Sharon Carson, Retirement Strategist, answers frequently asked questions about how this rule change may affect some of your clients.

What is the Social Security Fairness Act?

The Social Security Fairness Act repeals two provisions passed into law by Congress in the 1980s to slow depletion of the trust funds, which help fund the system:

• The Windfall Elimination Provision (WEP) reduced or eliminated Social Security benefits for individuals (primarily, state and local public employees) who receive a pension or disability benefit from an employer that did not withhold Social Security taxes. (To be eligible for their own retirement benefit, an individual must have worked at least 40 quarters—for a total of 10 years—in covered employment.)
• The Government Pension Offset (GPO) reduced Social Security benefits paid to the spouses, widows and widowers of state and local government employees if the spouses received a non-covered government pension (non-covered work is employment that doesn’t withhold Social Security taxes).

Learn more about the new legislation here.

Who will benefit from the new law?

This law increases Social Security benefits for certain non-covered public sector workers. This includes some:

• Public workers at the state and local level—teachers, firefighters and police officers—mainly, in Alaska, California, Colorado, Connecticut, Illinois, Louisiana, Missouri, Nevada, Ohio and Texas
• Federal employees covered by the Civil Service Retirement System
• People whose work had been covered by a foreign social security system

At present, about 72% of state and local public employees work in Social Security-covered employment, according to the Social Security Administration (SSA). These individuals will not receive a benefit increase as a result of the new law.

Does the new benefit rate go into effect immediately? 

No. While the law went into effect on January 5—and the rate increase will be applied to Social Security benefits payable after December 2023—the government has not yet announced an implementation plan. Implementation, especially for payment of the retroactive benefits may have significant delays—although there was a recent announcement that people may start seeing funds as early as this week.

Do affected individuals have to register to receive higher benefits?

The SSA recommends the following:

• Anyone who has filed for Social Security and had their retirement benefits partially or completely offset should make sure the agency has their correct mailing address and direct deposit information.
• Those interested in applying for Social Security benefits who have not yet done so should apply online or schedule an appointment.

How can I help clients affected by the new law?

The new legislation will create only a very modest benefit increase for some individuals. But for others, the bump up in benefits may be enough to warrant reassessment of their overall retirement plans; for example, if the increase allows them to retire sooner, create a long-term care plan, spend more and/or fund legacy goals.

Another group of clients who may need your assistance: Those who have not yet filed for Social Security benefits. In light of the rule changes, these individuals may want to review their planned claiming strategy, keeping in mind: 

• They must claim their own benefit before their spouse can claim a spousal benefit on the individual's work record.
• If they wait until they reach their full retirement age they will receive 100% of their benefits. However, if they file earlier than full retirement age (but after age 62), their benefit amount will be reduced—and so will any benefits paid to a spouse who survives them.
• Clients who delay claiming retirement benefits (permissible up to age 70) will increase their own monthly benefit amount as well as the benefits paid later to their surviving spouse.

Use the timing trade-offs chart in the J.P. Morgan Guide to Retirement to help clients understand what may be at stake.

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