There could be a substantial increase in the number of people filing for Social Security as the result of a new measure signed into law recently by President Biden, Think Advisor reports.
he Social Security Fairness Act rescinds two provisions — the Windfall Elimination Provision and the Government Pension Offset – that limit Social Security benefits for recipients if they get retirement payments from other sources, including public retirement programs from a state or local government.
It will increase payments for current and former public employees, affecting nearly 3 million people who receive pensions from their time as teachers, firefighters, police officers and in other public service jobs.
The benefit claiming strategies of these workers could be affected by the new law, according to Joe Elsasser, a certified financial planner and the founder and president of Covisum, who discussed the development with ThinkAdvisor.
He expects more new claims for Social Security benefits by retirees, in particular those who would have had spousal benefits reduced to $0 by the Government Pension Offset. They will now have more of an incentive to file for a benefit.
“It is possible that there will be an administrative fix for these situations, but in general, benefits can only be paid when beneficiaries are both eligible and have filed for benefits,” Elsasser said.
He also noted the benefit for Social Security recipients of doing away with the Windfall Elimination Provision, though it will not happen right away.
“These changes will take time to implement while the Social Security Administration updates its systems to conform to the legislation,” Elsasser said. “New enrollees to Social Security may be paid full benefits during the transition, but those who have already filed for benefits and are impacted by either provision will likely not see an immediate change to their benefit amounts.”
Affected beneficiaries will receive a retroactive payment for any increase in benefits that would have been payable back to January of 2024.
The Congressional Research Service estimated that in December 2023, there were 745,679 people, about 1% of all Social Security beneficiaries, who had their benefits reduced by the Government Pension Offset. About 2.1 million people, or about 3% of all beneficiaries, were affected by the Windfall Elimination Provision.
The Congressional Budget Office estimated in September that eliminating the Windfall Elimination Provision would boost monthly payments to the affected beneficiaries by an average of $360 by December 2025. Ending the Government Pension Offset would increase monthly benefits in December 2025 by an average of $700 for 380,000 recipients getting benefits based on living spouses, according to the CBO. The increase would be an average of $1,190 for 390,000 or surviving spouses getting a widow or widower benefit.
Eisasser explained that the new law may prompt some affected by the WEP or GPO to wait longer to apply for benefits.
“Part of the motivation for an early claim may have been that spousal and/or survivor benefits would not be available to a spouse who had worked primarily in non-covered employment,” Elsasser noted. “Now that spousal and survivor benefits will be available to this group, delayed claiming may make considerably more sense.”
The Social Security Fairness Act will affect Social Security benefits payable after December 2023. “By signing this bill, we’re extending Social Security benefits for millions of teachers, nurses and other public employees and their spouses and survivors,” Biden said. “That means an estimated average of $360 per month increase.”
Overall, current and former public sector employees and their spouses, ex-spouses and survivors are expected to receive an additional $20 billion a year in Social Security benefits over the next decade.
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