
Insights
February 4, 2025
The Social Security Fairness Act: Will Your Benefits Change?
In Financial Planning, Retirement

On January 5, 2025, the Social Security Fairness Act was officially signed into law, repealing both the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO). These changes stand to meaningfully increase monthly Social Security benefits for workers who receive a pension based on work not covered by Social Security.
What is the Windfall Elimination Provision?
The Windfall Elimination Provision (WEP) affects how Social Security benefits are calculated for individuals who have earned income both from jobs not covered by Social Security, such as certain public service jobs, and jobs that are covered by Social Security. The WEP is designed to reduce Social Security benefits for individuals if they are also receiving a pension from a job in which they did not pay Social Security taxes.
Under the WEP, the formula used to calculate the primary insurance amount (PIA) is adjusted to lower the benefits for those who have a significant number of years of employment where Social Security taxes were not paid. Specifically, if an individual has less than 30 years of substantial earnings covered by Social Security, their benefits may be reduced.
What is the Government Pension Offset?
The Government Pension Offset (GPO) is a provision that applies to spousal or spousal survivor benefits. For individuals who are eligible for pension benefits based on their earnings history from jobs that were not covered by Social Security, this provision may result in their spousal benefit being reduced by two thirds of their pension benefit.
How much will the repealing of the WEP impact my Social Security Benefits?
The WEP and GPO reduced Social Security benefits for over 3 million people who receive a pension from work not covered by Social Security. (source: Social Security Administration) The Social Security Fairness Act repeal of these provisions will increase Social Security benefits for certain types of workers, including some civil servants such as teachers, firefighters, and police officers. Only employees who receive a pension based on work not covered by Social Security will see a benefit increase under this Act.
The impact of this new legislation may be best understood through illustration:
Suppose Sam is a hypothetical firefighter who is eligible for a civil service pension benefit of $3,500 per month at retirement. During their time as a firefighter, their wages were not subject to Social Security taxes, but they worked for ten years prior to their firefighting career in jobs that were covered by Social Security. The average indexed monthly earnings used to calculate their Social Security benefit is $1,500.
In the absence of the WEP, their Social Security benefit would be approximately $1,191 per month. After the WEP is applied, this benefit would be reduced to approximately $578 per month, with the presumption that they would also be receiving additional income from their pension as a firefighter.
Suppose that our hypothetical worker Sam has a spouse, Lee, who participated in Social Security throughout their career and is eligible for a benefit of $3,500 per month at full retirement age. In the absence of the GPO, Sam would be eligible for a Social Security benefit as high as $1,750 per month based on the Social Security Spousal Benefit.
Because of the size of Sam’s civil service pension benefit, however, the GPO would fully offset the spousal benefit. Because an individual is eligible for the higher of the Social Security benefit based on their work history or the spousal benefit, Sam would still receive their own benefit of $578 per month.
To summarize, prior to the passage of the Social Security Fairness Act, our hypothetical worker, Sam, would have received a Social Security Benefit of only $578 per month. But under the new legislation, Sam would receive $1,750 per month based on their spouse Lee’s earnings history, increasing their annual income by over $14,000 per year. If Sam were single, their monthly benefit would still be almost twice as high at $1,191, increasing their annual income by over $7,300.
The WEP and GPO will cease to apply to benefits payable for January 2024 and later. However, implementation may take some time; the Social Security Administration expects that it could take over a year to adjust benefits and pay all retroactive benefits.
For employees who hold or previously held jobs not covered by Social Security, be sure to work with your wealth manager to understand if and how this legislation may enhance your Social Security benefit.
For a FAQ on the Social Security Fairness Act, visit https://www.ssa.gov/benefits/retirement/social-security-fairness-act.html?tl=1%2C2%2C4
*All of Coldstream’s staff shall attain the required licenses and designations necessary for his/her position. Certified Financial Planner Board of Standards Inc. owns the certification marks CFP® and Certified Financial Planner™ in the U.S. The CFA Institute owns the certification marks CFA® and Chartered Financial Analyst®. The ChSNC® is the property of The American College of Financial Services, which reserves sole rights to its use, and is used by permission. Investments & Wealth Institute® (the Institute) is the owner of the certification marks “CPWA®,” and “Certified Private Wealth Advisor®.” Use of CPWA®, and/or Certified Private Wealth Advisor® signifies that the user has successfully completed the Institute’s initial and ongoing credentialing requirements for wealth advisors.
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