Biden signs Social Security Fairness Act into law: What to know

President Biden signed legislation into law over the weekend to expand Social Security benefits for droves of Americans.

The measure, dubbed the Social Security Fairness Act, repeals two tax rules that proponents say have unfairly reduced benefits for many Americans who also receive government pensions. But experts are sounding alarm over its expected price tag and raising questions of fairness around the legislation. 

Here are some things to know.

How does it work?

The legislation would repeal decades-old tax rules known as the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO) that have reduced Social Security benefits for workers that receive pensions and for their spouses. 

Experts say the provisions are aimed at preventing some beneficiaries from collecting higher Social Security benefits than earned. But critics of the rules say the measures are flawed and have led to unfair reductions for many people.

While most jobs are covered by Social Security, many Americans have worked in state and local government jobs that fall outside of that coverage — and have been able to earn a pension instead. That includes those in teaching professions, police officers, firefighters and others who have worked in public service. 

Because Social Security runs on a progressive benefits formula, those on the lower end of the income spectrum who worked much of their career in jobs paying into the program earn higher benefits relative to their income.

But experts say issues come about when calculating Social Security benefits for someone who has spent much of their life in employment not covered by the program.

“When you have state and local workers, some of those jobs are not covered by Social Security,” Rich Johnson, head of the Urban Institute’s program on retirement policy, said in an interview. “So, when you work at those jobs, you're not paying into Social Security, not paying Social Security taxes, your employer doesn't pay into Social Security taxes.”

“Then when this person leaves that state and local job and then works in the private sector, they're, let's say, only in the private sector for 10 years, Social Security sees those 10 years of earnings, but when they're computing lifetime earnings, they’re dividing it by 35 years,” he said.  “And so it looks really small, and so, as a result, they’re getting a 90 percent replacement rate.”

What supporters say

Proponents have cheered the legislation as a long time in coming, panning the rules as outdated while championing the measure as a victory for public servants. 

“In 2003, I held the first-ever Senate hearing on the WEP and the GPO, and I am pleased that with today’s signing of the Social Security Fairness Act, these unfair provisions in our Social Security system have finally been repealed,” Senate Appropriations Chair Susan Collins (R-Maine), who authored the Senate version of the bill, said in a statement over the weekend. 

Collins, whose office said the law will ensure 25,000 Mainers receive their “earned” benefits, also attended the White House’s recent bill signing ceremony, where President Biden also lauded the measure.

“The bill I’m signing today is about a simple proposition,” Biden said. “Americans who have worked hard all their lives to earn an honest living should be able to retire with economic security and dignity.”

According to the Congressional Research Service, more than 2 million beneficiaries were affected by the WEP as of December 2023. That same month, nearly 746,000 also saw their benefits reduced under the GPO. 

Behind those numbers, reports of improper payments have helped fuel calls for reforms. 

The Office of the Inspector General for the Social Security Administration (SSA) said that the agency disclosed it “made more than $457 million in improper payments related to WEP and GPO” in August 2022. 

The watchdog also said it discovered in 2011 that the SSA had “overpaid about 24,900 beneficiaries approximately $623.8 million because they were receiving non-covered pensions from state or local governments, but SSA had not reduced their benefits.”

The price tag

Fiscal hawks have sharply criticized the legislation in recent months, while citing a projection from the Congressional Budget Office (CBO) estimating the move would cost upward of $190 billion over a decade. 

The CBO also projected in a letter late last year that Social Security’s trust funds could “be exhausted roughly half a year earlier than it would be under current law” if the measure were made law.

“First of all, $200 billion is a lot of money over 10 years, right?” Chris Towner, policy director for the Committee for a Responsible Federal Budget, said in an interview, calling the estimate “significant.” He also raised concerns about the impact the legislation could have on Social Security’s funds. 

The board of trustees for the program’s accounts said last year that the depletion date for the Old-Age and Survivors Insurance Trust Fund, which pays out Social Security benefits to retirees, and the program’s smaller Disability Insurance Trust Fund will be 2035.

“Six months maybe wasn’t an issue 20 years ago, but the fact that we're only nine years away now, yeah, I mean, that's a pretty big issue,” Towner said. “Actually, we're closer now. We're like eight and a half years away because of this bill.”

“I mean, the closer we get to Social Security, the harder it’s going to be to prevent the kind of steep benefit cuts, or prevent really steep tax increases from having to happen immediately.”

When will people see higher payouts?

Biden also said on Sunday that more than 2 million Americans will “receive a lump sum payment of thousands of dollars to make up for the shortfall in the benefits they should have gotten in 2024.”

“They're going to begin receiving these payments this year,” Biden announced at the ceremony.

He also said people affected by the changes would see their own benefits increase by an estimated average of $360 per month.

“That's a big deal in middle-class households,” Biden said.