President Joe Biden on Sunday signed the Social Security Fairness Act, bipartisan legislation that clears the way for teachers, firefighters, policeman and other public sector workers who also receive pension income to receive increases in their Social Security benefits.
The benefit boost comes as the new law repeals two provisions — the Windfall Elimination Provision, or WEP, and the Government Pension Offset, or GPO — that have been in place for more than four decades. Source: CNBC
The following is a statement from Maya MacGuineas, president of the Committee for a Responsible Federal Budget:
Coming off of 2023, where we saw significant savings driven by the enactment of the bipartisan Fiscal Responsibility Act, we had high hopes that 2024 would be a continuation of that trend. With interest rates and costs surging, debt projected to hit its new record in just two years, and Social Security hitting insolvency within a decade, one would think policymakers would choose to continue to reduce projected borrowing.
Yet they did just the opposite. In 2024, we saw a combined $1 trillion in new ten-year debt added – the result of about $600 billion of legislation and $400 billion of executive actions. More than half of the debt from legislation – a whopping $380 billion – happened in just the final day of the 118th Congress.
There must have been some logic to the original law.
BACKGROUND: The Windfall Elimination Provision (WEP) is a formula used to adjust Social Security worker benefits for people who receive “non-covered pensions” and qualify for Social Security benefits based on other Social Security–covered earnings.a A non-covered pension is a pension paid by an employer that does not withhold Social Security taxes from your salary typically, state and local governments or non-U.S. employers.
Congress passed the WEP to prevent workers who receive non-covered pensions from receiving higher Social Security benefits as if they were long-time, low-wage earners.b In 2022, the WEPapplied to 3.1 percent of all beneficiaries (2.01 million beneficiaries out of 65.99 million total beneficiaries).
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Al Lindquist:
So, here we go again–the person living next to you taught in a NJ high school for 35-years–no SS was withheld–but she had a side hustle which, as a self-employed person, she paid the maximum into SS as employee and employer (self employed for our example)–1/2 of the employer contribution she could write off as an expense on the appropriate tax form.
She retires from teaching–part time hustle becomes full-time self-employed “hustle”– she makes top dollar income for 20-years–pays into SS (employer/employee) at the required amount and then finally retires for good.
So, why should her benefit be reduced by WEP? The amount of the contribution is not adjusted by a WEP like formula because she has a NJ teacher’s pension/annuity. It’s not like she has two state pensions/annuities.
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