The Social Security Administration (SSA) is an ever-changing agency. It not only constantly adapts its procedures to meet the evolving needs of its users, but it is also influenced by legislative changes that affect its rules and funding.
This will inevitably have an impact on you as a program recipient or contributor. As a result, it makes sense to know which regulations will be discussed and thus have a better chance of being enacted.
In September, a bipartisan bill was introduced to change how the Social Security Administration defines Social Security payment amounts. The primary goal is to make the process more equitable, thus the name “Social Security Fairness Act.”
What is the proposed change to the SSA?
The Social Security Fairness Act aims to eliminate dispositions for two SSA provisions: the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO). Both aim to prevent unfair Social Security benefits for individuals who contribute to multiple pension schemes.
Many Americans work in industries that are not covered by the Social Security system. True, as the economy liberalizes and public and commercial organizations’ operational budgets are limited, these specialized pension plans are shrinking and becoming increasingly rare.
In some cases, individuals may have contributed to both the private plan and the Social Security Administration (SSA), resulting in a payout from both. The WEP reduced their SSA contribution as a direct beneficiary of the Retirement Insurance Program.
Alternatively, the GPO reduced the benefit size for those who received money through the Survivors Program. The bill seeks to eliminate those cuts and make the process more transparent for all Americans who pay into the Social Security Administration.
What is the current state of affairs the SSA has regarding what the Fairness Act proposes?
The reduction is based on the assumption that the procedure used by the SSA to calculate a person’s benefits under two pension plans will provide him with more benefits than someone who has only contributed to the SSA.
To calculate SSA benefits, the government will use the highest 35 years of contributions, adjusted for inflation. Following that, a progressive benefit formula will be used to calculate the monthly payment. This progressive formula gives an apparent unfair advantage.
As the name implies, this formula favors people who contribute less than those who contribute more.
How is it done? The progressive benefit formula calculates the final amount using three income points based on AIME (Average Indexed Monthly Earnings): 90% of the original AIME’s $1,115, 32% of the gap between the AIME’s $1,115 and $6,721, and 15% of the AIME’s value greater than $6,721.
Contributing to two schemes will result in lower overall Social Security taxes compared to someone with the same income level, but higher benefits due to a smaller share of the money in the SSA.
How many of the SSA beneficiaries are expected to be impacted?
This law’s plan aims to make the process more equitable and benefit approximately 1% of Social Security beneficiaries in the GPO and 3% in the WEP.
As a result, the current rules only affect a small portion of the population and generate overhead, which ultimately does not benefit the SSA in terms of expenditures.
When will the SSA implement this change?
For now, the change will not affect Social Security. The House of Representatives has only approved the legislative proposal. As a result, it is still a topic of debate in Congress. This process is expected to begin next month.
Also See :VA payment table 2025: compensation for disability beneficiaries