As the old adage goes, most Americans rely upon the three-legged stool of Social Security, pensions, and personal savings to source their retirement income. Each leg plays a vital role in providing financial stability during retirement.

However, for nearly fifty years, millions of individuals have been unable to take full advantage of one of these pillars. Namely, individuals or their spouses who spent a portion of their career working at a job where they did not pay Social Security taxes and qualified for a pension through that job, as well as also having spent at least 10 years working at one or more jobs where they did pay Social Security taxes.  

This was due to two pieces of legislation: the Windfall Elimination Provision (WEP) & the Government Pension Offset (GPO). Both of which were just repealed at the beginning of January 2025 by former President Biden.¹

When first introduced, the WEP was put in place to reduce Social Security benefits for individuals who were also set to receive income from a non-covered pension (a pension paid by an employer that did not withhold Social Security taxes). The formula scaled down an individual’s Primary Insurance Amount (PIA)– the amount of Social Security benefit an individual was set to receive at their full retirement age. This resulted in a reduction in Social Security benefits for some individuals by as much as several hundred dollars a month.

Likewise, GPO was a law that reduced a spouse’s or surviving spouse’s Social Security spousal benefits by two-thirds of their own government pension (i.e. a pension received through their own employment at a local, state, or federal agency where Social Security taxes were not paid), sometimes resulting in hundreds or even thousands of dollars a month in reduced Social Security spousal benefits.  

According to U.S. Census Bureau data,² the median Social Security benefit for a person age 65+ in 2023 was $19,740, while the median state/local government pension was $25,610. With GPO in effect, the surviving spouse would lose $17,073 in annual benefits, as shown in Figure 1 below.

Who’s impacted?

As of 2022, more than 3% of all Social Security beneficiaries were impacted by WEP,³ and more than 12% of all spousal or widow(er) beneficiaries were impacted by GPO,⁴ totaling nearly 3 million individuals. Notably, nearly 70% of those impacted by GPO, had their Social Security benefits completely offset, reducing them to $0.⁵  

Yet even these numbers may be misleading, as there are some individuals who, due to the impact of WEP, GPO, or a combination of both, have never filed for Social Security or spousal/survivor benefits.

While everyone should consult with their financial professional to understand how this change impacts them, most individuals impacted by the repeal of WEP or GPO meet the following criteria: 

1. They (or their spouse) worked at a job where they didn’t pay Social Security taxes*;
2. They (or their spouse) qualified for a pension from that job; and
3. They (or their spouse) worked at one or more other jobs where they paid Social Security taxes, which qualified them for Social Security benefits.

*Most are individuals who spent a portion of their career working for local, state, or federal employers – such as teachers, firefighters, police officers, as well as other state and local employees – as well as individuals who worked for non-U.S. employers.  

Things to Consider:

Those who have already filed for Social Security benefits:

For those individuals previously impacted by WEP and/or GPO that have already filed or are currently receiving their own Social Security or survivor benefits, they will begin receiving additional benefit amounts because of an increase to their PIA, retroactive to the beginning of 2024. In consultation with their financial professional, beneficiaries should determine what this additional cash inflow may mean for their retirement income planning, including any tax implications or Medicare surcharges resulting from this increase to annual income.

Those who haven’t filed for Social Security spousal or survivor benefits:

For many individuals, the effects of GPO have completely offset their spousal, or survivor benefits, discouraging them from filing for Social Security in the first place. With the repeal of GPO, these individuals should consult with their financial professional to reassess their eligibility and determine whether and when to file for Social Security spousal or survivor benefits for which they may now be entitled.

Those who have delayed their retirement due to WEP/GPO:

In an effort to offset the reduction of benefits due to WEP and/or GPO, many individuals may have delayed their retirement. Often continuing to work in a Social-Security covered role in order to reach the 20 years or more Social-Security covered employment required to reduce the impact of WEP on their benefits or working 30 years in a Social-Security covered role to fully eliminate the impact of WEP.

Likewise, spouses subject to GPO reductions may have previously looked to reduce or fully eliminate the impact of the GPO reduction by working their final 60 months in a state or local government position that contributed to Social Security, as well as a non-covered pension.

With the repeal of both WEP & GPO, these additional years of employment are no longer required to offset the impact of WEP and/or GPO on an individual’s own Social Security, spousal or survivor benefits. In consultation with their financial professional, these individuals should re-evaluate the timing of their retirement, election of benefits, and retirement income planning strategy as a whole.

What’s next?

In the coming months, more will be revealed as to the timing and specifics of payments due to the repeal of WEP & GPO, including retroactive adjustments and catch-up payments. Advisors and individuals can continue to monitor the SSA website to hear more as this information becomes available. 

As tax and benefit legislation continues to evolve, it’s now more important than ever to adopt a holistic approach to retirement income planning. Both individuals and advisors require a dynamic, comprehensive, and personalized solution for retirement income planning that incorporates and evaluates all the constantly changing variables, including tax-optimization, Social Security, full & partial annuitization of lifetime income, and other personalized strategies needed for individuals to feel comfortable and safe in their retirement. 

Contact us to model the recent changes in our software, or learn more about how Income Discovery’s Income Planning 2.0 and Paycheck in Retirement capabilities can allow advisors and firms help their clients achieve their retirement income goals.  

¹ https://www.ssa.gov/benefits/retirement/social-security-fairness-act.html
² https://www.census.gov/data/tables/time-series/demo/income-poverty/cps-pinc/pinc-08.html
³ https://www.ssa.gov/policy/docs/program-explainers/windfall-elimination-provision.html
⁴ https://www.ssa.gov/policy/docs/program-explainers/government-pension-offset.html
⁵ Ibid