When Can I Expect An Increase In My Social Benefit Increase Due To The Fairness Act?

If you remember, the Social Security Fairness Act was signed into law by President Biden just before he left office, and now it’s starting to make a significant impact on millions of teachers, former public employees, and others who were previously exempt from paying into Social Security.

In today’s post, I’m going to break down what the recent updates from Social Security mean for you, how this Act could affect your benefits, and how taxes might come into play for these increased payments. So, let's dive in!

What is the Social Security Fairness Act and How Does It Work?

The Social Security Fairness Act is designed to provide increased Social Security payments to individuals who were previously excluded from the program.

This includes:

• Teachers

• Firefighters

• State Workers

• Some Federal Employees

Under the new law, individuals in these categories will receive increased Social Security benefits, retroactive to January 1, 2024.

Previously, many of these individuals had their Social Security benefits reduced due to two provisions: the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO). These provisions significantly reduced benefits for people who worked in positions that didn’t require them to pay into Social Security.

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What’s New? Speeding Up the Payments

The Social Security Administration (SSA) recently announced that retroactive payments will begin to be issued in February, with increased monthly benefits starting in April. This is great news, as it’s much faster than the original estimates, which suggested it could take up to a year to process these changes.

Now, the SSA expects to process the majority of claims through automation, and only more complex cases will take longer. The retroactive payments will go all the way back to January 2024, which means people will receive a lump sum to cover the months they missed.

Important note: If you are eligible, Social Security advises that you don’t reach out to them until after they’ve had time to process your changes. They’re working as quickly as possible, and reaching out prematurely could delay the process.

Who Will Benefit from the Social Security Fairness Act?

Let's take a look at some examples of how this Act could positively impact your Social Security benefits, especially if you’ve been impacted by the Windfall Elimination Provision or the Government Pension Offset.

Example 1: The Spousal Benefit

Meet Jim and Judy. Jim is 70 and is receiving $3,100 per month in Social Security benefits. Judy, a retired Connecticut elementary school teacher, has a pension of $4,200 a month but has been excluded from Social Security due to her job as a teacher.

As a result, she wasn’t eligible for her own Social Security benefit. She was also ineligible for a spousal benefit due to the Government Pension Offset, which reduced her potential spousal benefits to $0.

Thanks to the Social Security Fairness Act, Judy will now be eligible for a spousal benefit of $1,300 per month, which is half of Jim’s full retirement benefit. In addition, she will receive a retroactive lump sum covering the months since January 2024.

Example 2: The Survivor Benefit

Let’s consider Sarah, a 75-year-old retired middle school teacher from Connecticut. Sarah’s husband, John, passed away two years ago at the age of 70, and at the time of his death, he was receiving $2,900 per month in Social Security benefits.

Before the Social Security Fairness Act, Sarah was not eligible for any survivor benefits because her teacher’s pension was considered too large, and the Government Pension Offset applied.

Now, thanks to the elimination of the Government Pension Offset, Sarah will be eligible for John’s survivor benefit of $2,900 per month. She will also receive a retroactive payment for the months missed, going back to January 2024.

Example 3: The Windfall Elimination Provision (WEP)

Let’s look at Jane, a 68-year-old retired Connecticut high school teacher. Jane has a pension of $3,500 per month and worked part-time jobs in the past, which contributed to her Social Security earnings. However, due to the Windfall Elimination Provision, her Social Security benefits were reduced by $587, meaning she was only receiving $413 per month.

Now, Jane will receive her full Social Security benefit of $1,000 per month, with a retroactive payment for the months she was underpaid due to the WEP reduction. This could mean a significant boost in her monthly income.

What Should You Do if You’re Eligible for Increased Social Security Benefits?

If you haven’t already filed for Social Security benefits, now is the time to do so! It’s crucial to file your application to ensure you’re eligible to receive the new, increased payments. You can file online at ssa.gov, by calling 1-800-772-1213, or by visiting a local Social Security office.

If you are eligible for the increased benefits, make sure you’re following up with Social Security to ensure they have all the necessary information to process your claim.

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The Tax Implications of the Social Security Fairness Act

One important aspect of this change is how your Social Security benefits may be taxed. As I discussed earlier, the amount of your Social Security benefits that is taxable depends on your total income for the year.

• If you’re a single filer and your combined income (half of your Social Security benefits + other income) is under $25,000, none of your benefits will be taxable.

• For married couples filing jointly, that threshold is $32,000.

• If your income exceeds these thresholds, a portion of your Social Security benefits will be taxable.

As more people start receiving increased Social Security benefits due to the Social Security Fairness Act, it’s important to stay on top of any potential tax liabilities. If you think your benefits may be taxed, it’s a good idea to consult with your financial advisor or accountant to ensure you’re prepared.

Looking Ahead: What’s Next for Social Security?

Recently, Congress passed a budget resolution that could make Social Security benefits tax-free for everyone. While this is still up for debate, it’s a significant development that could change the landscape for retirees. Stay tuned for more updates on this issue.

In the meantime, if you’re one of the millions who will benefit from the Social Security Fairness Act, make sure to file your claim and get your benefits on track as soon as possible.

I hope this breakdown helps clarify what the Social Security Fairness Act means for you and how it could impact your financial future. If you're eligible, don’t miss out on the opportunity to boost your Social Security benefits.

If you have a question or topic that you’d like to have considered for a future episode/blog post, you can request it by going to www.retirewithryan.com and clicking on ask a question. 

As always, have a great day, a better week, and I look forward to talking with you on the next blog post, podcast, YouTube video, or wherever we have the pleasure of connecting!

Written by Ryan Morrissey

Founder & CEO of Morrissey Wealth Management

Host of the Retire with Ryan Podcast