The U.S. Congress must act on the Social Security Administration’s (SSA) report as soon as possible. The Old Age and Survivor Insurance Trust Fund is in a dangerous and delicate situation. Due to the Social Security Fariness Act and the elimination of the Windfall Elimination Provision (WEP) and the Government Pension Offser (GPO) this situation is further exacerbated. Michael Ryan and the president of the National Association of Registered Social Security Analysts, Marthe Shedden, point out that although it benefits one sector of the population, another will be really affected. The U.S. is in a critical situation, and there are new challenges ahead in terms of the impact this situation will have on the Cost of Living Adjustment (COLA). Read on to learn more about the situation.
What latest Social Securtiy report has revealed
The recent report from the Social Security Board of Trustees has showed that the Social Security program keeps to face financial complications, and if Congress does not intervene in the near future, the Old Age and Survivor Insurance (OASI) trust fund will be exhausted by 2033 and following this, the program would only be able to pay 77% of listed payments.
The driving forces behind this projected shortfall are multiple, with payments for the Social Security Fairness Act causing a fair amount of strain on the program’s already dwindling finances. Additionally, this change in benefit payments due to the Fairness Act has also caused personal income figures for the United States to decline.
Social Security Fairness Act and the projected trust fund short fall
The Social Security Fairness Act had been signed into law at the beginning of the year and as a consequence, some 3 million public sector employees had their full benefits restored to them. This cohort earlier had their benefits reduced because of the alternate pensions having been provided to them by their employers under the provisions of the Windfall Elimination Provision (WEP) or the Government Pension Offset (GPO).
“What really happened is that the Social Security Fairness Act eliminated two provisions. The Windfall Elimination Provision (WEP) & the Government Pension Offset (GPO). They previously reduced benefits for individuals who also receive income from public pensions,” Michael Ryan, finance expert and founder of MichaelRyanMoney.com, shared with Newsweek.
“These retired teachers, firefighters, and government workers had been getting the short end of the stick for years. Having their Social Security benefits slashed just because they’d also earned a pension from their public service jobs.”
All along with the Social Security Fairness Act coming into effect, the impacted public sector employees will at this time receive a bump to their monthly benefit quantities, as well as a one-time retroactive payment dating back to January 2024. Whilst this modify will likely be happily received by the impacted beneficiaries, these raised payments, along with the payments of the retroactive payments will no doubt have placed an extra strain on the funds of the Social Security program.
There are now more than 70 million recipients of Social Security benefits, and as an effect, even the the smallest of increases will add up to important figures.
Personal Income in the U.S.
According to data lately released by the government, “personal income in the United States declined by 0.4 percent in May, marking the first monthly drop since 2021.” Prior to this, nevertheless, personal income in the United States rose by 0.8 percent in April. Lower wages were not to blame for this somewhat relevant modification, however, but rather the greater jump in income the 3 million or so beneficiaries received because of the retroactive payments being carries out to them under the Social Security Fairness Act.
Ryan further said to Newsweek, “When May rolled around and those lump sums disappeared from the monthly calculations, it looked like everyone suddenly got poorer. It’s like if you got a big tax refund in April. Your income would spike that month, then ‘drop’ in May even though you’re not actually making less money.”
“Beneficiaries affected by the Social Security Fairness Act were issued retroactive checks by the SSA for their new monthly amounts, some for as many as 16 months back to January 2024,” Martha Shedden, president and co-founder of the National Association of Registered Social Security Analysts, also shared with Newsweek. “Those individuals are now receiving higher monthly benefit checks that will not change going forward except for the annual COLAs each January.”
“The repeal of these provisions (WEP and GPO) increased projected Social Security benefit levels for some worke”
The implementation of the Social Security Fairness Act has also been ferenened as a contributing component towards to accelerated depletion of the OASI trust fund. In the annual report, the board of trustees explained that, “the repeal of these provisions (WEP and GPO) increased projected Social Security benefit levels for some employees, relative to projected benefit levels in last year’s report. The effect of this legislation on the OASI Trust Fund was the primary contributor to the modification in the combined OASDI fund depletion date this year.”