The SSA, which is also known as the Social Security Administration, is an organization that is always changing. In addition to always changing its processes to meet the needs of its users, it is also affected by changes in the law that affect its funding and rules.
This will definitely have an effect on you as a program participant or giver. Because of this, it makes sense to know which regulation will be talked about and has a better chance of becoming law.
Since September, a new bill has been introduced with support from both parties to change some of the way the SSA currently decides how much Social Security payments to give out. The name “Social Security Fairness Act” comes from the fact that its main goal is to make the process more fair.
What is the proposed change to the SSA?
The aim of the Social Security Fairness Act is to get rid of rules that affect the SSA’s Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO). Both were made to keep people from getting unfair Social Security benefits, in this case because they contributed to two different pension plans.
A lot of Americans work in fields that are not covered by Social Security. It is true that these specialized pension plans are shrinking and becoming less common as the economy opens up and the budgets of both public and private organizations are cut back.
Some people, though, have paid into both the private plan and the SSA, so they can get a payout from the private plan and a Social Security check from the SSA. As a direct beneficiary of the Retirement Insurance Program, the WEP cut the amount of money they put into SSA.
Instead, the GPO cut the size of the benefits for people who got money through the Survivors Program. The goal of the bill is to get rid of those cuts and make the process clearer for everyone in the US who pays into Social Security.
What is the current state of affairs the SSA has regarding what the Fairness Act proposes?
Based on the idea that the way the SSA figures out a person with two pension plans will give him more benefits than someone who has only contributed to the SSA, the reduction was made. The government will use the 35 years with the most contributions and adjust them for inflation to figure out SSA benefits.
After that, the monthly payment will be based on a progressive benefit formula. It looks like this progressive formula gives someone an unfair advantage. As the name suggests, this formula gives people who contribute less more money than people who contribute more.
How do you do it? Three income points based on AIME (Average Indexed Monthly Earnings) are used to figure out the final amount. The first point takes 90% of the original AIME of $1,115; the second point takes 32% of the difference between the AIME’s $1,115 and $6,721, and the third point takes 15% of the AIME’s value over $6,721.
Your overall Social Security taxes will be lower than someone with the same income who has not contributed to two plans. However, your benefits will be higher because the SSA will get a smaller share of the money you have contributed.
How many of the SSA beneficiaries are expected to be impacted?
The plan in this law addresses this issue because it will not only make the process more fair, but it will also help about 1% of Social Security recipients for the GPO and 3% for the WEP. Because of this, the current rules only affect a small group of people and cause extra work that does not really help the SSA in terms of the money it spends.
When will the SSA implement this change?
The change will not have an effect on Social Security for now. The legislative proposal is the only thing that the House of Representatives has agreed to. Because of this, Congress is still debating it. The next month should see the start of this process.
