President Joe Biden signed the Social Security Fairness Act into law on Sunday (5 Jan 2025), a landmark act that will remove the reduction of retirement benefits for those receiving non-covered pension income. This transformative law ends the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO), two controversial changes that have been detrimental to Social Security benefits for certain federal annuitants and public workers for decades. It will increase the monthly Social Security payments of nearly 3 million retired, married, and surviving spouses.
What Was WEP and GPO?
The Windfall Elimination Provision (WEP) and Government Pension Offset (GPO) reduced Social Security for recipients of pensions from non-Social Security-covered government jobs. They were supposed to reduce inequality, but these rules substantially restricted benefits for public servants, such as:
- WEP: Reduced Social Security payments to those receiving a government pension who had worked in in jobs where no social security was paid and/or received income from nono-covered pension schemes. It affected about 2 million people, among them retirees from the Civil Service Retirement System (CSRS).
- GPO: Spouses of those affected and surviving spouses affected.
A New Era for Public Officials and Outsiders
Repealing WEP AND GPO changes the lives of millions of Americans and even some non-residents too. WEP often impacted non-residents who are eligible for U.S. Social Security benefits but also have pensions from non-covered work in their country of residency. This meant that their Social Security benefits were cut under WEP. By eliminating WEP, these individuals and spouses will now be able to retire with the benefits they had without the reduction that was associated with their non-U.S. pensions.
“The bill I’m signing today is about a simple proposition: Americans who have worked hard all their lives to earn an honest living should be able to retire with economic security and dignity,” said President Biden during the signing ceremony at the White House.
The Fiscal Cost of Repeal
Estimates by the Congressional Budget Office (CBO):
- Waiving WEP will raise monthly average Social Security benefits by $360 for affected individuals by December 2025.
- Restoring GPO will increase monthly payments by $700 for affected spouses and $1,190 for surviving spouses on average by the same amount.
- These benefits will rise as cost of living increases (COLAs) are made each year.
Importantly, payments for affected individuals will be backdated to January 2024. The Social Security Administration is due to announce the operation of the law soon with more details published at https://www.ssa.gov/benefits/retirement/social-security-fairness-act.html
Challenges and Criticism
The repeal has been widely cheered, but some also warn that it will speed Social Security into financial struggles. The Committee for a Responsible Federal Budget estimates that repeal would cost close to $200 billion over 10 years, increase Social Security costs by approximately 1%, and move the program’s insolvency date forward by six months. Some had proposed modifications, instead of a repeal, to fix WEP and GPO’s injustices without putting additional financial pressure on Social Security.
WEP and GPO What’s Next?
In the eyes of those affected, the Social Security Fairness Act’s passage represents a long awaited victory. With the Social Security Administration ready to roll out the new changes, affected retirees and beneficiaries (including non-residents with dual pensions) should monitor agency websites for updates. If you want to understand what these adjustments mean for you as a non-resident who worked in the USA, a financial advisor chat could be beneficial, especially if you have additional US Pensions.
Lessons for Non-Resident Retirees
The repeal of WEP and GPO underscores the importance of staying informed about changes in retirement benefits. That’s difficult with life, full-time jobs, and family, so support the reason to use a competent and informed financial adviser. If you’re a non-resident who meets U.S. Social Security requirements to receive an income, now is the time to:
- Look At Your US Social Security Benefits: Compare what the repeal would mean for your Social Security benefits.
- Think Early: Now is the time to restructure your retirement savings for a better tomorrow.
- Quickly Seek Expert Advice: Talk to a financial advisor about the implications of these changes on your long-term financial plan.
We are a specialist firm working with non-resident Americans or those who have worked in the USA to help them understand their financial options with US Pensions and other assets. Contact us to get your retirement plan on the same page with this new law.