President Joe Biden on Jan. 5 signed the Social Security Fairness Act into law, effectively boosting retirement benefits for hundreds of thousands of current and former K-12 educators nationwide.
Bipartisan majorities in the House and Senate approved the bill late last year, following years of advocacy from teachers’ unions and retiree groups.
“Americans who have worked hard all their lives to earn an honest living should be able to retire with economic security and dignity,” Biden said Sunday during a signing event at the White House. “That’s the entire purpose of the Social Security system.”
The new law simplifies one of the many complications of America’s patchwork system of retirement benefits.
Retired public school educators in 15 states where school districts don’t participate in Social Security, and instead only participate in a public employees pension system, will now receive full federal retirement benefits for any income they earned from other Social Security-eligible jobs. While they still will not be eligible for Social Security benefits from working in schools in those states, they can now collect federal retirement benefits if they spent portions of their career in the private sector or elsewhere in the country.
Here’s what you need to know.
What does the Social Security Fairness Act do?
The newly passed law erases two longstanding components of federal retirement policy: the Windfall Exemption Policy and the Government Pension Offset.
The WEP reduced Social Security benefits for educators, firefighters, and other public-sector workers in states that prohibit those workers from participating in Social Security. Those reductions applied to the income workers earned from jobs where their employer did deduct Social Security taxes from their paychecks.
The GPO had a similar effect for retirement benefits accrued for people whose spouses or deceased relatives were public-sector workers in those states.
Some people are eligible to receive a Social Security spousal benefit because they didn’t earn enough to get one of their own, or they receive the benefits earned by a deceased relative, known as “a survivor’s benefit.”
If that spouse or deceased relative spent part of their career as an educator in one of those 15 states, the person eligible for spousal or survivor’s benefits would see their monthly checks reduced, via the GPO, by an amount equivalent to two-thirds of the educator’s pension benefit.
Sometimes that means the benefits recipient in this situation won’t see Social Security checks at all. If a person receives a monthly Social Security benefit of $200, and their spouse or relative’s monthly pension benefit from one of the 15 listed states is $300, the original person’s Social Security benefit will be cut by $200 (two-thirds of $300), wiping out the spousal or survivor’s benefit altogether.
Why did these provisions exist in the first place?
Both were passed by Congress during the Reagan administration in the early 1980s, in an attempt to prevent public workers who already get lucrative pensions from also receiving Social Security benefits, potentially at the expense of lower-income workers who can’t fall back on state pension checks. Some Social Security experts argue these provisions remain necessary and shouldn’t have been repealed.
But the policies also ended up slashing benefits for K-12 educators in states that prohibit some or all school district workers from participating in Social Security while they’re employed there. The loss of benefits can be particularly punishing, educator unions and advocacy groups have argued, for public-sector workers in those states whose pension payments aren’t sufficient.
Which states’ public school workers are affected by these policy changes?
Educators will most likely benefit if they retire from or previously worked for public schools in 15 states: Alaska, California, Colorado, Connecticut, Georgia, Illinois, Kentucky, Louisiana, Maine, Massachusetts, Missouri, Nevada, Ohio, Rhode Island, and Texas.
In a handful of those states, some educators do participate in Social Security and thus wouldn’t be affected by the latest policy change. Workers should consult their supervisors or retirement advisers for the full context of their benefits.
I currently work for a district in one of these states, but I used to work for the private sector and/or a district in a state that isn’t listed. Will this policy change affect me when I retire?
Yes. When you retire, all of your Social Security-eligible earnings will factor into the formula that results in your monthly Social Security check amount. Under the new law, the fact that you receive a pension for public school employment in one of those 15 states no longer triggers a reduction to your Social Security check. That could mean a monthly increase of up to hundreds of dollars, depending on how much of your career, or your spouse’s or deceased relative’s, was spent in a public-sector job that previously triggered the reduction.
I used to work at a school in one of those states, but now I work at a school in a state that’s not on the list and/or in the private sector. Will this policy change affect me when I retire?
Yes. Before this policy change, your prior time spent working for a public school district in one of those states would have caused a benefit reduction triggered by the WEP. Alternatively, your spouse or deceased relative’s time in that district would have caused a benefit reduction triggered by the GPO. That’s no longer the case—all the time you spent in the private sector or in public school jobs that aren’t in the listed states will count toward determining your Social Security benefit.
I work at a public school in one of the 15 states that doesn’t allow educators to collect Social Security benefits. If I work here for my entire career, will I now get Social Security benefits in addition to the state pension?
No. Federal law still doesn’t require public workers in the U.S. to get Social Security benefits. Instead, each state has the option to extend Social Security benefits to all of its public workers, or to certain subgroups. Lawmakers in Rhode Island and Georgia have recently tried to pass legislation that would extend those benefits to all educators, but so far they haven’t succeeded.
For educators in states where school districts don’t participate in Social Security, federal retirement benefits reflect time spent in the private sector or in other public-sector jobs that did participate in Social Security.
When do these expanded benefits take effect?
The law says they start retroactively in January 2024. That means retired educators who now expect a bigger Social Security benefit as a result of this legislation will also receive payments for all the money they would have received had those increased checks started arriving a year ago. The legislation doesn’t say whether workers will have to do anything to claim those retroactive increases, though.
I keep hearing that Social Security is running out of money. How will this new policy affect that?
The federal government will spend $196 billion more on Social Security benefits over the next decade as a result of the new law, the nonpartisan Congressional Budget Office estimated in September. Staffing for the Social Security Administration is at a 50-year low, even as the number of people receiving benefits has never been higher.
The Social Security Trust fund already reported last year that by 2035 it is set to only have enough money to pay for 75 percent of its committed benefits. Without further action from lawmakers, that crisis point may happen a little earlier now.
