ATLANTA — In the coming days, nearly 3 million individuals may see an increase in their Social Security benefits due to new legislation that is set for a decisive Senate vote. The Social Security Fairness Act aims to eliminate longstanding rules that reduce federal benefits for those who qualify for additional pensions, significantly impacting state, local, and federal government employees, including teachers, firefighters, and police officers, as highlighted by lawmakers and advocates alike.

This proposed legislation has garnered support from both sides of the political spectrum but has faced some backlash from conservative factions. After being passed in the House in November with a vote of 327-75, the bill successfully navigated its initial Senate vote on Wednesday. Its proponents are optimistic that the Senate will move quickly to send it to President Joe Biden before the new Congress convenes in January.

**What Does the Legislation Entail?**

The key component of this bill is the repeal of two provisions that currently limit Social Security benefits for specific recipients who also receive retirement payments from other sources, typically a public retirement program administered by state or local governments. The first of these is the Windfall Elimination Provision, which modifies the standard benefit calculation for retired or disabled individuals entitled to pension payments based on non-Social Security-covered salaries. The specifics may differ for each individual, but generally, a monthly benefit will be reduced in accordance with the pension payments linked to their prior work history and contributions.

The second provision, known as the Government Pension Offset, similarly limits spousal and survivor benefits based on a person’s pension, particularly affecting the benefits of retired public sector workers who opted out of paying into Social Security. Currently, the offset is set at two-thirds of an alternative pension, meaning a retired public health worker earning $1,500 monthly from a non-Social Security-compliant state retirement plan could see a reduction of $1,000 in their spouse’s Social Security benefit if they qualify for it posthumously.

**Who Will Be Impacted?**

Social Security is typically perceived as a universal system funded through payroll taxes, but certain exceptions in federal law have created disparities. Employees in specific categories can be exempt, leading to benefit reductions. These categories include:

— Civilian federal employees hired before 1984, who are under the Civil Service Retirement System rather than Social Security.

— State and local government employees who are part of retirement systems allowing them to opt out of Social Security.

— Railroad workers covered by a separate federal insurance scheme.

— Some clergy members who may opt out.

According to the Congressional Research Service, as of December 2023, approximately 745,679 individuals—about 1% of all Social Security beneficiaries—faced benefit cuts under the Government Pension Offset, while around 2.1 million (about 3% of beneficiaries) dealt with reductions due to the Windfall Elimination Provision.

The most significantly affected group is likely the state and local government employees, with many current workers potentially facing similar issues in the future. The CRS estimated that in 2022, 6.6 million state and local government employees—equivalent to 28% of all those positions—were not under the Social Security umbrella. As they retire, these individuals could qualify for Social Security benefits that would otherwise be unavailable without the proposed amendments.

**When Would the Changes Take Effect?**

The legislation suggests that any changes to payments would commence in January 2024. If the proposed timeline is adhered to, the Social Security Administration would be responsible for making back-dated payments.

**Financial Implications**

According to estimates from the Congressional Budget Office (CBO), abolishing the Windfall Elimination Provision could increase monthly payments for affected beneficiaries by an average of $360 by December 2025. Additionally, repealing the Government Pension Offset could raise monthly benefits by an average of $700 for 380,000 recipients who receive benefits based on their living spouses, and approximately $1,190 for around 390,000 survivors accessing widow or widower benefits.

These figures would expand over time, factoring in Social Security’s regular cost-of-living adjustments. Over the span from 2024 to 2034, the anticipated net spending increase for Social Security is around $198 billion. Moreover, it is projected that the modifications could save approximately $2 billion for the Supplemental Nutritional Assistance Program by reducing food aid distributions for households seeing increased Social Security income.

This increase in expenditures may put additional strain on the Social Security Trust Funds, which are already projected to be unable to fully meet benefit obligations starting in 2035. Fiscal concerns were cited by some conservative members in their opposition to the bill. However, supporters maintain that the changes are essential for fairness among beneficiaries.

**Will Beneficiaries Need to Take Action for Increased Benefits?**

The answer varies. The legislation outlines that the Social Security Commissioner will be tasked with adjusting primary insurance amounts to reflect the changes in law. The Social Security Administration utilizes income tax data to calculate each individual’s earnings history for determining their benefits according to the laws established by Congress.

Still, it is uncertain how smoothly the Social Security Administration could recalibrate payments for millions of beneficiaries. It may depend on whether the process can be effectively handled through automated systems or if it would require manual reviews of individual circumstances by federal employees. Furthermore, modifications to spousal benefits may lead to qualifying beneficiaries who currently do not receive payments, necessitating specific applications for those benefits. The CBO forecasts approximately 70,000 new beneficiaries could emerge by the end of 2033.

Complicated payment formulas—especially those subject to legislative changes—can also lead to inaccuracies in automatic recalculations. The problem of backdated payments can further complicate matters. The Social Security Administration does provide resources and support on its website, including tools for examining how supplemental pensions impact benefits under existing laws. Nonetheless, the agency has yet to comment on the pending legislation publicly. They also offer a toll-free hotline and facilitate in-person appointments at numerous Social Security offices nationwide.

Despite facing staffing shortages due to inadequate funding from Congress over the years—even with the rising demands from the aging baby boomer population—significant changes initiated by Congress could potentially worsen existing backlogs, impeding beneficiaries’ abilities to secure their rightful benefits according to the law.