This new Social Security change could shake up your retirement plans–What experts have to say about it
- Replies 3
The Social Security Fairness Act, signed into law on January 5th, was met with applause by many public sector workers who had long awaited the removal of two provisions that reduced their Social Security benefits.
However, this legislative change has sparked a wave of concern among Social Security experts. But why?
Many have warned that the new law could exacerbate the program's financial woes and potentially derail retirement plans for millions of Americans. To delve further, theAct eliminates two key provisions: the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO).
These provisions were designed to adjust Social Security benefits for individuals who also receive pension income from public sector work not covered by Social Security contributions.
The WEP, introduced in 1983, affected around 2 million individuals who also have pension or disability benefits from work where they did not contribute to Social Security, while the GPO (who receive their own pensions from work in the public sector) impacted nearly 750,000 spouses, widows, and widowers.
The rationale behind the WEP and GPO was to ensure equitable payouts from Social Security, which operates as a progressive anti-poverty program.
High-income workers receive a lower income replacement rate than low-income workers when collecting benefits. The WEP and GPO aimed to prevent public workers from being treated as low-income workers, thereby avoiding disproportionate benefit payouts.
With the repeal of these provisions, affected Social Security beneficiaries may see monthly benefit increases averaging between $360 to $1,190, according to the Congressional Budget Office (CBO). They will also receive lump-sum payments for the additional benefits they would have accrued throughout 2024.
Advocacy groups like the National Committee to Preserve Social Security and Medicare have celebrated the change, arguing that the WEP and GPO unfairly penalized public servants.
John Hatton, from the National Active and Retired Federal Employees Association (NARFE), echoed this sentiment, stating that the program is now “more fair” as people will no longer be penalized for income earned outside of the system.
However, many policy experts are critical of the new law. Andrew Biggs from the American Enterprise Institute and Maya MacGuineas from the Committee for a Responsible Federal Budget have both expressed concerns about the Act's financial implications.
“Literally, you cannot find a Social Security expert who thought the Social Security Fairness Act was a good idea,” said Biggs.
“What we saw was a huge special interest push for a very poorly developed and poorly targeted policy which is creating windfalls for a number of recipients,” said Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget.
The CBO estimates that the change will cost almost $200 billion over 10 years, hastening the depletion of Social Security's trust funds.
The program's trust funds are projected to last until 2035, after which only 83% of benefits will be payable. The elimination of the WEP and GPO could bring this date six months closer.
Experts agree that Congress needs to address the program's funding shortfall urgently. The complexity of the WEP and GPO rules and their impact on individual beneficiaries have been a contentious issue.
Alicia Munnell from the Center for Retirement Research at Boston College acknowledges that the provisions were an attempt to correct an injustice, albeit imperfectly.
The passage of the Social Security Fairness Act by a bipartisan majority in both the House and Senate, without amendments to address funding or modify the provisions, has left many experts disappointed.
The challenge now is to find a way to restore the program's solvency, which may require difficult decisions such as benefit cuts, tax increases, or a combination of both.
President-elect Donald Trump has pledged not to touch Social Security and has proposed eliminating taxes on Social Security benefit income. However, such a change would be costly and lack s the fairness argument that supported the repeal of the WEP and GPO.
The future of Social Security remains uncertain, with experts like Emerson Sprick from the Bipartisan Policy Center emphasizing the need for presidential leadership and a commitment to address the issue.
As the political landscape evolves, the question of how to secure the long-term viability of Social Security continues to loom large, with no clear solution in sight. To learn more about the Social Security Fairness Act, read the details in this story here.
How do you feel about the recent changes to Social Security? Share your thoughts, experiences, and questions in the comments below!
However, this legislative change has sparked a wave of concern among Social Security experts. But why?
Many have warned that the new law could exacerbate the program's financial woes and potentially derail retirement plans for millions of Americans. To delve further, theAct eliminates two key provisions: the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO).
These provisions were designed to adjust Social Security benefits for individuals who also receive pension income from public sector work not covered by Social Security contributions.
The WEP, introduced in 1983, affected around 2 million individuals who also have pension or disability benefits from work where they did not contribute to Social Security, while the GPO (who receive their own pensions from work in the public sector) impacted nearly 750,000 spouses, widows, and widowers.
The rationale behind the WEP and GPO was to ensure equitable payouts from Social Security, which operates as a progressive anti-poverty program.
The Social Security Fairness Act has eliminated the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO), affecting the way Social Security benefits are calculated for public sector workers. Image source: U.S. Social Security Administration / Youtube.
High-income workers receive a lower income replacement rate than low-income workers when collecting benefits. The WEP and GPO aimed to prevent public workers from being treated as low-income workers, thereby avoiding disproportionate benefit payouts.
With the repeal of these provisions, affected Social Security beneficiaries may see monthly benefit increases averaging between $360 to $1,190, according to the Congressional Budget Office (CBO). They will also receive lump-sum payments for the additional benefits they would have accrued throughout 2024.
Advocacy groups like the National Committee to Preserve Social Security and Medicare have celebrated the change, arguing that the WEP and GPO unfairly penalized public servants.
John Hatton, from the National Active and Retired Federal Employees Association (NARFE), echoed this sentiment, stating that the program is now “more fair” as people will no longer be penalized for income earned outside of the system.
However, many policy experts are critical of the new law. Andrew Biggs from the American Enterprise Institute and Maya MacGuineas from the Committee for a Responsible Federal Budget have both expressed concerns about the Act's financial implications.
“Literally, you cannot find a Social Security expert who thought the Social Security Fairness Act was a good idea,” said Biggs.
“What we saw was a huge special interest push for a very poorly developed and poorly targeted policy which is creating windfalls for a number of recipients,” said Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget.
The CBO estimates that the change will cost almost $200 billion over 10 years, hastening the depletion of Social Security's trust funds.
The program's trust funds are projected to last until 2035, after which only 83% of benefits will be payable. The elimination of the WEP and GPO could bring this date six months closer.
Experts agree that Congress needs to address the program's funding shortfall urgently. The complexity of the WEP and GPO rules and their impact on individual beneficiaries have been a contentious issue.
Alicia Munnell from the Center for Retirement Research at Boston College acknowledges that the provisions were an attempt to correct an injustice, albeit imperfectly.
The passage of the Social Security Fairness Act by a bipartisan majority in both the House and Senate, without amendments to address funding or modify the provisions, has left many experts disappointed.
The challenge now is to find a way to restore the program's solvency, which may require difficult decisions such as benefit cuts, tax increases, or a combination of both.
President-elect Donald Trump has pledged not to touch Social Security and has proposed eliminating taxes on Social Security benefit income. However, such a change would be costly and lack s the fairness argument that supported the repeal of the WEP and GPO.
The future of Social Security remains uncertain, with experts like Emerson Sprick from the Bipartisan Policy Center emphasizing the need for presidential leadership and a commitment to address the issue.
As the political landscape evolves, the question of how to secure the long-term viability of Social Security continues to loom large, with no clear solution in sight. To learn more about the Social Security Fairness Act, read the details in this story here.
How do you feel about the recent changes to Social Security? Share your thoughts, experiences, and questions in the comments below!
Last edited:
