Understanding the repeal of the Windfall Elimination Provision and Government Pension Offset

Key takeaways:

• The Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO) ended with the passage of the Social Security Fairness Act in January. 
• Both the WEP and GPO commonly affected public employees such as teachers or government workers.
• Financial professionals should be proactive in reaching out to clients who might be affected by these changes to help them optimize their increased monthly benefit. 

What was the Windfall Elimination Provision?

04/08/2025 – The Windfall Elimination Provision (WEP) was a rule that reduced a worker’s Social Security retirement or disability benefits if they also had pension benefits from work where they did not pay Social Security taxes. The WEP was introduced in 1983 to prevent “double-dipping” from both a government pension and Social Security. In other words, the provision prevented certain workers from collecting full Social Security benefits in addition to a governmental pension if they had not paid into Social Security for a significant portion of their career.

What was the Government Pension Offset?

The Government Pension Offset (GPO) was a separate but similar rule to the WEP that reduced Social Security spousal or widower benefits for individuals if those spouses or widowers also had pension benefits from work where they did not pay Social Security taxes. The GPO was introduced even earlier, in 1977, to help make sure that spousal and widower benefits would be relatively equal between those with Social Security covered earnings and those without Social Security covered earnings. Under Social Security's dual-entitlement rule, spouses or widowers with their own covered earnings had their spousal or widower benefits offset dollar-for-dollar by their own earned benefit. However, in 1983 Congress reduced the offset from dollar-for-dollar to two-thirds.

Who was affected by the WEP?

The WEP affected those who earned a pension in any job where they did not pay Social Security taxes yet also worked in other jobs long enough to qualify for a Social Security retirement or disability benefit. This was common among public employees, such as teachers or government workers. Said another way, if someone worked at a particular job where Social Security taxes were not withheld from their paycheck and then received a pension from that same job, then they could expect that any Social Security benefits they may have earned in another separate job would be reduced in retirement.

Who was affected by the GPO?

The GPO affected those who earned a pension in any job where they did not pay Social Security taxes yet were also entitled to a Social Security spousal or widowers benefit based on Social Security benefits earned by their spouse’s own employment and Social Security covered earnings. This was common among public employees, such as teachers or government workers. Said another way, if someone worked at a particular job where Social Security taxes were not withheld from their paycheck and then received a pension from that same job, then they could expect that any Social Security spousal or widower benefits they may have received based on their spouse’s Social Security covered earnings would be reduced in retirement.

How was the WEP applied?

The Social Security Administration (SSA) applied the WEP reductions on a sliding scale. It calculated what it considered to be a “fair” Social Security benefit that was proportional to the number of years that a worker had substantial earnings from a job in which they paid into Social Security. The WEP calculation was applied before other benefit-adjustment calculations, such as early retirement reductions, delayed retirement credits and cost of living adjustments. The SSA guaranteed that any reduction in the Social Security benefit amount caused by the WEP formula would never exceed more than one-half of the noncovered pension.

If a worker had 20 or more years of substantial earnings in which they paid into Social Security, then the effect of the WEP began to decrease. If a worker had 30 or more years of substantial earnings in which they paid into Social Security, then there would not be a WEP reduction in their Social Security benefit.

How was the GPO applied?

The GPO is simpler to explain than the WEP, because there was no sliding scale. The SSA simply reduced the spousal or widower’s Social Security benefits by two-thirds of any governmental pension that the spouse or widow received based on their own governmental service. Depending on the size of the governmental pension accrued by the individual, the GPO could sometimes fully offset an individual’s spousal or widower’s Social Security benefit to zero! In 2022 the GPO applied to around 12.6% of those who received a spousal or widower Social Security benefit, and nearly 70% of those impacted had their entire spousal or widower Social Security benefit offset to zero!¹

The Repeal of the Windfall Elimination Provision and the Government Pension Offset

In one of his last official acts in office, President Biden signed the Social Security Fairness Act (the “Act”) into law shortly after the start of the new year, on January 5, 2025. The Act repealed the WEP and GPO, meaning all Social Security beneficiaries who were negatively impacted by either the WEP or GPO will have their Social Security benefits recalculated and adjusted upwards to the increased amount to which they would be entitled without the WEP or GPO reductions. Even better, the Act had a retroactive effective date of January 1, 2024. This means that impacted beneficiaries will also receive a lump-sum payment representing the underpayment of Social Security benefits they should have received if the increased payment amount had begun at the start of 2024.

By the end of February 2025, the SSA began calculating and issuing retroactive payments, as well as increasing monthly benefits, for beneficiaries whose Social Security benefits were negatively impacted by the WEP and GPO.² By the end of March 2025, most of these individuals should have received a one-time retroactive payment covering the underpaid amount for the period from January 2024 through March 2025.³ This amount should have been deposited into their bank account of record with Social Security.⁴ Their new, increased monthly benefit amounts should begin in April 2025.⁵ However, recalculations in certain complex cases may require more time to process, and stretch out later into 2025. Regardless of the exact timing, anyone whose monthly benefit is adjusted upwards should receive notification from the SSA explaining the retroactive payment and/or the benefit change.⁶

Special considerations for financial professionals

The repeal of the WEP and GPO will improve the financial lives of millions of American retirees, giving them greater financial security because of the enhanced lifetime income. As financial professionals, it’s our job to make sure our clients are informed of these positive developments and make smart financial decisions to maximize the impact of this unplanned windfall. 

If you have not already done so, consider reaching out to clients who have been negatively impacted by the WEP or GPO to make sure they are aware of the repeal of these two rules. These legal changes create a good opportunity to touch base with those clients so that you can not only explain it to them, but also to make sure they maximize the positive financial impact from this increased monthly lifetime benefit.