If President Joe Biden signs the Social Security Fairness Act before the end of the current Congress, the Social Security Administration has confirmed that retirees who had their benefits docked due to the Windfall Elimination Provision (WEP) or the Government Pension Offset (GPO) will be eligible for back payments for 2024.
The information was confirmed by an SSA spokesperson, according to the National Association of Plan Advisors. According to the proposal, the removal of the Government Pension Offset and the Windfall Elimination Provision would apply to monthly insurance payments due under section II of the Social Security Act for months after December 2023.
What is the difference between the Government Pension Offset and the Windfall Elimination Provision?
Workers who receive a state pension or disability benefit from a job not covered by Social Security have their Social Security benefits reduced by the windfall elimination clause in H.R. 82.
The clause aims to stop workers from receiving greater benefits because they are low-wage earners. Advocates contend that it unjustly lowers or does away with Social Security benefits for public servants.
However, for wives and widows who earn their pensions from jobs that are not covered by Social Security, the government pension offset lowers Social Security spousal benefits to two-thirds.
In a letter to Senate leadership, bill authors also said the offset reduces or eliminates Social Security survivor payments for retirees who have devoted their whole lives to serving communities.
Millions of Americans could be eligible for back payments this year
Therefore, individuals affected by the Government Pension Offset and Windfall Elimination Provision must receive benefits that would have otherwise been due to retirees in 2024.
The Social Security Administration is awaiting the possible final enactment of the Social Security Fairness Act and rules for its implementation, a spokesperson for the agency told ThinkAdvisor. As further details become available, we will update the Social Security Administration website.
On December 20, the Senate passed the Social Security Fairness Act, also known as H.R. 82, which would do away with the GPO and WEP components of Social Security.
By a vote of 327 to 75, the bill passed the House on November 12 and is now pending Biden’s signature. Those who qualify for spouse or survivors’ benefits are covered by the Government Pension Offset, whereas those who qualify for their own Social Security benefits are covered by the Windfall Elimination Provision.
The Government Pension Offset and Windfall Elimination Provision statutes, approved by Congress in 1977 and 1983, decreased Social Security benefits.
Some workers could receive back payments and higher benefits
Critics of the law claim that the WEP and GPO disproportionately penalize public sector workers and first responders, among other groups.
Furthermore, according to a recent report by ThinkAdvisor, the provisions were implemented decades ago to address issues with Social Security’s benefit formula that might result in some government employees receiving larger Social Security benefits than long-term low-wage workers, despite the fact that they made a lot of money on the job and received a government retirement benefit commensurate with their earnings.
The creation of these policies was seen at the time as a matter of necessity and fairness because individuals with ostensibly similar earnings histories could have quite different experiences during the benefit filing process based on how their earnings history was balanced between covered and non-covered work.
However, Congress passed flawed formulae because of data limitations at the time. The Windfall Elimination Provision (WEP) tends to overcorrect benefit calculations in a way that disproportionately harms lower-income families, while the Government Pension Offset overcorrects in a way that can harm higher incomes.
Another issue has emerged in the decades that have followed: the Social Security Administration makes a small but significant number of incorrect payments to recipients, which may subsequently be refunded, due to the complexity of the Government Pension Offset and Windfall Elimination Provision (WEP) regulations. For this reason, some legislators wish to limit the clawback period to three years.
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