WEP and GPO Repealed

Edit: It’s helpful if you are interested in this topic to read these two previous posts: Are the WEP and GPO Fair? and Some Nuances of the WEP and GPO.

The U.S. Senate today passed, and President Biden is expected to sign, HR 82, the “Social Security Fairness Act.” (The bill was signed into law by President Biden on January 5, 2025.) This repeals the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO). These provisions potentially applied to anyone who paid into a “non-covered pension”, meaning they paid into a pension but did not also pay into Social Security on those same earnings. This applied to teachers in about 15 states, including Colorado (it also applied to folks who aren’t teachers who paid into non-covered pensions).

For those who are currently retired and affected by the WEP, this could result in an increase in several hundred dollars in their monthly Social Security benefits (the maximum reduction from WEP in 2024 was $587). For those who are currently retired and affected by the GPO, the increase could be much larger, maybe several thousand dollars a month (the maximum Social Security benefit in 2024 is $3,822/month, and the GPO often wiped out the entire survivor’s benefit).

It’s still very unclear on when people will start to see this money. This bill was actually introduced in the beginning of the 118th Congress, so the effective date listed in the bill is January 1, 2024 (text reads “months after December 2023”). This would imply there would be some retroactive payments as well for the missed payments from 2024. In addition, it’s hard to determine how long it will take Social Security to update their systems to reflect this change. On the one hand, you would think it might be really easy, since it’s just a “toggle” that could be flipped for anyone currently affected by the WEP and GPO that would “stop” the reduction. But I suspect it will be more complicated than that. There’s also the question of what happens if someone who was affected by the WEP or the GPO died after January 1, 2024, will their estate be paid for their missed benefits?

As to whether this is a good thing or not, I have mixed feelings. Certainly for those individuals who are currently retired and affected by the WEP and the GPO, this additional money (hundreds to thousands of dollars a month) will be very helpful. But for those not yet retired who would’ve been affected, and for everyone else in Social Security who would not have been affected, this could be problematic. This will increase the liability for Social Security and therefore will move up the date at which Social Security becomes “insolvent” and can’t pay the full amount of promised benefits. It will also likely lower the amount of benefits it can continue to pay after that point by an additional 5% (instead of the projected 75% to 80% of promised benefits, this would lower it to 70% to 75%). Perhaps more troubling, this will provide more ammunition for those currently in power who want to make major changes to Social Security going forward, including ideas such as reducing benefits and increasing the retirement age.

Note: The easiest – and best – solution to “insolvency”, of course, is to change just three words in the Social Security Act to make it like almost all other federal government programs that aren’t tied to a dedicated funding source. It’s completely illogical to tie a safety net program designed to keep elderly Americans out of poverty to an arbitrary funding source when we don’t fund anything else that way. These benefits should be a well thought out, rational policy choice. Imagine if the Department of Defense was “funded” this way. But I digress.

As I’ve written previously, unlike most people affected by the WEP and the GPO, I actually think they are good ideas, just implemented poorly. At the time they were implemented, we didn’t have the data or the computing capability so they created a very blunt formula. If I were King for a Day (just call me “Elon”), instead of repealing the WEP and the GPO I would have revised them to implement a formula based on each individual’s actual data to make the reductions truly accurate. This would’ve resulted in some folks having smaller reductions and some having larger, but all of them having reductions that correctly adjusted their Social Security benefit. With this full repeal, folks who contributed to non-covered pensions are now receiving “extra” from Social Security and are getting an unfair advantage compared to similar wage earners who didn’t have a non-covered pension (because of the progressive nature of Social Security benefits). I know that I’m unlikely to convince anyone who feels like they were getting “robbed” of the Social Security benefit they “earned”, but when you actually look at the math of how your Social Security benefit is calculated, as well as the intent and design of Social Security, it’s pretty clear that the WEP and the GPO were indeed “fair”, just implemented badly.

Of course, no one cares what I think :-), and the legislation is now passed (and presumably will be signed by President Biden). So once they figure out the process, some folks currently retired and receiving Social Security benefits (theirs or a survivor benefit) should see a nice increase in their benefits. But those increases might start to decrease in around nine years, and a few years after that folks may actually get less than they would have without passage of this legislation (if no other changes are made to Social Security and its “funding mechanism”). And for folks who would have been affected by the WEP and the GPO who are ten or more years out from claiming their Social Security, they may end up surprised at the end result of this legislation (for them) in the longer term. (This is especially true if they have a spouse who worked their entire career under Social Security – the decrease to their spouse’s benefit could very well be higher than their increase from the WEP repeal.)

I don’t have enough data, but I suspect those affected by the GPO will still come out way ahead (since the GPO often completely wiped out the survivor benefit), but those affected by the WEP who are ten or more years out from claiming may end up with less (again, unless something regarding the “funding” of Social Security is changed.)

Additional Comments 12-21-24

Unsurprisingly, some folks are reacting to this post. I understand. But I would gently ask that before you react you carefully read not only this post, but the linked post (https://fischfinancial.org/2021/06/11/are-the-wep-and-gpo-fair/) that describes how the WEP and the GPO actually worked. Many people’s reactions are based on how they think the WEP and the GPO worked, not on how they actually worked. Folks may still disagree, but it would be helpful if they would disagree based on the correct information.

Two simple (and necessarily simplified) examples.

WEP Example: Imagine someone who works under Social Security for their entire life and gets a benefit based on earnings of $50,000. Now think of a similar person who also had earnings of $50,000, worked under a non-covered pension, and as part of those $50,000 in earnings worked enough under Social Security to qualify for a benefit. Even though both people have the same earnings, the second person gets a higher proportion of their Social Security earnings back as a benefit due to the progressive nature of Social Security benefits (because it doesn’t “see” their non-covered pension earnings and views them as a “low wage earner”). They will get a proportionally higher Social Security benefit than if they had worked only under Social Security. This was what the WEP was trying to correct for, but corrected with a very blunt formula that wasn’t very accurate.

GPO Example: Again, imagine someone who works under Social Security for their entire life and gets a benefit based on earnings of $50,000. Imagine they have a spouse who gets Social Security benefits based on $100,000 in earnings, that spouse passes away, and they then get a survivor’s benefit (I’ll ignore similar issues with the spousal benefit). Imagine a similar person who works under a non-covered pension and gets a pension benefit and has the same spouse. They will now get the full survivor’s benefit even though they never paid into Social Security (in addition to their pension benefit). They will get proportionally much more than the person who only worked under Social Security. Again, this what the GPO was trying to correct for, although again with a blunt formula that wasn’t very accurate. (And see https://fischfinancial.org/2021/06/11/are-the-wep-and-gpo-fair/ for the design, intent and purpose of the survivor’s benefit for more on why this didn’t make sense even when comparing to a spouse who never worked and paid into Social Security getting a survivor’s benefit.)

See also Knock-On Effects of the WEP and the GPO Repeal.