If you work as a public employee for a state or local government, you probably already know that Social Security taxes may not be deducted from your paycheck.
Fifteen states, including Massachusetts, Connecticut and some parts of Rhode Island don’t collect Social Security taxes from the pay of most public sector employees.
Instead, most of these states or towns deduct a portion of employees’ income to fund future retirement benefits they’ll receive from their state-run pension plan.
If you’ve worked for one of these states your entire career, you probably won’t be able to apply for your own Social Security benefits. That’s because workers must pay Social Security taxes for at least 10 years before they can be eligible for benefits.
However, if you worked at least 10 years in jobs where Social Security taxes were deducted from your paycheck, you will be eligible.
But, until 2025, your ability to collect your full Social Security benefits might have been compromised.
That’s changed, with the enactment of the Social Security Fairness Act, which does away with two benefit-reducing requirements: The Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO).
Eliminating the WEP
Before 2025, if you spent a good portion of your career working in a state or local government job where you never paid Social Security taxes, Uncle Sam expected that your state pension would provide most of the income you would have otherwise received from Social Security.
So, when you started receiving Social Security benefits, your monthly check might have been significantly reduced if you were also getting monthly pension checks.
This is because of the Windfall Elimination Provision (WEP), a rule that was designed to keep some pensioned public sector employees from receiving maximum Social Security benefits.
In a nutshell, that WEP could have cut your monthly Social Security check by either 50% of the value of your monthly pension payment or $512, whichever was less.
The Social Security Fairness Act has eliminated WEP. Which means that for most state and local workers who would have been subject to it should receive the full value of the Social Security benefits they’re entitled to.
The GPO is off the table, too
What if you are or were a state or local employee who received a pension and wanted to claim spousal Social Security benefits rather than your own?
Before 2025, the Government Pension Offset, or GPO, could have reduced your spousal Social Security check by two-thirds of the amount of your monthly pension check. And, unlike WEP, there was no maximum cap on the GPO.
But the Social Security Fairness Act has eliminated the GPO as well. So, you should be able to receive the full amount of your spousal Social Security benefits, regardless of your pension payments.
For more information
Three million Americans—28% of state and local employees--may be impacted by the Social Security Fairness Act, which President Biden signed into law on January 5.
If you’re impacted by Social Security Fairness Act, you can visit an area of the Social Security Administration website that provides information and updates on the Act at https://www.ssa.gov/benefits/retirement/social-security-fairness-act.html
In the meantime, if you’re not sure exactly what your full Social Security monthly payments could be, you can find out by establishing an online account at the Social Security website at https://www.ssa.gov/
Once you’ve signed up, make sure that your address on file is correct in case the SSA needs to contact you via snail mail.
Also according to the SSA, if you never applied for your own or spousal Social Security benefits because of WEP or GPO, you can apply for them by telephone. Call 1-800-772-1213, Monday through Friday, from 9:00 a.m. to 6:00 p.m. ET. When the automated system asks, "How can I help you today?", say "Fairness Act." After answering a few qualifying questions, you'll be connected to a WEP-GPO trained representative who can handle your claim.
This material has been provided for general informational purposes only and does not constitute tax or retirement planning advice. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a tax preparer and financial advisor.
This article was authored by Michael Flaherty and Jeffrey Briskin. Michael is a senior financial advisor with Canby Financial Advisors, a SEC-registered investment adviser. SEC registration does not constitute an endorsement by the SEC nor a statement about any skill or training. Michael can be reached at 508.598.1082 or mflaherty@canbyfinancial.com. Jeffrey Briskin is Director of Marketing at Canby Financial Advisors.
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