On January 5, President Joe Biden signed the Social Security Fairness Act into law. This means that nearly 3 million public sector workers with government pensions will receive larger Social Security benefits, with an estimated average increase of $360 per month. But the new law also comes with bad news for beneficiaries.
The Social Security trust fund that pays benefits to retirees, spouses and survivors was already on track to be exhausted by 2033. That means automatic benefit cuts (without Congressional intervention) would be in less time of a decade. But the Social Security Fairness Act brings those reductions even closer by increasing program spending.
Here are the important details.
The Social Security Fairness Act eliminates two pre-existing rules: the windfall elimination provision and the government pension offset.
The Windfall Elimination Provision (WEP) reduced benefits for workers who had one job that did not withhold Social Security taxes and another job that did. The WEP generally affected public sector workers such as firefighters, police officers, and teachers who also held jobs in the private sector. The WEP prevented “a windfall of benefits for people who have only minimal Social Security coverage,” according to the Social Security Administration.
Government Pension Offsetting (GPO) reduced Social Security benefits for spouses and survivors who also receive pensions from federal, state, or local governments. It ensures that “government employees who do not pay Social Security taxes are treated the same as those who work in the private sector and pay Social Security taxes,” according to the Security Administration social.
Some policy experts say the WEP and GPO were unfair because they reduced benefits for retired workers and spouses who chose to serve their communities. Alternatively, other experts say the WEP and GPO were entirely fair because they prevented retired workers and their spouses from double-dipping Social Security and government pensions.
The Social Security Old-Age and Survivors’ Insurance (OASI) Trust Fund pays retirement, spousal, and survivors’ benefits. Before President Biden signed the Social Security Fairness Act, the AVS trust fund was projected to be insolvent by 2033, by which time only 79% of scheduled benefits would have been payable.
Above all, this does not mean that Social Security will go bankrupt, nor that the payment of benefits will cease. Instead, it means benefits will be cut by at least 21% unless Congress finds a way to increase funding for the program before the trust fund is exhausted.
