Free Money From Social Security For Public Sector Retirees
Good to Know
Your client, or their parents, may be entitled to increased retirement benefits from Social Security as a result of The Social Security Fairness Act of 2025 (the Act). Specifically public service workers may have been penalized if they qualified for Social Security Retirement benefits and they worked in a private sector job. We’ll unpack that intriguing opportunity by analyzing the:
- Windfall Elimination Provision (WEP) Penalty,
- Government Pension Offset (GPO) Penalty, and
- Penalty Relief from the Act.
WEP Penalty
This penalty reduced Social Security benefits for affected individuals for more than four decades. Individuals who worked both in government (public employment) and nongovernment (private employment) during their lifetime may be in line for increased Social Security benefits.
Here’s how that works.
- States are allowed to opt of out the Social Security System and frequently do so for public service employees such as teachers, firefighters, and police officers.
- These public service employees do not pay Social Security taxes but generally must pay into their state-run pension program instead.
- When a public service employee retires and subsequently goes on to work in private employment, Social Security taxes are withheld from their private employment compensation — thereby potentially qualifying them for Social Security benefits.
- The WEP forced public service employees to give up a portion of their Social Security Retirement benefit if they also received a public service pension.
GPO Penalty
Whereas the WEP penalized the individual worker, the GPO penalized the worker’s spouse. This punitive provision is best illustrated by example.
Assume a worker’s spouse is entitled to a spousal Social Security Retirement benefit based on the worker’s earnings record. Further, assume that the worker’s spouse is entitled to a state (public sector) pension from their work as a teacher. Here’s the bad news — the spouse’s benefit under Social Security could be slashed by two-thirds of the public sector pension amount.
Let’s make this real with national averages. Assume your client’s spouse receives a monthly public service pension of $3,500 (the national average). Their monthly Social Security spousal benefit could be slashed by over $2,333. Considering that the average spousal benefit is less than $1,000 monthly, this means the spouse gets nothing from Social Security.
Penalty Relief From The Act — Your Opportunity
You’re invited to join the author in celebrating the long-overdue demise of the WEP and GPO. Since about 1 of every 4 public sector workers and retirees could reap the benefits of the Act, you can make them happily aware. Although the Act is in the process of working its way through the Social Security Administration, clarifications will inevitably be forthcoming as ambiguities in the language are resolved. Increased Social Security Retirement benefits may take as much as one year to begin (the Social Security Administration advises they must calculate the increase manually for each individual). However, your author closes with good news, affected public service pensioners will qualify for increased benefits retroactively to January 2024
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The material contained in this article is to raise awareness—it is informational, general in nature and does not constitute financial advice. It should not be relied upon or used without consulting a credentialed financial professional to consider your specific circumstances. This communication was published on the date specified and may not include any future changes in the topics, laws, rules or regulations covered.
