If you have ever worked in the public sector, you may benefit from a recent change to the laws governing Social Security. If you receive a government pension, such as CalSTRS, as well as Social Security, your Social Security benefits may increase significantly. This change will impact approximately three million state or municipal employees, including many teachers, police officers, and firefighters.

The Social Security Fairness Act, signed into law by President Biden on Jan. 5, addresses inequities in Social Security benefit calculations for certain individuals. This bipartisan legislation removes two provisions which had eliminated or reduced Social Security benefits for many individuals who also receive pensions, the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO). These provisions impact those receiving workers benefits and those receiving spousal or survivors’ benefits, respectively.

The WEP adjusts Social Security benefits for those entitled to worker benefits who also receive pensions paid by employers who do not withhold Social Security taxes, also known as non-covered pensions. The WEP reduces the Social Security benefits these workers are eligible to receive by adjusting the formula used to calculate those benefits. This formula provides lower-earning workers with a larger percentage of their pre-retirement income than higher-earning workers. The WEP was introduced in 1983 to prevent those with non-covered pensions from receiving a disproportionately high Social Security benefit.

For example, consider a teacher who works for a school which does not pay into Social Security. She will receive a non-covered pension at retirement based on her work as a teacher. Prior to becoming a teacher, she worked in a different field and paid into Social Security. Under the WEP, this teacher would see her Social Security benefits earned from her first job reduced because of her teacher’s pension.

Similarly, the GPO impacts individuals eligible for Social Security spousal or survivor benefits who also receive a non-covered pension. Congress created the GPO in 1977 to ensure that widow(er)s or those receiving spousal benefits alongside other pensions would have roughly equal lifetime benefits compared to those who did not. The GPO reduces the spousal or survivor benefit by two-thirds of the amount of the non-covered pension. This can lead to a significant reduction in benefits for these individuals.

For example, consider a spouse who is not entitled to her own Social Security worker benefit, but is eligible for spousal benefits of $900/month. She also receives a non-covered pension through a previous employer. If her pension is $1,000 per month, her GPO is two-thirds of $1,000, or $667 per month. This is smaller than her Social Security spousal benefit, so she’ll receive a payment from Social Security equal to $233 per month—the difference between the spousal benefit and her GPO. If her pension is $1,600 per month, her GPO is $1,067 per month, which is larger than the spousal benefit. As a result, she will receive no payment from Social Security.

Both provisions were designed to prevent beneficiaries from “double-dipping” and receiving more in retirement income than if they were only entitled to either their non-covered pension or their Social Security benefits. However, these provisions have been viewed by many as unfair, and as penalizing public sector workers for their career choices.

The Congressional Budget Office estimates that those impacted by the WEP can expect an average monthly benefit increase of $360. Those impacted by the GPO and receiving spousal benefits can expect benefits to go up by $700 per month, on average, while surviving spouses are likely to see an average monthly increase of $1,190.

If you benefit from this legislation, you may see an increase in your monthly income by December 2025. Since the law applies to benefits received since January 2024, you may also receive back-dated payments. You do not need to take any action at this time, as long as the Social Security Administration has your updated mailing address and direct deposit information.

The Social Security Fairness Act attempts to fix the perceived unfairness caused by the WEP and GPO, which disproportionately affect individuals with both government pensions and Social Security benefits, by eliminating those provisions. The goal is to ensure that workers are not penalized for their career paths and have fairer access to their full Social Security benefits.

Hannah Rogge is a senior wealth advisor at Monterey Private Wealth, Inc., an independent wealth management firm in Monterey. She welcomes questions you may have concerning investments, taxes, retirement, or estate planning. Send your questions to: Hannah Rogge, 2340 Garden Road Suite 202, Monterey, CA 93940 or email hannah@montereypw.com.