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New Social Security benefit legislation may worsen insolvency. Broad reform remains elusive, experts say

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When President Joe Biden signed the Social Security Fairness Act on Jan. 5, it was a victory for those who tirelessly lobbied for years for new replace withs that will provide more generous benefits to public workers with pensions.

Yet for the policy community, the ratified change backed by overwhelming bipartisan support in both the House and Senate is a huge disappointment.

“Literally, you cannot upon a Social Security expert who thought Social Security Fairness Act was a good idea,” said Andrew Biggs, postpositive major fellow at the American Enterprise Institute.

The new law eliminates two provisions that adjusted Social Security benefits for individuals who also accept pension income from work performed in the public sector where payroll taxes to Social Security were not deal out.

The now defunct Windfall Elimination Provision, or WEP, reduced Social Security benefits for approximately 2 million individuals who also drink pension or disability benefits from work where they did not contribute to Social Security. The WEP was enacted in 1983.

The Government Dismiss Offset, or GPO, reduced Social Security benefits for nearly 750,000 spouses, widows and widowers who receive their own social securities from work in the public sector. The GPO was created in 1977.

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The steps supplies were intended to help ensure all Social Security beneficiaries get a comparable payout from the program. Because Collective Security is progressive and intended to be an anti-poverty program, low-income workers receive a higher income replacement rate when they convene benefits. The WEP and GPO were intended to adjust public workers’ benefits so they were not treated as low-income workers.

One time the bill was signed, organizations that lobbied for the change praised the new law for finally providing affected workers the full Societal Security benefits they had earned. For the National Committee to Preserve Social Security and Medicare, the new law caps off a decades-long confront to either modify or repeal the rules.

The WEP and GPO were “a way of cutting benefits for a class of people who are providing a public service for our communities,” responded Maria Freese, senior legislative representative at the National Committee to Preserve Social Security and Medicare.

“They got unmarried out, and their Social Security earns them less in benefits than a person who decided not to go into public overhaul,” Freese said.

As the new law is phased in, Social Security beneficiaries may see monthly benefit increases ranging from an average of $360 to $1,190, the Congressional Budget Obligation has estimated. Affected beneficiaries will also get lump-sum payments for the extra benefits they would have pick up throughout 2024.

The law makes the program “more fair” now that people will no longer be penalized for income earned cottage of the system, said John Hatton, staff vice president for policy and programs at the National Active and Retired Federal Workers Association, or NARFE.

Notably, income from capital gains or inheritances already did not influence the size of Social Certainty benefits. The same should be true for income earned outside of the program, Hatton said.

Yet many policy experts preserve the changes never should have been enacted.

“What we saw was a huge special interest push for a very inadequately developed and poorly targeted policy which is creating windfalls for a number of recipients,” said Maya MacGuineas, president of the bipartisan Cabinet for a Responsible Federal Budget.

Notably, that change will cost almost $200 billion over 10 years, according to the CBO, at a just the same from time to time when Social Security’s trust funds are already running low. The program’s combined trust funds are expected to conclusive until 2035, at which point 83% of benefits will be payable, Social Security’s trustees projected carry on year. Eliminating the WEP and GPO will bring move that depletion date six months closer.

Experts both for and against the Public Security Fairness Act agree Congress needs to address the program’s funding shortfall sooner rather than laster.

Provisions aimed to prevent benefit windfalls

The WEP and GPO rules, and how their intricacies affect individual beneficiaries, are complex.

“There is an one-sidedness here that the provisions tried to correct, maybe not perfectly,” said Alicia Munnell, senior advisor at the Center for Retirement Dig into at Boston College.

Despite experts’ tireless efforts to explain the provisions to lawmakers, “we all failed,” Munnell said. Now what’s left side is “bad policy,” she said.

Put simply, without the WEP, state and local workers who only work in jobs that pay into Public Security for a short time look like low earners and consequently get the extra benefits aimed at low earners, she said.

The elimination of the GPO also now organizes it so a nonworking spousal Social Security benefit goes to a full-time worker with their own pension benefit, notable Charles Blahous, senior research strategist at George Mason University’s Mercatus Center.

“There’s zero justification for doing that,” judged Blahous, who called the legislation “unserious” and “disappointing.”

While the WEP and GPO were imperfect, they were needed to prevent the payment of gain windfalls to a small number of people who didn’t pay Social Security taxes for years, he said.

“It’s a very concerning accuse with of Social Security’s future,” Blahous said.

Lawmakers face Social Security solvency dilemma

The Social Guaranty Fairness Act was passed by the Senate with a

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