The Social Security Fairness Act, recently signed by President Joe Biden, has eliminated the Government Pension Offset and Windfall Elimination Provision rules. The act aims to enable Americans to retire with economic security and dignity. However, some experts have raised concerns about its effectiveness and potential impact on the Social Security budget.
Kelly Gilbert, an owner and principal fiduciary advisor, shared his insights on the act. He stated that the act might harm the budget and create future roadblocks. “Government retirees will get overly generous Social Security benefits that no other senior citizens in the country are eligible for,” said Gilbert.
“This puts another $200 billion hole in an already failing Social Security budget.”
The Social Security program is projected to face financial issues by 2035, and a higher cost-of-living adjustment (COLA) could potentially accelerate these problems. Gilbert expressed skepticism about how accurately COLA reflects actual inflation.
Social Security budget concerns raised
“The COLA calculation is also amendable by Congress, which enables them to calculate a COLA that is not in line with actual inflation,” he noted. To address Social Security’s impending insolvency, Gilbert proposed solutions such as repealing the Social Security Fairness Act, not offering benefits to those who never paid into the system, and changing investment procedures to match the railroad pension. We must also change the investment procedures to match the railroad pension and let actual GDP growth help fund more benefits,” Gilbert added.
The act promises relief for nearly 3 million former public service employees impacted by reduced or eliminated Social Security benefits due to the WEP and GPO rules. Kathryn McCall, a CFP and financial adviser with CAPTRUST, highlighted how individuals previously affected due to shifting from private to public sector roles will now receive fair compensation without pension penalties. However, the legislation lacks a clear financial plan, sparking concern among critics who project an increase of $200 billion in federal debt over the next decade.
This could further hasten Social Security insolvency by six months. The Social Security Administration is reviewing procedures for implementation, with payments backdated to January 2024 and monthly payments expected to rise by December 2025. Beneficiaries need not take any action, as adjustments will occur automatically.