By Christian Hudspeth, CFP®
Good news for teachers, first responders, and public sector employees – the bipartisan passage of the “Social Security Fairness Act” means up to three million of these American public service workers will soon receive larger Social Security checks in retirement.
The 2025 law repeals the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO).
This means many public workers who expect to receive a public pension in the future will no longer face a reduction on their own Social Security benefit or their Social Security Spousal benefit.
Social Security Fairness Act: Who does the law benefit?
The 2025 law affects two categories of teachers, first responders, and public-sector employees who are expecting to receive (or are receiving) a public pension in retirement:
- Teachers and public-sector employees who also worked private-sector jobs during their career who may have built up Social Security benefits because they paid into the social program over several years.
This might include teachers who worked after school or during the summer at non-government jobs. Or workers who made a career change from an office job to a public-sector job at some point in their working years. - And/or teachers and public-sector employees who are (or were) married to someone who worked in the private sector that paid into the Social Security program.
For example: a teacher who is married to a lifelong doctor, engineer, businessperson, software developer, or other private-sector worker.
Repealed: The WEP penalty for Social Security benefits
For those in the first category who worked outside of government and built up their own Social security benefit, the WEP provision had been previously reducing Social Security benefits by up to $587 per month (2024 amount), depending on how many years they paid into Social Security through working private-sector jobs.
Here’s an example of how it worked before this law was passed. Lifelong elementary school teacher Ms. Riley worked at a retail store each summer for 15 years to supplement her teaching income.
She retired and began collecting her public pension. Her Social Security benefit at her full retirement age was going to be $1,000 per month, but because she was receiving a public pension, her monthly benefit would be reduced by $587 after the WEP penalty and she would collect just $413 per month.
Under the 2025 Social Security Fairness Act, Ms. Riley will receive all $1,000 per month because there is now no WEP-related Social Security reduction.
On average, the Congressional Budget Office (CBO) estimates that eliminating the WEP will increase monthly benefits by about $360 ($4,320 per year) for 2.1 million Americans.
Repealed: The GPO penalty for Social Security Spousal benefits
The 2025 law may be even more beneficial for those in the second category – teachers and public-sector workers who are or were married that are eligible for Social Security spousal benefits.
Under prior law, the Government Pension Offset (GPO) reduced spousal and survivor benefits by an expensive two-thirds of their public pension amount.
As an example, high school teacher Mr. White was married to a high-earning software developer for decades, and was eligible for a Social Security spousal benefit of $1,900 per month that’s based on his wife’s lifetime earnings.
He retires from teaching and begins collecting $3,000 per month from his public pension. With the GPO penalty, his Social Security spousal benefit would have been reduced by 2/3rds of his pension amount, slashing his spousal benefits by $2,000 per month. That would leave him with no Social Security check at all.
But under the 2025 Social Security Fairness Act, the GPO penalty has been repealed and Mr. White will collect his $3,000 per month public pension and still receive his $1,900 per month spousal benefit, giving him a raise of $22,800 per year.
On average, CBO estimates repealing the GPO will increase monthly benefits by $700 per month, or $8,400 per year, for 390,000 living spouses affected by this law.
The 2025 law affects survivor benefits as well. Previously, when the surviving spouse was the one who worked in government during their career, GPO would take up a large portion (or all) of the surviving spouse’s survivor benefits.
The old GPO penalty no longer applies to survivor benefits with the Social Security Fairness Act. The surviving spouse is entitled to all survivor benefits from the deceased spouse.
Is there a cost to the Social Security Fairness Act?
While the 2025 law will undoubtedly change lives for three million public service workers for the better, it does come at a cost.
The CBO says the Social Security Fairness Act’s price tag of $198 billion over 10 years will make the Social Security Trust Fund insolvent sometime in 2034, or half a year earlier than expected.
While that doesn’t mean Social Security is going away entirely (as we talk about here), it does mean it’s becoming more important to plan around Social Security benefits.
When does this law come into effect?
The law is retroactive to the beginning of 2024, so if you or your spouse are former public-service worker and started receiving Social Security benefits as early as January 2024, you may receive hundreds or thousands of dollars in “retroactive benefits” to catch up on those past months when you collected.
How do I receive my added benefit?
The Social Security Administration says no action is needed to receive benefits but to make sure the SSA has your current mailing address and direct deposit information (if you need to update, you can click here to sign in or create your Social Security account).
Could you retire sooner with these new Social Security benefits?
A teacher or public service worker that receives a Social Security pay raise of $4,000 to $8,000 per year could earn $80,000 to $160,000 more in Social Security payments over 20 years. And that’s before Cost-of-Living Adjustments (annual raises recipients each year to keep up with living expenses) are even considered.
This could dramatically impact when you retire.
In fact, if you or your spouse are in this group, some smart financial planning around Social Security while considering your retirement assets, pensions, and other future income streams (from an inheritance, home sale, or business sale for example) could reveal you retire years sooner than you thought possible.
Have a question about how Social Security or other money topics may impact you? Let us know at mail@fmpwa.com.
More from FMP Wealth Advisers:
Our Top 5 Most-Asked Social Security Questions
Planning for Retirement: How Much is Enough?
Pensions: Get Income for Life or Take the Lump Sum?
*The information presented here is not specific to any individual’s personal circumstances. FMP Wealth Advisers is not providing investment, tax, legal, or retirement advice or recommendations in this article.
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