Are you counting on a public pension and Social Security to fund your retirement? In the past, retirees with a public pension were not entitled to receive their full Social Security benefit, but that has changed with the passage of new legislation.
The passage of the Social Security Fairness Act ensures that when you retire, you'll get your public pension, and your full Social Security benefit.
Who are the retirees entitled to both a public pension and Social Security? Typically, those who had two careers, having worked both for the government and for the private sector. Perhaps, in one job, you were a government employee whose earnings were exempt from the Social Security payroll tax. In another job, you worked in the private sector, paying into the Social Security system. As a result, you were entitled to a pension and Social Security Benefits. But previously that would have meant that your benefits would have been reduced, due to the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO).
Legislation to fully repeal the WEP and the GPO, H.R.82 - Social Security Fairness Act of 2023, was signed into law on January 5, 2025, and applies retroactively to benefits payable for months after December 2023. This means almost three million retired public sector employees can expect to receive a payment(s) to reflect higher benefits owed for 2024.
The repeal comes with a price tag. The Old-Age and Survivors Insurance (OASI) Trust Fund is less than 10 years from insolvency. The Congressional Budget Office (CBO) expects that the bill will advance the exhaustion date for the combined trust funds (the OASI and Disability Insurance (DI) Trust Funds) by roughly a half a year, according to its Cost Estimate of the legislation. In total, the CBO estimates that repealing the WEP would increase off-budget direct spending by $101 billion over the 2024-2034 period.
"At a time when we’re already borrowing $2 trillion a year and retirees are already slated to see a 21% benefit cut – an average of $16,500 for a newly retiring couple in 2033 – in just nine years, why would we make it a 22%, $17,300 cut in eight and a half years instead?" said Maya MacGuineas, president of the Committee for a Responsible Federal Budget.
The CBO did identify some savings coming from the repeal. It projected that increased benefits for some recipients would disqualify them for the Supplemental Nutrition Assistance Program (SNAP) and decrease on-budget spending by by $2 billion over the 2024-2034 period.
How the Social Security Fairness Act of 2023 works
Previously, the WEP reduced benefits for retired or disabled workers with fewer than 30 years of employment in which they paid into the social security system, if the workers also received non-covered pensions. A non-covered pension is a pension paid by an employer that does not withhold Social Security taxes from your salary, typically, state and local governments.
The GPO reduced the spousal or surviving spousal benefits of people who receive pensions based on noncovered employment. The Social Security Fairness Act has repealed both reductions.
Social Security benefits are calculated by applying three different percentages to a person's lifetime average indexed monthly earnings (AIME) and adding them up to obtain the worker's monthly benefit (primary insurance amount (PIA) at full retirement age. The WEP PIA replicates the regular PIA but scales down the first percentage from 90% to 40% in increments of five percentage points for workers with less than 30 years of paying into the SS system.
The Social Security Fairness Act repeals the WEP PIA that would reduce monthly benefits for non-covered employees and raises the first factor to the standard 90% for all workers.
The public pension "penalty" has been eliminated
"The WEP and GPO provisions were initially designed to address perceived inequities in the Social Security system regarding individuals who received both a government pension and Social Security benefits based on other employment," Michèle Walthert, Managing Director & Head of Advisor Success at Wealthspire Advisors tells Kiplinger. "However, they can disproportionately affect certain groups, such as individuals who worked in both the public and private sectors over their careers (State and local government employees, including teachers, firefighters, and police officers tend to be among those most affected by the WEP and GPO)."
To understand how the WEP worked, you need to know how Social Security calculates benefits. Social Security looks at the average monthly earnings for the years a person paid into the system. Benefits are intended to replace a percentage of a worker's pre-retirement earnings. Lower-income workers get a larger percentage of their earnings replaced than higher-income workers.
Until the mid-1980s, the Social Security Administration used a formula that treated government employees, who may have contributed to the system for only a few years, as low-wage workers. As a result, public employees received a disproportionately large Social Security benefit — plus their government pension. In 1983, Congress ended this windfall.
However, the windfall provision never applied to government pensioners who paid into the Social Security system for 30 years or longer. Nor did it apply to workers who received a military pension or a private pension.
Also, a government pensioner who applied for a spousal or survivor benefit based on his or her spouse's Social Security earnings record will face cuts thanks to the Government Pension Offset (GPO). Typically, a spousal benefit is about 50% of a husband or wife's benefit if that's more than the spouse would receive based on his or her work record. A survivor generally receives 100% of a deceased spouse's benefit. When the government pension offset applied, your Social Security spousal or survivor benefit would have been reduced by two-thirds of your government pension.
How much more money can you expect?
The CBO estimates that eliminating the WEP would increase monthly benefits in December 2025 by $360, on average, for 2.1 million Social Security beneficiaries, or about 3 percent of all Social Security beneficiaries.
By eliminating the GPO, the CBO estimates monthly benefits in December 2025 will increase by an average of $700 for 380,000 spouses and by $1,190 for the 390,000 surviving spouses.
The Social Security Administration hasn't released any information about the payment schedule for retroactive increases for benefits paid in 2024. However, the CBO says in its Cost Estimate that it "assumes that higher benefits owed for the months before enactment would be paid retroactively mostly in fiscal year 2025, with some paid in fiscal year 2026."
When will payments arrive?
The Social Security Fairness Act retroactive payments and 2025 increases have been delayed, and the Social Security Administration (SSA) is unsure when they will be delivered. Some reports suggest that the delay could be as long as a year if not more.
The work needed to implement the new law, including calculating the benefits owed for 2024 and the increase for 2025, for almost 3 million beneficiaries, must be done on a case-by-case basis and preformed manually by staffers.
The timeline is slowed by the agency being understaffed and subject to a hiring freeze, with current staffing below fiscal 2023 levels. Additionally, no provision was made in the SSFA bill to fund its implementation.
Where to find more details
The Social Security Administration will publish more details on the Act, including the timing of payouts, on its website. The Administration stresses that beneficiaries "do not need to take any action except to verify that we (the SSA) have your current mailing address and direct deposit information if it has recently changed."
If you are receiving a public pension and are now interested in filing for benefits, you may file online or apply in person.
