RETIREMENT TIPS: Biden Increases Social Security Benefits

By Akemi Kondo Dalvi, CPA/PFS, CFP

On Jan. 5, just weeks before his presidential term will end, President Biden signed new legislation expanding Social Security benefits for millions of retirees under H.R.82-Social Security Fairness Act of 2023. The new bill repeals the existing provisions that reduced Social Security benefits for retirees who were also receiving other benefits such as a pension from a state or local government.

In other words, the Social Security Fairness Act eliminates the Government Pension Offset (GPO) or Windfall Elimination Provision (WEP) that previously reduced or eliminated Social Security benefits for retirees who had earned enough credits to collect both pension and Social Security income. This benefit has been extended to spouses, widows, and widowers who may also be collecting government pensions of their own.ⁱ

Often the professions most affected included retired firefighters, police officers, teachers and other government workers. In such cases, employees were eligible for pension income and their employers may not have withheld Social Security taxes from their payroll during their working years.

However, such employees may have also worked the necessary 40 quarters with Social Security withholding in other professions that would have made them eligible for benefits. Alternatively, these employees may be the spouse or beneficiary of a person who contributed to Social Security payroll withholdings.

H.R. 82 will be effective as of December 2023, which means those affected by the new rules may receive retroactive payments for eligible benefits back to 2024 in a lump-sum payment. Future benefits would be paid monthly.

The Social Security Fairness Act had bipartisan support. It is estimated that the reversal of the WEP will amount to an average monthly increase of $360 for more than 2.5 million Social Security recipients. According to the Congressional Budget Office, the law would add an estimated $195 billion to the federal deficit over a decade.
Additionally, the Congressional Budget Office estimated that the elimination of the GPO is estimated to provide new benefits to living spouses with an average monthly benefit of $700 for 380,000 previously ineligible recipients. The legislative change would increase surviving spouse benefits by an average monthly benefit of $1,190 for 390,000 widows or widowers.

“Biden is the first president in more than 20 years to expand Social Security benefits,” a White House spokesperson said in a statement. “The bill he is signing today will expand benefits by hundreds of dollars per month for more than 2.5 million Americans.”ⁱⁱ

The Social Security Administration noted it is evaluating how to implement H.R.82 and beneficiaries do not need to take any action to receive the enhanced payments other than verifying their current mailing address and direct deposit information. Such updates can be completed online without having to call or visit a Social Security office.

However, if you are an affected beneficiary, it may serve you well to make an appointment with your local Social Security benefits office in-person or online to inquire further.

A financial planner can examine the overall economic outlook and legislative landscape for you, in addition to the investments that they manage. Reach out to a Certified Financial Planner or CPA Personal Financial Specialist if you feel you could use a partner in your corner.

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i. https://www.congress.gov/bill/118th-congress/house-bill/82

ii. https://www.cbsnews.com/news/social-security-fairness-act-signed-by-president-biden/?ftag=CNM-00-10aac3a

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The opinions expressed above are solely those of Kondo Wealth Advisors, Inc. (626-449-7783 info@kondowealthadvisors.com), a Registered Investment Advisor in the state of California. Neither Kondo Wealth Advisors, Inc. nor its representatives provide legal, tax or accounting advice.