How will the repeal of the Windfall Elimination Provision and Government Pension Offset affect you?
President Biden has officially signed the Social Security Fairness Act (HR 82) into law on January 6, 2025, revoking the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO) under Social Security. This is a significant development for those participating in the State University Retirement System (SURS), Teachers' Retirement System (TRS), and other government pension plans not also paying into Social Security. Below, we outline what WEP and GPO are, how they impact benefits, and what this change means for those at different stages of their financial journey.
What is the Windfall Elimination Provision (WEP)?
The WEP reduces Social Security benefits for individuals who receive a pension from work not covered by Social Security, such as SURS or TRS. Work is “not covered” if you don’t have Social Security tax withheld from pay because you are paying into a pension designed to replace social security benefits. This could also impact those paying into Social Security through supplemental income such as authorship, speaking, consulting, or royalty income while also paying into a non-covered pension. The typical impact of WEP is reducing your benefit by the lesser of 50% of your pension amount or $613 (2025).
What is the Government Pension Offset (GPO)?
Under Social Security, most participants get the higher of their own calculated benefit or half of their spouses. If a participant’s spouse dies, the survivor may be able to step up to their deceased spouse’s higher benefit. The GPO affects these spousal or survivor benefits for those who also receive a government pension from non-covered employment. It reduces the Social Security spousal or survivor benefit by two-thirds of the pension amount, which often results in a significant reduction or even elimination of the spousal or survivor benefit.
How the New Law Impacts You
Current Retirees with both a Non-Covered Pension and Social Security
Under the new law, the reduction calculation caused by the WEP will be removed. While the exact adjustments vary based on individual circumstances, many retirees will see an increase in their monthly Social Security benefits.
You may also see an increase in benefits with the newly added ability to draw spousal benefits. This is due to the removal of the GPO provisions, which had historically reduced spousal benefits or survivor benefits to zero.
Pre-Retirees not yet drawing Social Security
For those planning their retirement, this change presents an opportunity to reassess your Social Security strategy. With the elimination of WEP and GPO penalties, you may:
Receive a higher benefit than previously estimated.
Reevaluate the timing of you or your spouse’s Social Security claims to maximize your benefits.
Next Steps
We anticipate those already drawing Social Security benefits will see their benefits automatically recalculated and retroactive benefits paid to January 1, 2024. However, we are awaiting further guidance from Social Security on the details and timing of these changes. With most legislation, the agency left to implement will need time to sort out how to implement the changes. It may take months (or longer) before the changes go into effect and retroactive benefits are paid. As additional information about the implementation of this law becomes available, we will keep you updated. For our impacted clients, we will discuss one-on-one during future meetings.
If you or somebody you know needs help interpreting how the change in law affects your financial life or want the peace of mind that you have a second set of eyes on your financial situation, please let us know. Many of our clients are affected by this change in law, and we have helped hundreds of clients through the complexities of retirement, pension planning, and Social Security strategies. If you would like our perspective or professional opinion on your financial situation, Contact Us today!
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References
Windfall Elimination Provision
Higher Social Security payments coming for millions | AP News