Experts say that new Social Security benefit legislation may increase insolvency. Broad reform remains elusive.

• The Social Security Fairness Act was enacted on January 5th after years of campaigning from organizations representing firefighters, police, teachers, and other workers with pensions.
• A group of Social Security experts is generally in agreement that the new law's changes are not desirable.
• The insolvency problems of Social Security are becoming more severe, and finding a solution remains as difficult as ever.

The signing of the Social Security Fairness Act by President Joe Biden on Jan. 5 marked a triumph for those who have long advocated for changes that would enhance the benefits received by public workers with pensions.

The policy community is disappointed by the enacted change, which was backed by overwhelming bipartisan support in both the House and Senate.

According to Andrew Biggs, a senior fellow at the American Enterprise Institute, no Social Security expert believed the Social Security Fairness Act was a good idea.

The new law abolishes two provisions that adjusted Social Security benefits for individuals who also receive pension income from public sector work where payroll taxes to Social Security were not paid.

In 1983, the Windfall Elimination Provision (WEP) was enacted, which reduced Social Security benefits for approximately 2 million individuals who also have pension or disability benefits from work where they did not contribute to Social Security.

Nearly 750,000 spouses, widows, and widowers who receive their own pensions from public sector work had their Social Security benefits reduced due to the Government Pension Offset, or GPO, which was established in 1977.

In 2025, retirees will see changes in Social Security and Medicare. Biden withdrew student loan forgiveness plans, but there is still debt relief available.

The WEP and GPO were designed to adjust the benefits of public workers so that they were not considered low-income and received a lower income replacement rate, which is contrary to the progressive and anti-poverty nature of Social Security.

The National Committee to Preserve Social Security and Medicare hailed the new law as a victory after a decades-long fight to modify or repeal the rules, as organizations that lobbied for the change praised the new law for providing affected workers with the full Social Security benefits they had earned once the bill was signed.

According to Maria Freese, senior legislative representative at the National Committee to Preserve Social Security and Medicare, it's a method of reducing benefits for a specific group of individuals who offer a public service to our communities.

Freese stated that they were singled out and their Social Security benefits are lower than a person who chose not to enter public service.

The Congressional Budget Office has estimated that Social Security beneficiaries may see monthly benefit increases ranging from an average of $360 to $1,190 as the new law is phased in. Additionally, affected beneficiaries will receive lump-sum payments for the extra benefits they would have received throughout 2024.

The law has made the program "more fair" by eliminating penalties for income earned outside of the system, as stated by John Hatton, staff vice president for policy and programs at the National Active and Retired Federal Employees Association, or NARFE.

Hatton stated that income earned outside of the program should not affect the size of Social Security benefits, as income from capital gains or inheritances does not influence the benefits.

Yet many policy experts maintain the changes never should have been enacted.

Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget, stated that what was observed was a massive special interest campaign for a poorly crafted and ineffective policy that is benefiting a select few.

The elimination of the WEP and GPO will bring the depletion date of Social Security's trust funds six months closer, costing almost $200 billion over 10 years, according to the CBO.

Congress must address the Social Security Fairness Act's funding shortfall sooner rather than later, as both experts in favor and against the act agree.

Provisions aimed to prevent benefit windfalls

The complexity of the WEP and GPO rules and their impact on individual beneficiaries is intricate.

Alicia Munnell, senior advisor at the Center for Retirement Research at Boston College, stated that there is an injustice here that the provisions tried to correct, but perhaps not entirely.

Although experts have tried to explain the provisions to lawmakers, "we all failed," Munnell said, leaving only "bad policy" as the result.

Without the WEP, workers who only work in jobs that pay into Social Security for a short time are considered low earners and receive extra benefits intended for low earners, she stated.

The elimination of the GPO results in a nonworking spousal Social Security benefit being given to a full-time worker with their own pension benefit, according to Charles Blahous, senior research strategist at George Mason University's Mercatus Center.

"Blahous stated that there is no justification for doing that, calling the legislation "unserious" and "disappointing.""

To prevent benefit windfalls to a small number of people who didn't pay Social Security taxes for years, the WEP and GPO were necessary, despite their imperfections, he stated.

Blahous stated that the indicator is a cause for concern regarding Social Security's future.

Lawmakers face Social Security solvency dilemma

The Social Security Fairness Act was passed by the Senate with a 76-vote bipartisan majority. In the final legislative hours in December, amendments were introduced, but they failed to add ways to pay for the change or alter the provisions instead of replacing them. The Senate took up the bill after the House passed it in November with a 327 bipartisan majority.

One way to make the changes more equitable after the WEP and GPO elimination is to bring the 25% of state and local workers who do not currently contribute to Social Security into the program, as suggested by Munnell.

It is unlikely that Congress will revisit the changes made to the Social Security Fairness Act.

The challenge for lawmakers is to determine the appropriate time and method for reinstating the program's financial stability.

According to Emerson Sprick, the Bipartisan Policy Center's associate director of economic policy, politically it is challenging for members of Congress to endorse significant, responsible modifications to the program that will tackle its long-term financial problems.

Addressing the issue will require presidential leadership and a commitment, Sprick said.

Trump has pledged not to alter Social Security, but he wants to remove taxes on Social Security benefits. Trump's transition team did not respond to a request for comment.

According to Biggs, the change would be expensive, costing over $100 billion annually, and it lacks the same fairness argument, making it less likely to be approved.

Trump's promise of no benefit cuts creates a dilemma for Republicans, who are known for being a low-tax party.

To ensure the sustainability of Social Security, it might be necessary to implement reductions in benefits, hikes in taxes, or a combination of both.

"Neither party nor leader possesses the political will or integrity to address the insolvency of Social Security and Medicare, which is expected to occur within roughly a decade, according to MacGuineas."