Congress Could Vote On Major Social Security Changes Before December 20th

Over the past few decades, private sector companies have largely done away with pensions, leaving workers with no choice but to save for retirement on their own. But it’s different for government and public service employees. Many people in that boat do get a pension guaranteeing them some amount of income for life.

Key Points from 24/7 Wall St.

• Some government workers with pensions get less Social Security.
• The Social Security Fairness Act would prevent benefits from being reduced due to a government pension.
• The bill has bipartisan support so far, but there’s another hurdle to get past.
• Also: Are You On Track to Retire? Take This Quiz and Find Out (Sponsored)

But there’s a drawback to getting a government pension. In many cases, it means reduced Social Security benefits.

There are two provisions that seek to prevent some workers from double dipping, so to speak, by receiving their pension plus full Social Security benefits. One is the Windfall Elimination Provision (WEP), and the other is the Government Pension Offset (GPO).

The purpose of these provisions isn’t to rob retirees of money so much as preserve Social Security funds. But unfortunately, it tends to have the former effect.

A new bill called the Social Security Fairness Act seeks to change that by getting rid of the WEP and GPO. And it happens to have bipartisan support. But whether it gets signed into law is still up in the air.

Expanding Social Security for more people

Collectively, the WEP and GPO impact close to 3 million Social Security beneficiaries. The WEP doesn’t completely eliminate Social Security payments, but the GPO could.

Given that the Social Security Fairness Act has bipartisan support, it’s clear that both parties feel that government workers should be entitled to a full monthly benefit. The problem, though, is that restoring benefits would come at a cost. And given that Social Security is already teetering toward insolvency, it’s a tough call.

As it is, Social Security may have to broadly reduce benefits as early as 2035, which is when the program’s combined trust funds are expected to be depleted. Lawmakers clearly have time to find a way to prevent Social Security cuts. But expanding benefits for a few million people certainly won’t help matters in that regard.

As such, it’s unclear at this point as to whether the Social Security Fairness Act will end up being passed by the Senate. And with 2024 rapidly winding down on December 20th, there’s not a whole lot of time to push the bill through.

If the bill doesn’t pass in 2024, it can be introduced again in 2025. But whether it loses steam between now and then is anybody’s guess.

What government employees need to know about retirement savings

It’s natural for government employees to fall back on their pensions and Social Security for retirement income. And given that public sector salaries aren’t always the most generous, it’s easy to see why many people in these roles don’t actively save for retirement.

But the reality is that it’s a wise idea for all workers to save for their future years — even those with guaranteed retirement income coming their way. And there are tax-advantaged ways to do so.

Many public sector jobs offer a 457(b) plan, which is similar to a 401(k). Other public sector jobs offer access to a 403(b) plan, which, too, works similarly to a 401(k). It’s common for school district employees to use these plans.

Saving in a 457(b) or 403(b) can help public sector workers shield near-term income from taxes while building up nest eggs to supplement their pensions. And that could help take away the sting of a reduced monthly Social Security check.