President Joe Biden signed the Social Security Fairness Act into law on Sunday, a measure that increases Social Security payments for current and former public employees. It affects nearly 3 million people who receive a pension after having worked as a teacher, firefighter, police officer or other public service jobs.
Supporters say the Social Security Fairness Act addresses a decades-old disparity, although it will also strain Social Security trust funds, facing a looming insolvency crisis.
The bill strikes two provisions – the windfall elimination clause and the government pension offset – that limit recipients’ Social Security benefits if they receive retirement benefits from other sources, including programs public pensions of a state or local government.
“The bill I am signing today is based on a simple proposition: Americans who have worked hard their entire lives to earn an honest living should be able to retire with economic security and dignity – that is the entire goal of the bill. social security system,” Biden said. said during a signing ceremony in the East Room of the White House.
“It’s a big deal,” he said.
Biden was joined by labor leaders, pension advocates and Democratic and Republican lawmakers, including the legislation’s lead sponsors, Maine Republican Sen. Susan Collins and outgoing Ohio Democratic Sen. Sherrod Brown, who received a standing ovation from the participants in the ceremony.
The Congressional Research Service estimated that as of December 2023, 745,679 people, or about 1% of all Social Security beneficiaries, had their benefits reduced by government pension offsets. About 2.1 million people, or about 3% of all beneficiaries, were affected by the windfall elimination provision.
Still, the policy changes brought about by the new law will add to the administrative workload of the Social Security Administration, which is already at its lowest staffing level in decades. The agency, currently under a hiring freeze, has about 56,645 employees — the lowest level in more than 50 years, even though it serves more people than ever.
What will change?
The Congressional Budget Office estimated in September that eliminating the windfall elimination provision would increase monthly payments to affected beneficiaries by $360 on average by December 2025. Ending pension offset government would increase monthly benefits in December 2025 by an average of $700 for 380,000 beneficiaries. get benefits based on living spouses, according to the CBO. The increase would be an average of $1,190 for 390,000 surviving spouses receiving a widow or widower’s benefit.
These amounts would increase over time with regular Social Security cost-of-living adjustments.
The change affects payments from January 2024 and beyond, meaning the Social Security Administration would be on the hook for backdated payments. The measure passed by Congress states that the Social Security commissioner “shall adjust primary insurance amounts to the extent necessary to take into account” the changes in the law. It is unclear how this will happen or whether those affected will need to take any action.
Edward Kelly, president of the International Association of Firefighters, said firefighters across the country are “excited to see change – we have righted a 40-year wrong.” Kelly said the policy was “much more egregious for surviving spouses of firefighters who paid their own Social Security taxes but were victims of the government’s retirement system.”
The AIP has approximately 320,000 members, not counting the hundreds of thousands of retirees who will benefit from this change.
“Now firefighters who are paid very little can now afford to retire,” Kelly said.
Brown, who as an Ohio senator had lobbied for the proposal for years, lost his re-election bid in November. Lee Saunders, president of the American Federation of State, County and Municipal Employees, thanked Brown for his advocacy.
“More than two million public employees will finally be able to access the social security benefits they have paid into during their careers,” Saunders said in a statement. “Many will finally be able to enjoy their retirement after a life of service. »
National Education Association President Becky Pringle said the law is “a historic victory that will improve the lives of educators, first responders, postal workers and all those who dedicate their lives to public service in their communities.”
And while some Republicans such as Collins supported the legislation, others, including Senators John Thune of South Dakota, Rand Paul of Kentucky and Thom Tillis of North Carolina, voted against it. “We gave in to the pressure of the moment instead of doing this on a sustainable basis,” Tillis told The Associated Press last month.
Still, Republican supporters of the bill said it was a rare opportunity to tackle what they described as an unfair section of federal law that harms public service retirees.
Other Social Security changes for 2025
The future of Social Security has become a major political issue and was a major point of contention in the 2024 elections. About 72.5 million people, including retirees, people with disabilities and children, receive social security benefits. social security. The annual report of the Social Security and Medicare administrators, released last May, indicated that the program’s trust fund would not be able to pay full benefits starting in 2035. The new law will accelerate the date of insolvency of the program of approximately six months.
There are other changes for Social Security recipients in 2025 that could result in increased payments. Here is a breakdown:
Cost of living adjustment
Each year, Social Security recipients receive what is called a “cost of living adjustment” or COLA.
By 2025, more than 70 million Americans will benefit from a 2.5% cost-of-living adjustment to their checks.
For those wondering how this will change their benefits, notices are expected to be published and posted online this month informing beneficiaries of the change.
Maximum taxable income
Every year, high income earners have taxes withheld from their checks. This figure, like the COLA, adjusts each year to reflect changes in the cost of living.
In 2025, the social security contribution limit will increase to $176,100. That’s an increase from $168,600 in 2024.
Full retirement age
Although most know that you can begin receiving benefits as early as age 62, you are not eligible to receive full benefits until you reach what is known as “the age of full retirement”.
The full retirement age, also called “normal retirement age,” was 65 for many years, until 1983, when Congress passed a law to gradually raise that age.
The law raised the full retirement age starting for people born in 1938 or later, and this age gradually increased by a few months for each year of birth, until it reached 67 for people born in 1960 and after. This means that 2025 will be the last increase.
In 2025, the full retirement age will be increased by two months, to 66 and 10 months for people born in 1959.
According to the Social Security Administration, “if you delay receiving your benefits from your full retirement age until age 70, your benefit amount will increase,” the agency notes.
On the other hand, those who start receiving benefits earlier will be reduced each month until full retirement age.
Payment schedule
The payment schedule will be a little different in early 2025.
For January, the checks were already delivered on December 31. For February, checks will be delivered on January 31st and for March, checks will be delivered on February 28th.
This is due to a rule that if the first of the month falls on a holiday or weekend, checks are delivered on the previous day of the week.
There will then be no checks issued in March before a return to normal in April.
NBC Chicago
