CHAMPAIGN, Ill. — A new law affecting Social Security benefits for workers with a public pension means some retirees will receive a modest increase in their monthly checks, according to a University of Illinois Urbana-Champaign expert on U.S. tax policy and retirement issues.
The bipartisan Social Security Fairness Act got rid of the Windfall Elimination Provision and the Government Pension Offset, which reduced Social Security benefits for some public employees with pensions, says Richard L. Kaplan, the Guy Raymond Jones Chair in Law at Illinois.
“The new law changes how Social Security benefits are calculated for workers whose employers didn’t pay into Social Security for the bulk of their careers,” he said. “Let’s say you’re someone who worked in the private sector and paid into Social Security for a decade or so before switching careers and becoming a public school teacher. Before this change, your Social Security benefits would be reduced because of your pension. But now, you will receive the full Social Security benefits based on your earnings subject to Social Security’s payroll tax. As a result, some retirees will see a bump in their monthly check as well as a one-time lump-sum payment for the increase that’s retroactive to January 2024.
“The exact amount will vary with an individual’s work history and their age, but it might be as much as several hundred dollars per month.”
Kaplan estimated that the new law would affect approximately 3% of Social Security beneficiaries.
“I imagine that in Illinois, that percentage will be a bit higher because the state government and many local governments do not participate in Social Security,” he said.
It is still necessary for a worker to have accumulated 40 quarters of credits paying into the Social Security system, Kaplan said.
“People who spent the bulk of their career in a job that had a pension but whose employer didn’t participate in Social Security might have had prior employment that paid into Social Security,” he said. “It might also affect the spouse or widow of a public pensioner.”
Kaplan cautioned that those benefitting from the new law shouldn’t expect to see a bigger check anytime soon.
“This is going to be a massive undertaking for the Social Security Administration because this change was not on their radar,” he said. “The Social Security Administration is already understaffed, and now they have to go back and comb through everyone’s records to see who’s affected and to what extent.”
The change will also likely accelerate the Social Security Trust Fund’s insolvency date, but not by much, Kaplan said.
“The best estimate is that it will move the insolvency date up by about six months, which is not trivial, but also not a gamechanger,” he said. “There’s that old expression that if you’re in a hole, the first thing to do is stop digging. Well, Congress’ version is if you’re in a hole, get a bigger shovel — on credit. To be fair, this legislation was wildly popular, but it also makes Social Security’s impending financial difficulties slightly more imminent.”