Congress votes to eliminate Social Security payment reductions GPO and WEP
On Dec. 20, the U.S. Senate passed the Social Security Fairness Act, eliminating the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO), which currently affect about 3 million individuals. (The House of Representatives approved the measure in November.) This bill is expected to be signed into law by President Biden.
WEP and GPO were put in place in the early 1980s to reduce Social Security benefits to individuals who were receiving pensions from employment that was not subject to Social Security payroll tax, generally public sector workers such as police, firefighters and teachers. WEP reduces the individual’s Social Security retirement or disability benefit, while GPO reduces the spousal or survivor benefit.
What should I do if my benefits were impacted by GPO/WEP?
It could take some time for the Social Security Administration to make these changes. But individuals subject to GPO and WEP should see their Social Security benefits increase in 2025 by the amount previously reduced. Retroactive benefits would also apply from 2024.*
According to the Social Security Administration (SSA) website (linked below), if you are already entitled for benefits, you do not need to take any action at this time except to verify that the SSA has your current mailing address and direct deposit information. If you are receiving a public pension and are now interested in filing for benefits, you may file online at ssa.gov or schedule an appointment.
What is the potential impact to Social Security?
Based on Congressional Budget Office (CBO) estimates, the elimination of these provisions is expected to increase the federal deficit by $196 billion. It also could accelerate Social Security’s insolvency by six months, which is estimated to occur in 2033 and would result in a 21% reduction in benefits.
Ultimately, we believe steps can and will be taken to ensure Social Security remains on solid footing. But keep in mind Social Security was never designed to provide for all your income in retirement. Talk with your Edward Jones financial advisor about the role Social Security can play as part of your retirement strategy.
Scott Thoma
Scott Thoma co-chairs Edward Jones’ Investment Policy Committee and is responsible for Client Needs Research, the team that develops and communicates advice and guidance for client needs, including retirement, education, preparing for the unexpected and leaving a legacy.
He is a CFA® charterholder and a member of the CFA Institute and the CFA Society of St. Louis. Scott also earned the CFP® professional designation. He graduated summa cum laude from Southern Illinois University-Edwardsville with a bachelor’s degree in business administration, with an emphasis in finance. Scott earned a master’s degree in economics and finance from the same university.
Important information:
*Source: The Wall Street Journal
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