What you need to know about Social Security changes

Millions of retired Americans are set to benefit from the Social Security Fairness Act, signed into law on Jan. 5. But there are worries it could worsen the insolvency of the government program and impact future generations.

The law eliminates two controversial provisions: the Windfall Elimination Provision and the Government Pension Offset. Both were designed to reduce Social Security benefits for employees with pensions from employers who weren’t required to withhold Social Security taxes. Both policies barred public-sector workers, such as public school teachers and firefighters, from collecting their full benefits under the federal retirement program. 

For decades, these two federal laws have been condemned as unjust because they’ve deprived millions of public servants of the Social Security benefits they’ve earned. Critics say the two provisions penalized workers for having alternative pensions and have left many retirees struggling to make ends meet despite their years of service.

With the Social Security Fairness Act, over 2.1 million retirees are expected to receive an additional $360 extra per month, on average. And more than 700,000 surviving spouses will get an average increase of $700 to $1,190 in their monthly benefits. The benefits adjustments will go back to January 2024, so beneficiaries may also receive payments for the extra benefits they would have received last year.

Insolvency concerns

Though the Social Security Fairness Act aims to bring equity to millions of retirees, critics have voiced concerns about the overall cost of repealing the two provisions and the financial strain it puts on Social Security Trust Funds.

A report from the Congressional Budget Office estimates that implementing the Social Security Fairness Act would cost around $195.7 billion over the next decade. And repealing the two provisions may accelerate Social Security’s insolvency date timeline, currently projected for 2033. That date could move up by six months. 

With the Social Security Trust Fund already running low, Congress will need to address the program’s funding shortfall as they implement the Social Security Fairness Act. 

What does this mean for you?

"For the nearly 3 million people who are currently receiving benefits and are affected by the Windfall Elimination Provision and the Government Pension Offset, this is a win," said Devin Carroll, certified financial planner and owner and lead adviser at Carroll Advisory Group.

According to Carroll, if you had your benefit reduced by the Windfall Elimination Provision, the new law would make a difference of a few hundred dollars per month. And for those affected by the Government Pension Offset, the difference could be well over a thousand dollars per month.

"For those currently receiving a benefit, there will be a recalculation process," Carroll said. "This recalculation will not only consider the benefits payable moving forward but also a lump sum of benefits that should have been paid since the effective date of the legislation, December 2023."

However, Carroll says the law could lead to people missing out on benefits simply because they aren’t aware of their eligibility. For example, someone receiving a pension from a non-covered service may have been told they weren’t eligible for spousal or survivor benefits because of the Government Pension Offset. However, with the repeal of this provision, they may now qualify for those benefits. 

"The challenge is that the Social Security Act doesn’t automatically review prior marriages to determine eligibility, and now, the responsibility lies with the individual to know the rules and present the necessary documentation and proof," he said. "And if someone misses the news or doesn’t understand how this change affects them, they could leave unclaimed benefits on the table."

What’s next? 

The Social Security Administration is still developing the process for implementation, so no immediate action is required on your part. The only thing you should do now is verify that the SSA has your correct mailing address and direct deposit information on file at ssa.gov/myaccount. If you hadn’t previously applied for Social Security benefits but think you might be eligible, you can apply here.  

As the Social Security Act is ironing out the details, you’ll want to regularly check the Social Security Administration’s updates page to stay informed about the progress on implementation and if any additional action is needed.