WEP GPO Payment Changes for Retired Professionals

In the final days of the 118th Congress, the Senate voted 76-20 on December 21, 2024, to repeal two controversial federal rules that reduce or eliminate Social Security benefits for millions of public sector employees, including many police, firefighters, teachers and postal workers. The bill now goes to President Biden for his signature. The Social Security Fairness Act repeals two federal policies—the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO) rule—that reduce Social Security payments for nearly 3 million retirees. The legislation repeals the WEP and GPO reductions for Social Security benefits payable after December 2023. As a result of the repeal, some public sector retirees could see their Social Security benefits increase in the future and some spouses and survivors, who had been denied Social Security benefits because of their public pensions, could become newly entitled to Social Security benefits. The Congressional Budget Office estimates the Social Security Fairness Act would cost about $196 billion over the next 10 years and could accelerate the exhaustion of the Social Security trust funds by several months. The combined Social Security retirement, survivor and disability trust funds are projected to run dry within the next 10 years if Congress does not take action before then. If the trust funds are exhausted, all Social Security recipients could see their benefits cut by about 20%. The WEP reduces Social Security benefits for individuals who have worked long enough in covered employment—at least 10 years—to earn a Social Security benefit but who also receive pensions from public sector jobs where they didn’t pay Social Security taxes. It affects state and local public-sector workers, including teachers, in about a dozen states and public safety officers such as police, firefighters and emergency services personnel in many more states as well as postal workers nationwide. All told, the WEP reductions affect about 2.1 million. The GPO reduces Social Security benefits for spouses, widows and widowers who receive government pensions based on work where they did not pay Social Security payroll taxes and who try to claims Social Security spousal or survivor benefits. The GPO reduces any potential Social Security spousal or survivor benefits by two-thirds of the amount of the non-covered public pensions with no annual dollar limits. In many cases, the GPO reductions can totally wipe out a Social Security spousal or survivor benefit. The Congressional Research Service estimates that the GPO affects about 800,000 individuals.        

My latest for Kitces! With the signing of the Social Security Fairness Act on January 6, the WEP and GPO are officially history (at least, once the Social Security Administration updates its systems to actually implement the law). What does that mean? In a nutshell, anyone with a pension from a non-Social-Security-covered job (including many retired teachers and police officers), who previously had their Social Security benefits reduced by WEP or GPO, will have their "full" benefits restored going forward. And because the law is retroactive to January 2024, there will be an additional payment to repay any benefit reductions since then. It will take time for SSA to implement these changes, but for now the biggest job for planners is to identify which of their clients are subject to WEP or GPO and start to plan around the question of what higher Social Security benefits mean to their overall financial picture. Additionally, for some clients who never filed for Social Security spousal benefits to begin with because they would have been reduced to $0 because of the GPO, it's important to have them file as soon as possible to maximize their eligibility for both higher benefits going forward as well as any retroactive benefits they might be entitled to! All this and more in today's post: https://lnkd.in/gHyDfpjh

Starting February 25, 2025, The Social Security Administration is beginning to pay retroactive benefits and will increase monthly benefit payments to people whose benefits have been affected by the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO). If a resident is due retroactive benefits as a result of the Act, they will receive a one-time retroactive payment (deposited into the bank account SSA has on file) by the end of March. This retroactive payment will cover the increase in their benefit amount retroactive to January 2024 (as applicable). Monthly benefits will be adjusted, as appropriate, and new amounts will start being paid on April 1. Anyone whose monthly benefit is adjusted, or who will get a retroactive payment, will receive a mailed notice from Social Security explaining the benefit change or retroactive payment. If you have questions about how to treat those payment when determining income for residents receiving benefits through HUD's MFH programs, check out our News page. https://lnkd.in/ebnDr2d

Big Update for Those Affected by WEP & GPO... Starting this week, the SSA will begin issuing retroactive payments and increasing monthly benefits for those impacted by the WEP and GPO. This is a massive shift from SSA’s earlier announcement that recalculating benefits and issuing retroactive payments could take a year or more. → Retroactive payments (covering benefits back to January 2024) will be deposited by the end of March into the bank accounts SSA has on file. → New, higher monthly benefits will begin in April 2025 (for March benefits). → Beneficiaries will receive mailed notices explaining their adjusted benefits—but payments may arrive before the notice. Although many payments are being expedited, the SSA warns that “more complex cases" will take additional time for manual processing. This is lightning speed for the SSA. Fingers crossed that the retro payments and ongoing payments are accurate.