Social Security Fairness Act could restore benefits for millions, but policies still cause hardship

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Evelyn Paternostro, an 84-year-old cashier at Dollar Tree, works part-time.She worked as a teacher and principal in Louisiana for many years, dedicating her life to the field of education. She has served in the public sector for many years, but she is currently having financial difficulties.

“Are you doing this for fun?” is a question that people at the store frequently ask me. Why do you not have a retirement? She enquired. therefore I have to eat.

Paternostro found that two federal laws, the Windfall Elimination Provision and the Government Pension Offset, prevented her from receiving her husband’s Social Security benefits after his death.

For millions of Americans who get a public pension but do not pay Social Security taxes, these measures cut or eliminate their Social Security payments. Those most impacted include retired educators, firefighters, and other public employees.

She clarified, “I was totally unprepared. I was aware that I would retire as a teacher. It was my intention to join the Teachers Retirement System in Louisiana. Furthermore, I never thought about the implications for me of my husband’s income.

Who is affected?

Approximately 2.8 million Americans are impacted by WEP and GPO. In 26 states, it impacts all state, county, municipal, and special district employees. The repercussions are also being felt by teachers in 13 of those states, including certain districts in Georgia and Kentucky.

Teachers are the only municipal employees affected in Massachusetts and some Rhode Island districts.

2.8M Social Security recipients impacted by reductions

According to Jill Schlesinger, a business expert for CBS News, the purpose of these two initiatives from the 1980s was to prevent using Social Security and a government pension in the same way.

People who receive a pension from another work where they did not make Social Security contributions but are also eligible for Social Security benefits through their employment are impacted by the Windfall Elimination Provision.

Up to half of their pension could be cut from their Social Security benefits.

For instance, Michelle Cosgrove’s benefits will be reduced from $557 to $601, almost halving.

Cosgrove returned home to raise her children after working as a paralegal for the first part of her career and making Social Security contributions.

She later started teaching in the San Francisco Bay Area’s public schools and made contributions to California’s educator pension fund, CalSTRS. But when she learned about the intricacies of the pension system, her retirement plans took a surprising turn.

Cosgrove’s diminished income after retirement made it difficult for her to make ends meet and pay her bills.

Following the death of her husband, Mike, in 2022, Cosgrove was much more affected by the other policy, the Government Pension Offset. She had contributed to Social Security and worked in the private sector for decades, but the GPO prevented her from receiving his payments.

Despite receiving a rare cancer diagnosis at the age of 52, Mike, a welding supervisor, kept working until his health deteriorated. At age sixty-three, he passed away.

Pension recipients may not receive any benefits at all or may have their survivors payments reduced if they are the widow or widower of someone who receives Social Security benefits.

Cosgrove remarked, “I would have received all the money if I had stayed at home and done nothing.” I might not have decided to become a teacher if I had been aware of this. I would have made a different decision.

83% of people affected by the GPO are women, according to data from the Congressional Research Service.

According to Joslyn DeLancey, vice president of the Connecticut Education Association, the reason the GPO numbers are increasing is because a large proportion of those individuals were most likely teachers and married to a Social Security employee. Spousal Social Security benefits will not be paid to them. It’s such a complex and subtle matter.

According to Paternostro, she would have earned $300,000 over the previous ten years, or $2,500 a month, in Social Security payments.

She clarified, “That’s a lot of money.” It’s more money than I can even fathom.

However, Dede Ruel, a retired school psychologist in Illinois, had a different kind of pain as a result of these rules.

She said that her Social Security benefits were cut by 21% after she just received a letter from the agency telling her that she owed over $13,000.

These practices are one of the main reasons for Social Security overpayments, which amounted to over $450 million between fiscal years 2017 and 2021, according to a CBS News examination of federal data.

More than $457 million in improper payments

More than $457 million in incorrect payments pertaining to the Government Pension Offset and the Windfall Elimination Provision were reported by the Social Security Administration in 2022.

Ruel told me that despite my attempts to appeal it through their process, I have been turned down at every turn.

“State and local government employers are required to disclose potential effects of WEP/GPO on newly hired non-covered employees,” the Social Security Administration’s press office said in response to this story.

According to a Social Security representative, “We strive to pay the right people the right amounts at the right times, and Social Security makes correct payments in the majority of cases.” People rely on the agency to avoid overpayments and underpayments, therefore there is still opportunity for improvement.

Bipartisan support for the Social Security Fairness Act

One of the most bipartisan initiatives in Congress this session, the Social Security Fairness Act, aims to repeal GPO and WEP.

The law was adopted by the Senate on Friday, December 20, after the House voted in favor of it on November 12.

Unless changes are made to the cost and revenue structure of the fund, Social Security is predicted to run out of money by 2035.

While proponents of the Social Security Fairness Act assert that it will only deplete the Social Security fund six months ahead of schedule, some opponents contend that there are better ways to solve the problem and that states should reorganize their retirement systems to deal with the underlying issues instead of depending on federal fixes.

According to Schlesinger, many critics predict that this will cost close to $200 billion over the course of the next ten years. Critics argue that we compel people to pay into the Social Security system for a reason.

These systems are distinct from one another. Let’s fix Social Security if it has to be fixed. We shouldn’t simply enact a repeal, which is merely a temporary solution.

“People should receive benefits based on what they contributed to the system,” said Rep. Garret Graves, a Republican from Louisiana who led the bill. That should be the foundation of the formula. I understand the efforts made in the 1970s and 1980s, but the overcorrection has likely taken $600 to $700 billion in benefits away from these people.

Financial adviser Devin Carroll encounters a lot of clients who are totally caught off guard. Carroll frequently instructs his clients to use the Social Security Administration s WEP calculator, which calculates benefits while accounting for the WEP s impact.

Carroll illustrates the challenge of forecasting future Social Security income. The benefits formula includes bend points, which are adjusted annually for wage inflation.

These changes are critical because the exact amount of the WEP reduction is determined when a person turns 62.

You have to make some projections, some assumptions about forward-looking inflation, both price inflation and wage inflation, Carroll told me. Once you do, then you can start to work through that and use a calculator like the SSA has that will do a lot of that for you, and it will tell you what your WEP adjusted for retirement age benefit should be.

Carroll also gets to witness the effects of these provisions firsthand. His daughter-in-law teaches in Texas, and his son works as a firefighter there.

In essence, this money has been stolen from all of us for all these years, Paternostro told the crowd. It s not fair.

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