Recently, the Social Security Fairness Act was signed into law. Its primary purpose is to provide more equitable Social Security benefits for public sector workers and their families.
The way that the new law will achieve this objective is by removing rules that reduce social security benefit payments to workers who receive pensions from employers that did not withhold Social Security taxes. This typically applies to public sector workers (like teachers, firefighters, and state employees) whose pensions were not funded by Social Security.
Here are the two rules that will be removed by the Social Security Fairness Law:
- Windfall Elimination Provision (WEP) – Reduces Social Security benefits for individuals who receive pensions from employers that did not withhold Social Security taxes (like state and local governments).
- Government Pension Offset (GPO) – Reduces or eliminates Social Security benefits for spouses of public sector retirees.
This is a major change and a huge increase in social security benefits for public sector workers. For many, it will be life changing, in a good way.
Of course, the downside is the higher funding costs which could accelerate the depletion of the social security fund. 2035 is the expected year that there won’t be enough money to pay 100% of the benefits. But I have a feeling that Congress will get that fixed right before the fund runs out of money.
Please comment or send an email if you have any questions.
Joe Baker, CFP®
Baker Asset Management, LLC
