How the Social Security Fairness Act Could Help Boost Retirement Benefits

If you’re among the millions of public workers whose Social Security benefits have been reduced by the Windfall Elimination Provision (WEP) or Government Pension Offset (GPO), you may already have heard the good news.

On January 5, President Biden signed the bipartisan Social Security Fairness Act into law, which eliminates those two provisions. The change restores full benefits to millions of public sector retirees and their spouses whose payments were previously impacted.

This will result in a significant boost in monthly income for millions of retirees who receive public pensions. More than 2.5 million Americans also can expect to receive a lump-sum retroactive payment to make up for the benefits shortfall dating back to January 2024.

Why the Change?

The bill repeals two decades-old provisions that affected public pensioners:

• The WEP, enacted in 1983, reduced Social Security payments for workers who earned full benefits through private sector employment, but also received a pension or disability benefits for work that did not require paying Social Security taxes. A Congressional Research Service report estimates that as of December 2023, about 2.1 million people—or about 3% of all Social Security beneficiaries—were affected by the WEP. Those recipients can expect their benefits to increase by an average of $360 a month, according to a Congressional Budget Office (CBO)
• The GPO, enacted in 1977, reduced Social Security spousal benefits for spouses, ex-spouses and surviving spouses who were also receiving income from government pensions. The Congressional Research Service found that 745,679 Social Security beneficiaries—about 1% of all beneficiaries—had their benefits reduced by this provision. Spouses affected by the GPO can expect an average monthly increase of $700, according to the CBO, and surviving spouses receiving a widow or widower benefit may anticipate a $1,190 increase.

Public workers and their advocates have long argued that these two provisions unfairly penalized public sector retirees who had earned full Social Security benefits. This includes teachers, law enforcement officers, and others who may have worked a second job to make ends meet. Workers who transitioned from a nongovernmental career to the public sector—a common scenario—were also impacted, as were those who contributed exclusively to a pension but had a spouse who qualified for Social Security benefits.

What’s Next?

The Social Security Administration (SSA) is still working out the details of how it will implement the new law. So it may be a while before eligible beneficiaries see changes to their payments or receive any retroactive amounts they are due. There are steps you can take in the meantime, however, if you’re among those who will be affected.

• If you’re already receiving Social Security benefits, you can go to SSA.gov to confirm that your direct deposit information is up to date and your mailing address is accurate. You also can sign up to receive email updates from the SSA.
• Those who haven’t yet applied for Social Security benefits can still sign up for updates. You can also create an account, check your eligibility, apply for benefits (if you’re ready), or make an appointment to speak to someone at your local Social Security office.
• Additionally, Octavia’s Complete Guide to Maximizing Your Social Security Benefits can be a useful resource if you have questions about how benefits are calculated, filing strategies, and more. And of course, you can contact your Octavia wealth advisor for assistance at any time.

How Can You Prepare for Coming Changes?

The new law could result in a substantial increase in benefits for many eligible retirees and pre-retirees. Here are just a few things you may want to keep in mind as you prepare for its implementation:

• Your Claiming Decision: Those who haven’t yet filed for their Social Security benefits may want to revisit the various claiming strategies available to them and, if necessary, rework their plan. If you delayed (or didn’t bother) filing for your Social Security benefits because of the negative impact of the WEP or GPO, for example, you may find you can retire sooner than you thought. Or you may wish to delay claiming now that spousal and/or survivor benefits could be a meaningful factor in your projected income. There are multiple scenarios that could apply based on your marital status and other details unique to you and your family.
• Your Taxes: An increase in Social Security income could mean higher taxes for some beneficiaries. If you file a joint return, and you and your spouse have a combined income that is between $32,000 and $44,000, up to 50% of your benefits may be subject to income tax. For combined income more than $44,000, up to 85% of your benefits may be taxable. (Combined income = Your adjusted gross income + nontaxable interest + ½ of your Social Security benefits.) A higher Social Security benefit could also lead to increased income-based surcharges for Medicare Parts B and D. For married couples filing jointly in 2025, the surtax kicks in when your modified adjusted gross income (MAGI) exceeds $212,000. Once you surpass this limit, an additional 0.9% tax is applied to your earned income for the year. Managing your tax bracket and rates is critical to minimizing your tax burden. Check out our Ultimate 2025 Tax Planning Guide for tips and strategies that may help you lower your tax bill.

• Your Overall Retirement Plan: Retirees and pre-retirees also may want to revise their income, investment, withdrawal, charitable giving and estate plans to reflect their new benefit amount. Your Octavia wealth advisor can help you update your retirement plan so you can optimize your increased monthly payments, any retroactive payments you might receive, and help you allocate those funds toward your retirement goals.

Don’t Hesitate to Ask for Help

If you’re unsure how the Social Security Fairness Act may impact your retirement income, don’t hesitate to reach out to us at any time.

The team at Octavia Wealth Advisors will be closely monitoring all updates from the Social Security Administration. We’ll pass along the latest information along with our thoughts regarding how these changes may affect your situation. We know you’ve waited a long time to see this proposal make its way to becoming a law, and we’ll be here to help you maximize your newly increased benefits this year and in the future.