political “third rail” for many years. SSA last ran a surplus in the Clinton administration, so this has been building for some time.
In our planning with clients at Frazier Financial, we do budget for full SSA benefits for those clients in their 50s in older. We also often budget for higher taxes for things like Medicare in retirement, and potentially higher payroll taxes in their later working years. Only time and Congress will tell us how these program’s funding evolves in the next 5-15 years.
For detailed information on how these changes may affect your benefits, you can refer to the SSA’s official publications on the Windfall Elimination Provision and Government Pension Offset, available here. Additionally, the full text of the Social Security Fairness Act is available on the U.S. Congress website here.
Reference Links
[Their Social Security benefits were slashed. Now they’re getting hundreds – maybe thousands – of dollars back under new law Biden just signed.](https://www.marketwatch.com/story/their-social-security-benefits-were-slashed-now-theyre-getting-hundreds-maybe-thousands-of-dollars-back-under-bidens-new-law-a8dff8c6)
[Biden Signs Social Security Law in a Boost for Government Retirees](https://www.barrons.com/articles/biden-social-security-government-retirees-4b6fb725)
[Biden Signs Social Security Law That Boosts Benefits For Public Sector Retirees](https://www.investopedia.com/bill-that-boosts-social-security-benefits-for-retired-federal-workers-goes-into-law-8768459)