Following the start of the new year, President Biden signed into law the Social Security Fairness Act, which the White House has referred to as the first expansion of Social Security assistance in two decades.1
Starting in 2025, millions of Americans will be eligible to receive more Social Security benefits than previously provided, as this new legislation repeals two longstanding provisions for public sector employees and their spouses or widows.
Let’s take a look at what’s included in the Social Security Fairness Act, who may be impacted, and what other key changes are coming to Social Security in 2025.
Signed into law on January 5, 2025, the Social Security Fairness Act is a bipartisan-supported legislation that repeals previous provisions, including the Windfall Elimination Provision and the Government Pension Offset.
Previously, these provisions reduced the amount of Social Security benefits certain public sector employees could receive if they also had access to pension income.
This is significant, considering the majority of public workers (teachers, state and local government employees, firefighters, police officers, and more) are offered some type of defined benefit (pension) plan through their employer. While the exact percentage varies, some studies show around 60% of public employees are offered a pension plan, while others indicate as many as 86% of government workers have access to one.2,3
The Windfall Elimination Provision, or WEP, historically provided a formula that would adjust the Social Security benefits for public sector employees who met two criteria:4
For reference, a “non-covered pension” refers to a pension plan that does not withhold Social Security taxes from the employee’s salary—most commonly, these belong to government workers.
WEP was originally created to prevent employees who met the criteria above from receiving higher Social Security benefits.4 Rather than follow the traditional calculation for determining Social Security benefits, WEP created an alternative formula that reduced the primary insurance amount (PIA).
By 2022, WEP impacted around 2 million Social Security beneficiaries (or 3.1%).4
The Government Pension Offset, or GPO, again had the potential to reduce (even eliminate) Social Security benefits for certain beneficiaries including spouses, widows, and widowers. Impacted individuals were required to deduct two-thirds of their civil service or government pension from their spousal Social Security benefits.5
Again, because Social Security taxes were not withheld from these earnings, the provision was used to reduce the benefit amount for spouses and surviving spouses. For reference, the GPO impacted nearly 750,000 beneficiaries in 2023.5
All in, around 2.8 million people should expect to receive a lump-sum payment worth potentially thousands of dollars in missed Social Security benefits from 2024, as the new Act affects benefits payable starting January 1, 2024.
This legislation, which received bipartisan support, repeals the two provisions shared above that were previously enacted to prevent public sector employees from “double dipping” benefits—though proponents of the new law indicate these previous provisions unfairly penalized public workers.6
Not only does this new legislation impact state and local government employees, but it has the potential to provide more guaranteed retirement income for public employees, including school teachers, police officers, firefighters, healthcare workers, and others who have received non-covered pensions.
The Congressional Budget Office estimates that in 2025 beneficiaries will receive an average monthly increase of:7
If you believe you qualify for the additional lump-sum benefits from 2024, here’s a bit of good news—no further action is required at this time.
As long as you have previously filed for Social Security benefits and the administration has your current address and direct deposit information, you do not need to do anything else to claim the benefits you may be entitled to.
As with most legislation, there are both advocates and critics voicing their opinions about the increase in Social Security benefits for public sector employees.
The Social Security Fairness Act is estimated to cost $196 billion over the next 10 years.7 Not only do some say the change to benefits is unfair, but it jeopardizes the future financial health of the overall Social Security fund.
Based on current laws and data (including the number of retirees versus workers), Social Security trust funds are on track to be depleted by 2041—though this statement is often misunderstood.8 However, critics of the law do reference concerns over Social Security solvency, indicating that the additional $196 billion in spending will fast-track the trust fund’s path toward depletion.9
Even if you aren’t directly impacted by the Social Security Fairness Act, there are a few other important changes and reminders for the 2025 tax year to consider.
First, each year the Social Security Administration decides whether a cost-of-living adjustment (COLA) is necessary in order to keep beneficiary payments on pace with rising inflation. For 2025, the COLA is 2.5%, meaning your payments should be 2.5% higher than they were last year (if you received benefits previously). Keep in mind that a COLA is not guaranteed, and there may be years where the COLA is 0%.10
Second, if you’re still earning a paycheck, more of your salary may be taxed for Social Security in 2025, as the “taxable maximum” has been raised to $176,100. Your income, up to the taxable maximum, may be subject to Social Security tax. The silver lining? Paying more in benefits now can help you secure a larger benefit in retirement. The previous taxable maximum for 2024 was $168,600.11 If you earn less than last year’s taxable maximum, you should see no changes in your Social Security taxes this year.
Social Security benefits may not provide enough to address all of your financial needs, but they do play an important role in retirement as one of the only inflation-adjusted income streams guaranteed for life. Even if the most recent legislation doesn’t impact you directly, use this fresh start to the year to consider your benefits and how you’re leveraging them to the fullest.
If you haven’t started collecting benefits yet, don’t forget that the longer you wait to begin, the more you’ll receive (up until age 70). If you have enough financial resources to delay benefits until age 70, the wait for a greater payout could be well worth it, depending on your unique circumstances.
And if you believe you qualify for a lump sum payment for missed benefits last year, you can find the latest updates on the Social Security Administration’s website.