Social Security Fairness Act

Should the Social Security Fairness Act be passed? Viewpoints from multiple sides.

Dec 20, 2024

Enjoying Framechange? Forward to a friend to help spread the word!

New to Framechange? Sign up for free to see multiple sides in your inbox.

Learn more about our mission to reduce polarization and how we represent different viewpoints here.

Quick announcement

We’re taking a two-week break from publishing over the holidays and will be back in your inbox on Jan 10. I hope you get to spend some quality time with family and friends and shut down as much as possible!

Heading into the new year, we’re excited to pilot a few new formats and get your feedback on what you value most from Framechange. Stay tuned and see in a couple weeks.

Eric

What’s happening

This week, the Senate voted 73-27 to proceed with a final vote on the Social Security Fairness Act, which would increase Social Security benefits to certain retirees that have worked both public and private sector jobs. The procedural vote indicated bipartisan support for the bill, which passed the House of Representatives 327-75 and would arrive on President Biden’s desk should it pass the Senate. (A vote is expected today.)

What the bill would do: The bill would roll back two key rules in place since 1983 – the Windfall Elimination Provision (WEP) and the Government Pension Offset provision (GPO) – that currently place limits on Social Security benefits received by a retiree that worked in both a pension-covered public sector job and a Social Security-covered private sector job during their career.

The rules were originally intended to prevent those retirees from receiving an unfairly high Social Security benefit – on top of their pension – relative to retirees who only receive Social Security benefits. Rolling back WEP and GPO would effectively increase the Social Security benefits received by retirees that worked in both the public and private sector.

How Social Security is calculated: Social Security benefits are calculated using a progressive formula meant to replace more of a lower-income retiree’s average annual career earnings, proportionally, than those of a higher-income retiree. The formula uses an individual’s average indexed monthly earnings (AIME) – taken from their highest 35 years of income – and calculates how much Social Security benefit is paid to them relative to those earnings by applying diminishing replacement rates across 3 tiers of earnings. In 2024, those replacement rates were as follows:

For the first $1,174 of AIME: 90% replaced by Social Security payments monthly
AIME between $1,174 and $7,078: 32% replaced
AIME greater than $7,078: 15% replaced

A retiree’s total monthly Social Security benefit is the sum of their calculated benefit across all 3 tiers.

Roles of the WEP and GPO: The WEP reduces the multiplying factor for the first $1,174 AIME from 90% to as low as 40% for a pension-covered public sector worker depending on the number of years the individual also held a Social Security-covered job (fewer years covered results in a greater percentage reduction). This is to offset the basic formula’s bias toward recognizing them as a lower career-earnings worker than they actually are.

The GPO is intended to prevent retirees with public sector pensions from receiving an unfair amount of spousal (or widower) benefits from a spouse that receives Social Security. It works by reducing the spousal benefit the public sector retiree can receive by at least ⅔ the size of their own pension. If ⅔ of their pension is greater than the total spousal benefit they would otherwise receive, they get no spousal benefit.

Potential impact: Approximately 2M people are currently affected by WEP and an estimated 735,000 are affected by GPO including state and local government employees in 26 states and teachers in 13 states.

Critics of the bill highlight its projected costs while contending it won’t necessarily make the system more fair. Supporters contend it’s necessary to give public sector workers fair retirement benefits and improve the attractiveness of public sector work.

We expand on these arguments and several additional viewpoints below. Let us know what you think.

Notable viewpoints

More supportive of the Social Security Fairness Act:

The WEP and GPO unfairly penalize individuals that work both public and private sector jobs.

The WEP can reduce the annual Social Security benefit by thousands of dollars, particularly for those who have split their careers more evenly between private and public sector jobs, which can impact lower-income earners to the point where living is unsustainable.
The GPO unfairly penalizes surviving spouses of Social Security beneficiaries and can effectively remove all spousal benefits for a worker receiving a pension, even if they are relatively lower earners and need the additional income to live a comfortable life.

Public sector workers should have the right to a retirement benefit system that enables them to live comfortably and rewards them for their public service.

Individuals that have paid into the Social Security system through private sector jobs should have the right to receive commensurate benefits from that system even if they have also worked a public sector job that provides a pension.
Increasing the benefits received by individuals that work both private and public sector jobs would help improve recruiting and retention to the public sector, where there are already inadequate incentives for important jobs such as teacher, firefighter, and police officer.
“For too long, the government has taken away Social Security benefits from millions of retired federal, state and local government employees who worked as teachers, police, firefighters, postal workers and general employees — benefits they earned when they worked other jobs.” (Richard Fiesta, Executive Director of the Alliance for Retired Americans.)

More opposed to the Social Security Fairness Act:

Without WEP, people that work both public sector and private sector jobs would receive an unfairly high amount of Social Security benefit relative to those only working in the private sector.

Based on the way social security benefits would work without WEP, many individuals whose primary career was in pension-covered public service but worked for a shorter time in a Social Security-covered job would receive relatively greater Social Security benefits than someone who only worked in Social Security-covered jobs but made an identical level of career earnings. For example, without WEP, someone with average annual earnings of $85,000 from a primary, pension-covered job that also earned $10,000 annually from a secondary, Social Security-covered job, would currently receive a $9,000 Social Security benefit annually on top of their pension. Comparatively, an individual that earned $85,000 from a primary, Social Security-covered job, and $10,000 from a secondary, Social Security-covered job would only receive a $1,500 annual benefit from that marginal $10,000 earned.
“What’s unfair is rewarding high-paid government workers with larger Social Security benefits than they earned. That’s essentially what the bill would do.” (Wall Street Journal Editorial Board.)

Repealing the WEP and GPO provisions would be ineffective and costly.

Repealing the WEP and GPO provisions would cost an estimated $196B over 10 years and accelerate the projected date of Social Security insolvency by 6 months in 2034, which would complicate an already uncertain future for the Social Security budget.
Rather than repealing the WEP and GPO provisions completely, a reform to the current benefit calculations under them would be more effective. For example, the benefit calculation for pension-receiving workers who also qualify for Social Security should factor in their total career earnings – both from public sector and private sector work – rather than just using their earnings under Social Security-eligible work, which makes them appear to be lower-income earners than they actually are and is the underlying reason WEP currently needs to exist.
Social Security is a government expenditure like any other federal budget program (e.g., NASA) and beneficiaries are not paid directly based on what they contributed; therefore, Social Security is not an “investment” and arguments that a worker should receive certain benefits because they paid taxes into that system fall short. The government established rules for Social Security and has a right to disperse benefits according to those rules.

From the source

Snippets

House Speaker Mike Johnson (R-Louisiana) said the House would vote today on a new measure to keep the government funded through Mar 14 by tonight’s deadline. The House previously failed to pass a revised short-term spending bill backed by President-elect Donald Trump.
The Federal Reserve announced its third consecutive interest rate cut this year, reducing its benchmark rate by 0.25 points to a range of 4.25% to 4.5%. The Fed indicated that it would likely lower rates only twice more in 2025.
German Chancellor Olaf Scholz lost a confidence vote in parliament, following the collapse of his three-party coalition in November. Germany will hold parliamentary elections on February 23, seven months earlier than originally scheduled.
The Supreme Court will hear arguments over the constitutionality of a federal law passed in April that would ban TikTok in the US unless it finds a non-Chinse buyer by Jan 19. The Court agreed to expedite the case and hear arguments on Jan 10. (See our previous coverage.)
Thousands of Amazon workers across 7 facilities in 4 states went on strike over contract negotiations and labor union representation claims amid the holiday delivery rush. Teamsters – a labor union that says it represents 10,000 Amazon employees – organized the strike.

Give us your feedback! Please let us know how we can improve.

Your feedback

Music on the bottom

Enjoy this haunting track, “How Far We’ve Come,” off the latest album from ethereal rock band Palace.

Listen on Spotify, Apple Music, or Amazon Music.