On Jan. 5, President Joe Biden signed into law the Social Security Fairness Act. That means nearly 3 million public-sector workers with government pensions will receive larger Social Security benefits, with the average increase estimated at $360 per month. But the new law also comes with bad news for beneficiaries.

The Social Security trust fund that pays benefits to retired workers, spouses, and survivors was already on pace to be depleted by 2033. That means automatic benefit cuts (without Congressional intervention) were less than a decade away. But the Social Security Fairness Act brings those cuts even closer by increasing program spending.

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Here are the important details.

President Joe Biden speaking from a podium. Image source: Official White House Photo By Adam Schultz

The Social Security Fairness Act eliminates two pre-existing rules

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 commonly affected public-sector workers such as firefighters, police officers, and teachers that also held private-sector jobs. The WEP prevented a “windfall in benefits for individuals who have only minimal Social Security coverage,” according to the Social Security Administration.

The Government Pension Offset (GPO) reduced Social Security benefits for spouses and survivors who also receive pensions from federal, state, or local governments. It ensured “government employees who do not pay Social Security taxes are treated in a manner similar to those who work in the private sector and pay Social Security taxes,” according to the Social Security Administration.

Some policy experts argue the WEP and GPO were unfair because they reduced benefits for retired workers and spouses who chose to serve their communities. Alternatively, other experts argue the WEP and GPO were entirely fair because they prevented retired workers and spouses from double dipping from Social Security and government pensions.

The Social Security Fairness Act comes with bad news for retired workers

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 into law, the OASI Trust Fund was expected to be insolvent by 2033, at which point only 79% of scheduled benefits would have been payable.

Importantly, that does not mean Social Security is going bankrupt, nor does it mean benefit payments will stop. 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 depleted.

However, the Social Security Fairness act will increase benefit payments for about 3 million public-sector workers. While that is undoubtedly good news for those individuals, it is also bad news for retired workers and other recipients. When the trustees estimated the OASI Trust Fund would be depleted in 2033, they did not account for expanded benefits under the new law.

Consequently, the Social Security Fairness Act not only hastens benefit cuts, but it also increases the size of the projected cuts. The Congression Budget Office estimates the law will accelerate trust fund depletion by approximately six months, and that it will increase the minimum necessary benefit cut to 26% once the OASI Trust Fund is insolvent.

Here is the bottom line: Congress will likely find a solution for Social Security’s financing problem before benefit cuts happen automatically. But the Social Security Fairness Act raises the stakes. It brings potential benefit cuts closer, meaning Congress has less time to find a solution. It also increases program spending, which means Congress must now surmount an even greater funding shortfall.

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