On January 5, 2025, former President Biden signed the Social Security Fairness Act of 2023 (SSFA) into law. For millions of public sector and employees and retirees including federal employees, the passage of the SSFA resulted in the repeal of two longstanding provisions that for more than four decades reduced, and in some cases eliminated, Social Security or Railroad Retirement benefits for certain individuals including thousands of federal retirees. This column discusses the SSFA and how it affects CSRS retirees, CSRS Offset retirees, and those CSRS employees who voluntarily transferred to FERS in 1987/1988 or during the last six months of 1998 and retired as FERS retirees.
The SSFA specifically eliminates (effective January 1,2024) both the Government Pension Offset (GPO) and the Windfall Elimination Provision (WEP). The GPO and the WEP reduced or eliminated Social Security or Tier 1 Railroad Retirement benefits for many retirees receiving public pensions not subject to Social Security (FICA) taxes. This group includes federal employees who are covered by the Civil Service Retirement System (CSRS). CSRS employees are not covered by Social Security. Also affected by the GPO and WEP are teachers, firefighters, police officers working in states and localities in which public employees are not covered by Social Security.
The SSFA is effective for those benefits that are payable after December 31, 2023. This means that those federal employees and retirees affected by the WEP and GPO will be eligible to receive refunds for Social Security benefits that were withheld during 2024. They also will see a permanent increase in their monthly benefit income moving forward.
What is the GPO and why was the GPO created?
The Government Pension Offset (GPO) is a law that reduces Social Security spousal and/or widow/widower benefits for individuals who receive government pensions in which the individuals were not covered by Social Security. Much like the Social Security “dual entitlement” rule, an individual receiving a government pension, (for example, a CSRS annuity) has his or her own Social Security benefit reduced by a spousal or widow/widower benefit and only the higher of the two benefits is payable. Initially “non-covered” pensions – pensions in which participants were not covered by Social Security – were treated the same way when the GPO was created in 1977. In other words, a “non-covered” pension would offset a Social Security spousal or widow(er)’s benefit dollar-for-dollar. However, in 1983 Congress reduced the offset to two-thirds of the “non-covered” pension. The following example illustrates:
Example 1. Carl is a CSRS annuitant and is not eligible for his own Social Security benefit because he has not earned the minimum 40 credits of Social Security. Carl’s monthly CSRS annuity is $6,000. Carl’s wife, Sheila, is eligible for Social Security and is currently receiving a monthly retirement benefit of $3,000 per month. Under Sheila’s Social Security record, Carl would be eligible for a $1,500 spousal benefit (half of $3,000) per month. However, under the GPO, Carl’s spousal benefit is reduced by two-thirds of $6,000 or $4,000. Subtracting $4,000 from $1,500 results in Carl not receiving any spousal Social Security benefit.
With the repeal of the GPO under the SSFA, Carl will now receive his entire monthly $6,000 CSRS annuity and his entire $1,500 monthly Social Security spousal benefit. Additionally, Carl will receive a retroactive refund of lost spousal benefits going back to January 2024.
What is the WEP and why was the WEP created?
The Windfall Elimination Provision (WEP) was introduced in 1983 to adjust (reduce) the monthly Social Security benefit of individuals whose working careers included employment in which they were not covered by Social Security and entitled to a government pension (such as a CSRS annuity) and they had earned the minimum number of Social Security credits (40) in other employment to be eligible for a monthly Social Security retirement benefit.
In order to fully understand how the WEP works, it is important to discuss the structure of the Social Security retirement benefit calculation.
Social Security retirement benefits are calculated and structured to be progressive, providing a higher percentage of pre-retirement income replacement for lower earners compared to smaller percentage for higher earners. For example, calculating benefits in 2025 uses a “three-tier progressive formula” based on average indexed monthly earnings:
90% of the first $1,226 of average indexed monthly earnings, plus
32% of average indexed monthly earnings between $1,226 and $7,391, plus
15% of any average indexed monthly earnings above $7,391.
Note that since there is an annual cap on Social Security earnings ($176,100 during 2025), an executive earning $176,100 during 2025 will pay the same Social Security (FICA) tax during 2025 as a professional athlete earning $17 million a year. Both will receive the same credit towards future Social Security benefits.
The “windfall” in the WEP came about when individuals earned a pension from a government (federal, such as a CSRS annuity) or state (such as a state police officer) or local (local police officer or firefighter), or foreign employee whose earnings were not subject to Social Security (FICA) taxes. Without an adjustment, those individuals often appeared as low-income earners in the Social Security system because their years of service were recorded as zero in the 35-year average used to calculate benefits. This led to a disproportional high replacement rate in the first tier of the benefit formula.
Congress enacted the WEP in 1985. This allowed the replacement of the 90% rate in the first tier to as low as 40% for those with 20 or fewer years of “substantial” Social Security-covered earnings. The reduction decreased gradually, increasing by five percent per year for those individuals with 21 to 29 years of “substantial” Social Security earnings. Note that the WEP reduces an individual’s earned Social Security monthly benefit. The WEP does not eliminate the individual’s monthly benefit.
The following example illustrates:
Example 2. Larry is a retired CSRS annuitant who receives an $8,000 monthly CSRS annuity check. After he retired from federal service, Larry worked part-time in covered Social Security employment and become “fully insured.” When he reached his full retirement age of age 66, he applied for his monthly Social Security check of $1,500. However, because of the WEP, Larry’s monthly Social Security check was reduced from $788 to $712.
With the repeal of the WEP, Larry is entitled to his full $1,500 monthly Social Security retirement benefit. If Larry was collecting his monthly Social Security benefit for January 2024 and beyond, he can also expect a retroactive monthly refund of the monthly difference.
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Which Federal retirees are affected by the Social Security Fairness Act passage?
The following discussion explains the impact of the Social Security Fairness Act on CSRS retirees, CSRS Offset retirees, FERS retirees, and those FERS retirees who transferred from CSRS – “Trans” FERS retirees.
- CSRS retirees. A CSRS retiree who earned the minimum number (40) of Social Security credits in outside employment to qualify for a Social Security monthly retirement benefit, will as a result of the SSFA passage, have an increase in his or her monthly benefit. The average monthly increase is between $500 to $1,000.
If a CSRS retiree is married to someone who earned a Social Security retirement benefit not subject to any Social Security offset, then the SSFA’s passage removes the reduction to the CSRS retiree’s Social Security spousal benefit caused by the GPO. If the spousal benefit without the GPO reduction is greater than the earned benefit without the WEP reduction, then the CSRS retiree’s earned benefit will be increased to the amount of the spousal entitlement.
A CSRS retiree who has been receiving his or her own Social Security benefit (currently subject to the WEP) need not take any action now except to verify his or her current mailing address that is on file with the Social Security Administration, along with direct deposit information. Most individuals can do that online with their personal https://www.MySocialSecurity.gov online account.
- CSRS Offset retirees. A CSRS Offset retiree who has more than 30 years of Social Security-covered employment earning minimum requirements (including private sector employment and federal service working under CSRS Offset) has not been affected by WEP. This means that a CSRS Offset retiree is most likely not affected by the provisions in the SSFA.
The one reduction to a CSRS Offset annuitant’s CSRS annuity that is unaffected by the SSFA is the reduction made by the Office of Personnel Management (OPM). OPM calculates the reduction to the CSRS annuity by using a percentage equal to the CSRS Offset retiree’s Social Security benefit earned while a CSRS Offset employee to the CSRS Offset employee’s full Social Security benefit that was earned during his or her lifetime. This includes private employment and CSRS Offset service. That same reduction will continue.
- FERS retirees. A FERS retiree is not affected by any part of the SSFA.
- FERS retirees who transferred from CSRS to FERS. A FERS retiree with more than five years covered under CSRS and over 30 years of FERS coverage (having switched to FERS in 1987/88) is not affected by the provisions in the SSFA.
What should CSRS retirees who have never applied for their spouse’s (or former spouse’s) benefits do?
Since the GPO can reduce or more likely eliminate a CSRS retiree’s spousal or surviving spousal Social Security benefit, some CSRS annuitants may have never applied for their Social Security spousal benefit. In that case, a CSRS retiree who has never filed an application for a spousal Social Security benefit should do so as soon as possible. If their spouse is deceased, then the CSRS retiree is eligible to receive the full amount of their deceased spouse’s monthly Social Security benefit as a widow/widower benefit. Filing sooner for either the spousal benefit or a widow/widower benefit may help the retiree get a higher benefit amount.
Also, those CSRS retirees who are divorced may be eligible for a former spouse’s spousal benefit or widow/widower benefit. To be eligible, the CSRS retiree must have been married to the former spouse for at least 10 years, been divorced from that spouse for at least two years, and have not remarried.
The most convenient way to apply for Social Security benefit or a spousal benefit is online at https://www.ssa.gov/apply.
A survivor benefit application is not available online. Individuals who cannot apply online for benefits should call 1-800-772-1213, Monday through Friday, 8:00 am to 7:00 pm to learn other ways to apply.
The challenges facing the Social Security Administration (SSA) to implement the Social Security Fairness Act
Although Congress acted on a bipartisan basis to pass legislation ending the WEP and GPO that affected some federal employees and other state and local government employees, Congress failed to give the SSA any money to implement the Social Security Fairness Act. The SSA’s ability to implement the Social Security Fairness Act without negatively affective the SSA’s day-to-day customer service relies on Congressional funds.
The law requires the SSA to adjust Social Security benefits for over three million individuals. Since the law’s effective date is retroactive, the SSA must adjust an individual’s past benefits, as well as future benefits. The WEP affects more than two million retired public servants, while 750,000 spouses and survivors are affected by the GPO, with many public servants seeing their entire spousal or survivor benefit eliminated by the GPO.
Adding to the SSA challenges and woes is that the agency is operating under a continuing resolution and is currently experiencing a 50-year staffing low. To make matters worse, the Trump administration issued a temporary hiring freeze for most federal agencies. All SSA customers including those not affected by the Social Security Fairness Act will face delays and increases in waiting times on the telephone as the SSA prioritizes this new workload.
Given these funding and staffing shortage challenges, it is not surprising that officials at the SSA have said that it could take more than a year to fully implement the Social Security Fairness Act repealing the WEP and GPO.
Avoiding the scams associated with the WEP and GPO repeal.
It is unfortunate that there are individuals out there who may attempt to take advantage of situations when money is involved, especially with senior citizens when it comes to their retirement. The SSA will never ask or require a person to pay for assistance or to have their benefits started, increased, or paid retroactively. Any federal employee or retiree who is eligible for Social Security benefits should hang up the telephone and not click or respond to any individual or company offering to increase or expedite their Social Security benefits. Federal employees and retirees are encouraged to learn more about Social Security-related scams, and not to report them, to the SSA Office of the Inspector General at https://www.ssa.gov/scams.
Edward A. Zurndorfer is a CERTIFIED FINANCIAL PLANNER™ professional, Chartered Life Underwriter, Chartered Financial Consultant, Chartered Federal Employee Benefits Consultant, Certified Employees Benefits Specialist and IRS Enrolled Agent in Silver Spring, MD. Tax planning, Federal employee benefits, retirement and insurance consulting services offered through EZ Accounting and Financial Services, and EZ Federal Benefits Seminars, located at 833 Bromley Street - Suite A, Silver Spring, MD 20902-3019 and telephone number 301-681-1652. Raymond James is not affiliated with and does not endorse the opinions or services of Edward A. Zurndorfer or EZ Accounting and Financial Services. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.
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Ed Zurndorfer, EA, ATA, CFP®, CLU®, ChFC®, CEBS®, ChFEBC℠: Federal Employee Benefits Expert
A former career Federal employee, Ed has published a staggering 1,200+ separate articles on Federal Benefits and Retirement!
Just “Google” his name, and you are likely to find a plethora of sites that contain his writings. Drawn to its mission to reach, teach
and serve Feds, Serving Those Who Serve is the only financial planning practice with which Ed has chosen to affiliate in over
20 years teaching. In addition to conducting Federal Benefits seminars for Serving Those Who Serve, you can find Ed’s
writings here on our blog in the FedZone, and on Fed-Soup, MyFederalRetirement, FederalNews Radio and NITP.
He is a member of the Maryland Society of Accountants, the National Association of Enrolled Agents, the International Society of Certified Employee Benefits Specialists, the Financial Planning Association, the National Association of Health Underwriters,
and the Society of Financial Service Professionals. Since 1999, Ed has taught many thousands of Federal employees about
their benefits, in person and at Federal agencies all over the country. Ed is a true national treasure.
Edward A. Zurndorfer is a CERTIFIED FINANCIAL PLANNER™ professional, Chartered Life Underwriter, Chartered Financial Consultant, Chartered Federal Employee Benefits Consultant, Certified Employees Benefits Specialist and IRS Enrolled Agent in Silver Spring, MD. Tax planning, Federal employee benefits, retirement and insurance consulting services offered through EZ Accounting and Financial Services, and EZ Federal Benefits Seminars, located at 833 Bromley Street - Suite A, Silver Spring, MD 20902-3019 and telephone number 301-681-1652. Raymond James is not affiliated with and does not endorse the opinions or services of Edward A. Zurndorfer or EZ Accounting and Financial Services. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.