WEP. GPO. Those that have been subjected to the whims of these three letter words know their definitions all too well. WEP is defined as the Windfall Elimination Provision and GPO is defined as the Government Pension Offset. Though government workers or public service employees typically don’t pay into the social security system, they may have worked for employers that did and could still be entitled to a Social Security benefit.

This is where the WEP comes in. WEP only affected government employees and other public sector employees (government workers, teachers, firefighters, etc.) who had paid into Social Security through working in the private sector at some point in their lives. The theory behind WEP was to stop people from receiving a “windfall” from collecting 100% of their social security benefit and 100% of their government pension and help elongate Social Security’s solvency.

GPO only applies to spousal and survivor benefits. The theory behind GPO was similar. It was meant to elongate the solvency of Social Security funds by reducing the potential spousal benefits for a surviving spouse that also receives a government pension. It typically received the Social Security benefits one could receive by two-thirds of their government pension.

Both the GPO and WEP had in-depth formulas that would take some time to write out, so I’m not going to here. The reason why is because of all the past tenses to describe GPO and WEP I’ve been using so far. All you need to know going forward is GPO and WEP have a new formula to remember.

WEP + GPO = BUH-BYE

That’s right! No more GPO and WEP. As of January 5, 2025, the Windfall Elimination Provision and Government Pension Offset were eliminated through The Social Security Fairness Act, HR 82. Our lives as financial planners just got a bit easier and those that have been subjected to WEP and GPO can expect to have their full benefits restored.

Why would this get signed into law? There’s a cynical way to view this. You may be thinking this was signed in the twilight hours of an exiting administration just to carry favor with the public (note: the bill had bipartisan support). However, I think the real reason is just a simple and optimistic message from Washington. According to Pew Research, 79% of Americans don’t want Social Security benefits reduced in any capacity. The Kaiser Family Foundation illustrated the percentage of people in the United States who vote by age:

Since Congress understands that most people who vote are on or about to be on Social Security and those same people don’t want their benefits reduced, Congress put two and two together. They got rid of WEP and GPO to make sure that not only benefits aren’t reduced, but that some people may be able to receive more Social Security income than originally planned. Although the increased benefit amount for individuals will vary, the Congressional Budget Office (CBO) has estimated that eliminating the GPO will increase monthly benefits for 380,000 impacted spouses by $700 on average and by $1,190 on average for 390,000 impacted surviving spouses. Eliminating the WEP will increase monthly benefits for approximately 2.1 million impacted individuals by $360 on average.

Some positive impacts from this law are:

• Just because your deceased spouse had a government pension doesn’t mean that the surviving spouse should be penalized when claiming their deceased spouse’s Social Security benefits.

• There’s more fluidity between public and private sector career transitions. Assume, you worked for a private company for 10 years and decided to become an elementary school teacher (if you’re interested in finding how much of a shortage there is by area, you can click here to go to the department of education’s website and run a report for yourself).  The government knows there is a shortage of teachers and wants to make that type of transition easier without having to worry about what happens to their future Social Security benefits.

When meeting with our clients, we regularly get questions like:

1. “Will Social Security be there when I retire?”
2. “How much will I get?”
3. “Isn’t Social Security going to default in the near future?”

The answers to these are as follows:

1. “Maybe”
2. “Maybe”
3. “Maybe”

I know, I know. Nobody likes cop-out answers. In all seriousness, here are the real answers to those questions:

1. We believe that people who paid into the system would get something out of it regardless of their current age if they satisfied 40 quarters of service into the system (currently $1,810 earned every 3 months).
2. A financial plan can help dial in how much you could potentially get when you go to collect Social Security.
3. According to a CBO cost estimate, the depletion date for the combined Old-Age, Survivors, and Disability Insurance (OASDI) trust funds could be pushed forward about six months, potentially leading to a substantial reduction in Social Security benefits for all beneficiaries even sooner than expected, unless Congress acts to address the impending trust fund shortfall. Politicians recognize that Social Security is in many cases the only source of income a retiree has (According to a study done in 2020 by the National Institute on Retirement Security, 40.2% of retirees rely solely on Social Security for their retirement). Yes, Social Security has a funding issue. Yes, we will have to reform the Social Security system. No, politicians aren’t hiding under a rock. There is just some disagreement on how to reform it. The passage of The Social Security Fairness Act is the first step towards reaching an agreement on how to reform Social Security to make it more equitable for all Americans.

Now for those who’ve been subjected to WEP and GPO thinking you’re entitled to backpay for all the money you’ve missed out on over the years and want to meet with one of our financial planners to see how long and extravagant a world cruise you can go on with your newfound money, hold your horses! The current guidance illustrates that the repealing of GPO and WEP isn’t going to be retroactive beyond 2024. Therefore, that world cruise may just be a cruise from LA to Cabo instead (which is still fun in its own right). Just because I said you can’t go on an extravagant world cruise with your newfound money, doesn’t mean you shouldn’t meet with one of our Certified Financial Planner™ professionals. There may be new avenues to explore towards meeting your financial goals that WEP or GPO may have been hindering.

If you’re among those affected, be aware that implementing benefit changes may take some time, according to a message from the Social Security Administration:

“At this time, the Social Security Administration is evaluating the law and how to implement it. We will provide more information on our website, ssa.gov as soon as it is available. If you are already entitled, you do not need to take any action at this time except to verify that we have your current mailing address and direct deposit information. If you are receiving a public pension and are now interested in filing for benefits, you may file online at ssa.gov or schedule an appointment.”

The SSA notes that you can verify your current mailing address and direct deposit information online without calling or visiting a Social Security office by signing in to a personal mySocialSecurity account or creating one on the SSA website. It is also important to file for Social Security benefits if in the past the GPO reduced your prior Social Security benefit to $0.

Please feel free to reach out to us at financialplanning@bfsg.com or call us at 714-282-1566 to schedule a free consultation with one of our Certified Financial Planner™ professionals.

Sources:

Congressional Budget Office, September 2024

Social Security Fairness Act: Windfall Elimination Provision (WEP) and Government Pension Offset (GPO) update | SSA

Legislative Search Results | Congress.gov | Library of Congress

Biden Signs Social Security Fairness Act, WEP and GPO No Longer Exist

Nadeem, R. (2024a, June 24). 2. Americans’ views of government aid to poor, role in health care and Social Security. Pew Research Center. https://www.pewresearch.org/politics/2024/06/24/americans-views-of-government-aid-to-poor-role-in-health-care-and-social-security/#:~:text=Democrats%20(43%25).-,Views%20on%20the%20future%20of%20Social%20Security,reductions%20need%20to%20be%20considered.

Kenneally, K. (2020, January 14). New report: 40% of older Americans rely solely on Social Security for retirement income. National Institute on Retirement Security. https://www.nirsonline.org/2020/01/new-report-40-of-older-americans-rely-solely-on-social-security-for-retirement-income/#:~:text=The%20report’s%20key%20findings%20are,from%20Social%20Security%20in%20retirement.

Number of voters as a share of the voter population, by age. KFF. (2023, May 24). https://www.kff.org/other/state-indicator/number-of-individuals-who-voted-in-thousands-and-individuals-who-voted-as-a-share-of-the-voter-population-by-age/?currentTimeframe=0&sortModel=%7B%22colId%22%3A%22Location%22%2C%22sort%22%3A%22asc%22%7D

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