Millions of Americans rejoiced after former President Joe Biden signed a bill into law that will boost Social Security benefits for approximately 3.2 million retirees and spouses. Social Security can be a touchy subject because it impacts tens of millions of Americans and also has many looming financial issues, which has led to partisan disagreement. Needless to say, it’s not easy to get bipartisan support for Social Security bills, so passage of the Social Security Fairness Act was pretty well received. However, retirees slated to benefit just found out that the bill also comes with a bit of an unwelcome surprise.

What is the Social Security Fairness Act?

The Social Security program is very complex and has many rules regarding who can claim benefits, when they can claim benefits, and how much they can claim. The Social Security Fairness Act eliminated two provisions called the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO).

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WEP essentially limited Social Security benefits for retirees who qualified for benefits and also received a noncovered pension, which is an employer-covered pension that doesn’t take out Social Security taxes from someone’s salary. The Social Security program is predicated on workers paying taxes throughout their careers and then receiving benefits once they retire or are nearing retirement. The idea behind WEP was to prevent recipients of noncovered pensions from also receiving higher benefits. WEP typically applied to a select group of state and local municipal workers, federal employees, and teachers. In 2022, WEP impacted over 2 million Americans.

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GPO is similar to WEP but impacts spouses or widowers who receive noncovered pensions. In 2022, GPO applied to over 734,000 beneficiaries, or roughly 12.6% of those who receive Social Security spousal benefits. Eliminating WEP and GPO will impact retirees differently based on the benefits they are entitled to and the amount they get from noncovered pensions.

However, the Social Security Administration (SSA) estimates that eliminating WEP and GPO could theoretically boost a retiree’s benefits by as much as $1,000 or more per month. That’s quite significant when you consider that the average monthly benefit for retirees in December 2024 was roughly $1,926 per month, and benefits have already risen this year due to the 2.5% cost-of-living adjustment.

The unwelcome surprise

Unfortunately, many retirees impacted by WEP and GPO may need to wait over a year to claim their increased benefits from the SSA. On its website, the SSA recently stated that it will likely struggle to implement the law in a timely manner. That’s because passage of the law did not include funding to actually implement its provisions, which are more complex than meets the eye.

SSA must now recalculate the benefits of over 3 million people. Additionally, the law will require the SSA to adjust benefits retroactively dating back to the beginning of 2024, further complicating the process. The agency noted that it has begun to work through the process and assist retirees. However, the SSA said it is also dealing with staffing shortages and a hiring freeze that went into effect last November and is expected to continue.

Retirees who have been impacted by WEP and GPO should be cautious on adjusting their budgets because they likely will not yet know by how much their benefits could increase. The SSA has made it clear that it’s on a case-by-case basis and that while some might benefit immensely, others may not see much of a change at all.

Additionally, it’s possible that many spouses never applied for Social Security benefits in the first place due to concerns over GPO. If you received a noncovered pension, you may now be able to apply for and receive Social Security benefits that will increase your retirement income.

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