What Happened
On January 5, 2025, the Social Security Fairness Act became law. The Act abolishes two long-standing provisions of the Social Security benefits structure:
- WEP – Windfall Elimination Provision
- GPO – Government Pension Offset
The new rules apply to all payments payable for January 2024 and later (generally benefits paid beginning in February 2024).
Background
In order to receive Social Security benefits, a person typically must work a sufficient number of years in “covered employment”. Covered employment is all employment during which a person is required to pay Social Security taxes. Non-covered employment is primarily an issue for state and local government employees, though most (72% according to the Social Security Administration) are in covered employment. Some workers may have both covered and non-covered employment due to career or employer changes.
The WEP and GPO reduced or eliminated Social Security benefits for people who have employment covered by Social Security and also receive a pension based on work that was not covered by Social Security. The provisions were implemented in the late ‘70’s (GPO) and early ‘80’s (WEP) and were designed to address perceived disparities in Social Security benefits for workers who had both covered and non-covered employment over their careers.
What Do Employers Need To Do
Generally, very little. The Social Security Administration (SSA) is charged with determining the benefits and any required changes. Employers of non-covered employees should not have to provide any additional information or data. Note that if an employer has a non-covered group of employees, the WEP/GPO offsets might have served as a barrier to changing that group to become a covered group. That consideration is no longer an issue.
What Do Employees or Retirees Need To Do
Employees and retirees should review their records to see if any current Social Security Benefits have been subject to reduction or elimination by WEP or GPO. Some individuals have not filed for retirement, spouse’s, or surviving spouse’s benefits because the WEP or GPO offsets would yield no payable benefits. In that case the person should consider applying for benefits.
The SSA automatically withholds Medicare premiums from Social Security payments. However, if the retiree’s Social Security benefits, after offset by WEP and GPO, were not sufficient to cover the premium, the retiree would arrange for direct payment of the premium (using Medicare Easy Pay or Medicare Online Bill Payment). The retiree will need to modify or stop those payments once the premium is paid directly through the unreduced Social Security benefits. Because this is a separate system, the SSA will not automatically adjust any direct payments the retiree has set up.
Timing
The new law was enacted very quickly. The SSA will need to redesign internal programming and recordkeeping to redetermine benefits for impacted retirees and process future benefit requests correctly. The Act is expected to affect about 3 million people and the changes for existing retirees will likely be somewhat manual in nature. At this time the SSA has not provided a timeline for when adjustments for existing beneficiaries will occur. The SSA has created a “Frequently Asked Questions” section on this topic on their website to help keep employees informed of their progress and what to expect.
