What the Social Security Fairness Act Could Mean for You

Here’s something you may not know about Social Security: Some people who worked in both public and private jobs in their lifetimes have their Social Security benefits reduced because of the pensions they receive from their public job. That means teachers, police and fire workers, and other civil servants don’t receive their full Social Security benefits — even if they also worked private-sector jobs. But a piece of legislation called the Social Security Fairness Act recently changed that. 

What is the Social Security Fairness Act?

This act addresses several decades-old — and somewhat controversial — rules. Social Security was created in 1935 to provide retirement income for workers who paid into the system through payroll taxes. But pensions covered public workers — who wouldn’t have paid those taxes in public jobs — like those mentioned above. However, some people worked public and private jobs during their careers and were getting retirement benefits from both. By the mid-1980s we had new rules to address the fact that some people thought those with pensions were getting more benefits than they should. 

The Windfall Elimination Provision (WEP) reduced Social Security benefits for those who also had a pension. On the other hand, the Government Pension Offset (GPO) cut back on spousal and survivor benefits for those who had a pension. While this was meant to even the playing field, some thought it unfairly penalized people who worked in the public sector — especially considering they paid into Social Security through other jobs. 

The Social Security Fairness Act came onto the scene to address these concerns, and Former President Joe Biden signed it into law on Jan. 5. Now, those civil servants who qualify for Social Security through secondary income will soon receive the same level of Social Security benefits received by citizens who worked only in the private sector. This is because the act eliminated the WEP and GPO. And even better news — the law applies to benefits received starting January 2024. That means those who benefit from the law will receive back payments. 

Who is Benefitting From This New Fairness Law? 

The main groups benefitting are those who have been getting reduced Social Security benefits they earned through private jobs because of government pensions, and those who got reduced spousal or survivor benefits because of the same thing.  

The new law impacts approximately 2 million Social Security beneficiaries and approximately 750,000 spouses and widows receiving benefits from deceased beneficiaries. It affects many of those who worked under the Civil Service Retirement System, the now century-old system of providing retirement, disability and survivor benefits for civil servants. But what if you only worked public sector jobs before you retired? In that case, your benefits won’t change.

How Much Benefit Is Coming?

According to the sponsors of the legislation, the average CSRS employee receiving Social Security benefits will receive a monthly increase of about $350. Spouses and widows receiving benefits will get a monthly increase of between $700 and $1,100 when the law is implemented. The Social Security Administration said it is evaluating how to carry out the new rules.

If this new rule applies to you, no action is needed on your part. However, it is recommended you check that your information with the SSA is up to date. 

Check here for how to speak with the SSA about whether or not the new law will impact you.

Kent McDill is a veteran journalist who has specialized in personal finance topics since 2013. He is a contributor to The Penny Hoarder.