The Biggest Social Security Change in Years Was Just Signed Into Law. How Will It Affect You?

Source The Motley Fool

Social Security has often been called the "third rail" of American politics. This saying stems from the high-voltage third rail in some railway systems, which is extremely dangerous to touch. The thought was that it was politically dangerous for any politician to touch Social Security.

But this saying might not apply anymore. The biggest Social Security change in years was just signed into law. How will it affect you?

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How will Social Security change?

President Joe Biden signed the Social Security Fairness Act of 2023 on Sunday. This legislation repeals two provisions related to Social Security that have been in effect for over 40 years: The Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO).

The WEP was put into place to reduce Social Security benefits for anyone who receives a pension or disability benefits from jobs where they didn't pay the Social Security portion of the FICA payroll taxes. The GPO was intended to reduce Social Security benefits for spouses, widows, and widowers who receive government pension benefits.

Repealing these two provisions means that many retirees receiving reduced Social Security benefits will now receive full benefits. President Biden said on Sunday: "The bill I'm signing today is about a simple proposition: Americans who have worked hard all their lives... should be able to retire with economic security and dignity."

There's a reason why the most significant Social Security change in years was enacted: It was popular among both Democrats and Republicans. Former Sen. Sherrod Brown, D-Ohio, and Sen. Susan Collins, R-Maine, sponsored the bill in the U.S. Senate, while Rep. Garret Graves, R-La., and former Rep. Abigail Spanberger, D-Va., led the charge in the House of Representatives. The legislation passed with strong bipartisan support in both chambers of Congress.

Who will be affected?

The WEP primarily affects individuals who work with state or local governments or non-U.S. employers. The GPO only applies to individuals who receive pensions from government jobs (federal, state, or local) where they didn't pay Social Security taxes. If you're in either group, the new Social Security change will affect you.

The text of the Social Security Fairness Act of 2023 makes the repeal of the WEP and GPO effective after December 2023. As of that date, the WEP applied to around 2 million Social Security beneficiaries, while the GPO affected nearly 750,000 beneficiaries.

Biden stated: "By signing this bill, we're extending Social Security benefits for millions of teachers, nurses, and other public employees and their spouses and survivors. That means an estimated average of $360 per month increase." The president added that more than 2.5 million Americans will receive a lump-sum payment to cover benefits they should have received last year, since the new law is effective retroactively.

Unsurprisingly, advocates for retired government workers applauded the Social Security Fairness Act being signed into law. National Active and Retired Federal Employees Association president William Shackelford said in a statement: "With the repeal of WEP and GPO, federal retirees, along with so many others, will finally receive the full Social Security benefits they've earned."

What should you do if you're affected by this Social Security change?

The Social Security Administration (SSA) updated its website on Jan. 6, 2025, to reflect the passage of the Social Security Fairness Act. The agency stated that anyone affected by the legislation doesn't need to take any action, except for verifying that the SSA has their correct current mailing address and direct deposit information if it has changed recently. You can make any needed changes online through your my Social Security account or visit your nearest Social Security office. The SSA said that it "will provide more information as soon as available."

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Disclaimer: For information purposes only. Past performance is not indicative of future results.
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