Social Security Fairness Act Repeals Pension Offset

If your Social Security benefits were reduced by a government pension, you may be entitled to a higher payout, thanks to the recently passed Social Security Fairness Act.

Most workers pay Social Security taxes with each paycheck, qualifying for Social Security benefits down the line in retirement. However, not all jobs are covered by Social Security. In particular, Federal employees covered under the Civil Service Retirement System (CSRS) prior to 1984, as well as many state and local government employees, did not pay into the Social Security system, and are instead covered by a separate pension system.

As we know all too well here in D.C., it is not uncommon to switch between public and private sector jobs. All told, there are roughly three million taxpayers eligible for both Social Security and a separate government pension payout.

However, this dual eligibility introduced a wrinkle in the Social Security calculation. Social Security pays out a higher benefit for low-income workers. This led to a scenario where a worker could have 10 years in the private sector paying into the Social Security system, and then 30 years working for a local government system, with no Social Security earnings recorded. As a result, when the private sector income of 10 years was averaged out over the 40-year working life, this worker qualified as a low-income worker and received the higher benefit rate.

In 1983, the Windfall Elimination Provision (WEP) was introduced to make an adjustment so that these workers did not qualify as low-income. In short, the Social Security formula was adjusted to lower the benefit for these workers.

A similar adjustment had been introduced earlier in 1977 to address a similar issue with spousal benefits, known as the Government Pension Offset (GPO). This adjustment also affected workers in the public sector who did not pay Social Security taxes, but instead qualified for a separate pension plan. Those workers could both earn the pension during their working years and collect the 50% spousal benefit from Social Security. The GPO was introduced to reduce (or eliminate) the spousal Social Security payout, so that a person’s total combined benefit could not exceed the highest possible Social Security benefit.

While the adjustments were meant to equalize payouts, they also resulted in workers paying into the Social Security system but not receiving benefits in return.

The Social Security Fairness Act of 2025 eliminates both the WEP and the GPO. As a result, if you have both covered and uncovered earnings, you may be eligible for a benefit increase. The Congressional Budget Office estimates the average increase in monthly benefits will be $360 for those affected by the WEP, and $1,000 per month or more for those spouses affected by the GPO.

While these increases will show up in 2025 payouts, those affected are eligible for a retroactive lump sum payout covering 2024 as well.

According to the Social Security office, those affected should see their payouts automatically updated, though the timeline for implementing the change is still very much up in the air. We recommend logging on to your Social Security account and monitoring your payouts until the change takes effect.

Presented by Chris Rivers, CFP®, CRPC®

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