A lot of people do not know about the problems that can happen with their Social Security benefits. Most of the talk and stories are about how much they will get each year because of COLA (Cost-of-Living Adjustment) estimates.
There are, however, other things that affect how much your Social Security check is. This article could be very helpful for you if you work in the public sector or are a retiree who is specifically chosen by some private pension plans. You may be able to get your monthly payment increased or refunded in the coming year.
What is the change in the Social Security benefits?
Garret Graves and Abigail Spanberger, two Representatives, recently brought up the Social Security Fairness Act. The Windfall Elimination Provision (WEP) and the Government Pension Offset were two parts of the Social Security bill that this bill proposal tried to get rid of.
The Social Security benefits of 1% of current SSA beneficiaries in the GPO and 3% of current SSA beneficiaries in the WEP would go up because of this. People who have saved for retirement through the SSA or a private pension plan are affected by both rules.
How are those Social Security benefits being calculated today?
How the benefits are calculated when you decide to retire is the main issue that led to the provisions. Most of the time, the SSA would pick the 35 years with the highest payments, adjust them for inflation, and use a formula to figure out your final monthly payment.
The problem comes from the fact that the formula is progressive, which means that it will help most people who made less money over their working lives. This is taken into account in the calculation, which tells you how much of your adjusted income (AIME, or Average Indexed Monthly Earnings) will be added to your final payment. This is how the structure looks:
- 90% of the AIME up to $1,115.
- 32% of the AIME is between $1,115 and $6,721.
- 15% of the AIME over $6,721.
You can see that the formula gives more money to people with lower AIME, so they get more Social Security benefits. So, a plan that would have lowered the benefits of people who had put money into both private and public pension plans seemed like a good idea.
At the moment, people whose Social Security benefits were affected by the WEP or GPO are getting less money because of the following rules:
- WEP: It affects those who have contributed to jobs not covered by the SSA and who also contributed to Social Security taxes. The WEP reduces 90% of the first bracket in the calculation for the final benefits depending on how many years you have been covering in the SSA:
- 30-plus years: There would be no WEP reduction.
- 20 or fewer years: The first-tier percentage changes from 90% to 40%.
- Between 21 and 29 years, the percentage will gradually increase from 40% to 90%.
- GPO: It affects those who are part of the Survivor programs, and the deceased worker contributed to SSA and a private system. The reduction method of the Social Security benefits consists of decreasing the dependent benefits for a factor of two-thirds of the portion that was not covered by the SSA’s pension.
Who is going to get their Social Security benefits increased?
People who get Social Security checks and payments from private pension plans are the main beneficiaries. People who had certain jobs for the government, like civilian federal employees, people with work agreements in other countries, railroad workers, firefighters, police officers, and some clergy.
After being passed by the House of Representatives on November 12, the bill was also approved by Congress on December 21. So, the only thing left to do is for President Biden to sign it, and then the SSA can put it into action.