Exploring the Origins of Social Security in the U.S.
Social Security benefits are often discussed, but do you know how they function and if they’re subject to taxes? Here’s an overview.
Just Curious
The first round of Social Security claims stemming from the Social Security Fairness Act, enacted on January 5, has been processed, and checks are now being dispatched, according to the Social Security Administration (SSA).
The Social Security Fairness Act has abolished the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO), which had previously reduced Social Security benefits for select retirees who also received pension income. Collectively, WEP and GPO impact nearly 3 million Americans, including police officers, firefighters, postal workers, and teachers.
The SSA has processed a small number of payments compared to the millions of Americans potentially eligible for increased Social Security checks, but they assure that they are making progress.
“To date, we have processed approximately 30,000 of these new initial claims, and based on individual ages and entitlement specifics, some new beneficiaries are receiving retroactive payments,” a spokesperson from the SSA communicated via email to USA TODAY. “We continue to work on the process.”
Why is there a delay in payments?
Since the Act’s effective date is backdated to January 2024, the SSA must revise both past and future benefits,” the agency stated last month.
However, the SSA noted that it did not receive the budget necessary to compute these adjustments for the millions impacted by the new law.
“The SSA’s capability to implement the law efficiently and without compromising everyday customer service is contingent upon funding,” the agency explained. “The Act did not allocate any funds for implementation… Effectively assisting individuals with this new and unfunded workload is compounded by SSA’s ongoing staffing shortages, operating under a hiring freeze since November 2024, which is expected to persist.”
Initially, the SSA projected that beneficiaries might have to wait a year or more for any payments. However, late on Tuesday, SSA indicated that it now anticipates that those due a retroactive payment under the new law will have this one-time payment deposited into their bank accounts by the end of March.
Since Social Security benefits are issued a month in arrears, most affected recipients are expected to start receiving their new monthly benefit amounts in April, reflecting March’s financial coverage.
Individuals whose monthly benefits are adjusted or who are set to receive a retroactive payment will receive a notice via mail from Social Security detailing the benefit modification or retroactive payment. Some beneficiaries may receive two mailed notifications: the first during the removal of WEP or GPO from their record, followed by a second detailing their updated monthly benefit amount. The SSA noted that recipients may receive the retroactive payment before the arrival of their mailed notice.
Responses to payment delays
The initial year-long delay incited considerable backlash, prompting both Republican and Democratic senators to advocate for the “immediate execution of this legislation to offer prompt assistance to the millions of Americans affected by WEP and GPO.”
Since then, the SSA has implemented automation to expedite payments. Additional time will only be required for complex scenarios that aren’t suitable for automatic processing; in such instances, the SSA will need to manually amend records and issue both retroactive and new benefit payments.
Retired divorced police officer Mike Barker, 67, from Brimfield, Ohio, expressed his disappointment about the delays in receiving additional funds but noted he wasn’t entirely surprised.
“Just classic bureaucracy,” he remarked. “Nonetheless, I plan to use the (retroactive) payment for travel.”
What actions can beneficiaries take to expedite payments?
Updating personal information is the most effective way to help, the SSA noted.
- Individuals filing new initial claims can monitor their claim status through their personal my Social Security account, as clarified by the SSA spokesperson. A notice will be mailed once the claim is finalized, and benefit payments for those with current bank account details will be issued through direct deposit.
- Current beneficiaries affected by WEP or GPO are encouraged to verify their mailing and direct deposit information on file with the SSA; typically, no other actions are required.
The simplest method for most beneficiaries to update their address or direct deposit information is online via their my Social Security account. There is no necessity to call or visit a Social Security office, according to the spokesperson.
The SSA offers updates on its Social Security Fairness Act webpage and highly recommends subscribing for alerts regarding website updates.
Furthermore, it urged beneficiaries expecting retroactive payments to wait until April before contacting the SSA, as checks will be distributed throughout March. Additionally, it advised seek clarification on monthly benefit amounts only after the April payment is received, as the new amounts won’t be reflected until then for the March period.
What additional amounts can affected beneficiaries look forward to?
The supplementary monthly amount each affected worker stands to gain can vary based on the type of Social Security benefit and the pension amount received, according to the SSA.
“Some individuals may notice minimal increases in benefits, while others could qualify for over $1,000 more monthly,” the agency indicated.
How did WEP and GPO affect Social Security benefits?
Implemented in 1983, WEP and GPO aimed to prevent Social Security from overcompensating individuals employed in non-covered pension positions, as noted by policy analysts. Workers earning outside the Social Security system may appear as low earners.
As Social Security replaces a higher percentage of past earnings for lower-paid workers in comparison to higher-income earners, those who received substantial government salaries for years would be granted the same benefits in Social Security calculations as long-time low-income workers, proponents argued.
Here’s a breakdown of how each provision functioned:
- The Windfall Elimination Provision decreased Social Security benefits for individuals with “non-covered” pension income from jobs, typically in the public sector, that did not contribute to Social Security payroll taxes. The reduction could be significant, amounting to up to half of the pension income.
- The Government Pension Offset lowered survivor or spousal benefits if a person’s pension is non-covered. Although GPO affected a smaller number of people, it would reduce the Social Security benefit by two-thirds of the pension amount. If two-thirds of your government pension exceeds your Social Security benefit, your benefit could be diminished to nothing.
The repeal of WEP and GPO remains contentious
Despite the bipartisan support behind the Social Security Fairness Act’s passage, the decision continues to be divisive.
Proponents of WEP maintained that it was necessary to close a loophole, as explained by Gary Brewer, a retired certified public accountant from Sacramento, California. “It’s important to note that the impacted government retirees were exempt from Social Security for their positions which were covered by a substitute plan,” he remarked. “For many of them, the substitute plan serves as the primary pension, while Social Security becomes secondary. While they collect from this secondary income, they shouldn’t enjoy the low-income adjustments typical for low wage earners, given most of their earnings were exempt from Social Security contributions.”
As for GPO, Brewer illustrated its implications by providing an example:
- Monica and Chandler, each earning a Social Security benefit of $3,000 per month, would not receive a spousal benefit since both earn more than 50% of each other’s amounts, culminating in a family income of $6,000.
- Monica, who received $3,000 as a chef from Social Security, while Chandler, a firefighter, garnered a $3,000 benefit from his substitute plan. With the repealing of GPO, Chandler is now eligible for a $1,500 spousal benefit from Social Security because the offset is removed. This raises their family income to $7,500.
“Any spousal benefits obtained are counterbalanced by retirement benefits – except for specific government retirees under the new law,” he concluded. “The rest of us must manage as best we can.”
Medora Lee is a journalist specializing in finance, markets, and personal finance for USA TODAY. You can reach her at [email protected] and subscribe to our free Daily Money newsletter for tips on personal finance and business news every Monday through Friday.
