Larger Social Security Payments on the Way: Are Your Clients Getting Them?

Understanding the Social Security Fairness Act

Legislation called the Social Security Fairness Act returns Social Security benefits to certain public sector employees, which may present a business opportunity for financial advisors and insurance agents. Now, a recent announcement that the payments would be expedited “immediately” — sooner than the expected year timeframe — creates extra urgency for advisors.

Here’s what you need to know about the Social Security Fairness Act.

What Is the Social Security Fairness Act?

The Social Security Fairness Act effectively repeals the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO).

The WEP is a formula that reduced Social Security benefits for individual workers who received pension or disability benefits from employment where Social Security payroll taxes were not withheld — which is called “noncovered employment.” Similarly, the GPO reduced Social Security benefits for spouses, widows and widowers who also received income from their own government pensions. The rationale behind these provisions was to prevent individuals from receiving disproportionately high Social Security benefits in addition to their noncovered pensions.

But critics argued that the provisions’ overly complex methodology didn’t allocate benefits equitably despite its well intentions. Specifically, for roughly the first $10,000 in average annual earnings, the WEP reduced the replacement rate from 90% to as low as 40%, depending on years of coverage under Social Security; however, the reduction could not exceed 50% of the amount of the pension received from noncovered employment, according to the SSA.

The GPO reduction was equal to two-thirds of the amount of the pension payment from noncovered government work (SSA 2012) and could wipe out the spouse or survivor benefit entirely. For a surviving spouse who spent a lifetime in noncovered employment — such as a public school teacher — that may entail a benefit reduction in the tens of thousands of dollars.

The bipartisan Social Security Fairness Act was signed into law by President Joe Biden on Jan. 5, 2025, repealing both the WEP and GPO. The repeal means that affected employees will receive their full Social Security benefits. The effective date is retroactive to January 2024, meaning the SSA needs to adjust beneficiaries’ past benefits as well as future benefits.

The Social Security Administration (SSA) initially estimated that beneficiaries would have to wait a year or more to receive the additional money. But on Feb. 25, 2025, the SSA announced that beneficiaries who are due a retroactive payment will have a lump sum payment deposited into their bank account on record by the end of March and that most affected beneficiaries will begin receiving their new monthly benefit amount in April. (Social Security benefits are paid one month behind.)

On March 4, 2025, the SSA announced that it had paid 1,127,723 people more than $7.5 billion in retroactive Social Security payments and that the average retroactive payment was $6,710 so far.

“Some of these people are going to get 60% back on their Social Security benefits — that could end up being thousands of dollars a month and even more a year,” said Lawrence Sanfilippo, Public Sector Market Business Coach and Mentor with Monument Benefits, a Senior Market Sales^® (SMS) program that connects advisors to 403(b) retirement plan clients. “This has a significant impact on income planning and asset spend-down, and those are important opportunities for agents and advisors to help their clients.”

Who Gets More Money From the Social Security Fairness Act?

According to the SSA, the WEP and GPO reduced or eliminated the Social Security benefits for more than 3.2 million people — including some teachers, firefighters, and police officers in many states; federal employees covered by the Civil Service Retirement System; and people whose work had been covered by a foreign social security system.

How Will Affected Beneficiaries Be Notified?

According to the SSA news release:

• Anyone whose monthly benefit is adjusted, or who will get a retroactive payment, will receive a mailed notice from Social Security explaining the benefit change or retroactive payment.
• Most people will receive their retroactive payment two to three weeks before they receive their notice in the mail.
• Many complex cases must be done manually, on an individual case-by-case basis, and those complex cases will take additional time to update the beneficiary record and pay the correct benefits.

The SSA press release also “urges beneficiaries to wait until April to ask about the status of their retroactive payment, since these payments will process incrementally into March. Since the new monthly payment amount will begin with the April payment, beneficiaries should wait until after receiving their April payment, before contacting Social Security with questions about their monthly benefit amount.”

The Opportunity for Insurance Agents and Financial Advisors

Review your client roster to identify anyone who might be impacted or who might have questions. Advising them on how to effectively utilize this unexpected lump sum and monthly bump in benefits can be a valuable service, whether it’s paying down debt, enhancing their savings cushion or buying an annuity, long-term care insurance or life insurance. You may identify opportunities to adjust asset allocation, re-evaluate income needs, or explore new investment opportunities.

By reassessing retirement income projections, you may identify that a client with higher Social Security benefits could rely less on their personal savings, allowing for more aggressive growth strategies in their investment portfolios. Additionally, the increased income can provide an opportunity to reduce withdrawal rates from retirement accounts, potentially prolonging the longevity of these funds.

The timing of these retroactive payments may present tax planning opportunities. Discuss potential tax implications of the additional income, exploring strategies like tax deferral or spreading the recognition of income over multiple years.

How to Reach Clients and Prospects

Once you identify potentially impacted clients, reach out through personalized communication such as emails, phone calls or video chats. Or it may be more efficient to use newsletters or webinars to explain the implications of the act, encouraging them to reach out to you if they have any questions.

Stay Informed on Social Security Changes

Staying informed about the Social Security Fairness Act is essential to providing accurate and timely advice. The SSA created a dedicated webpage for the Social Security Fairness Act, offering updates and resources.

Encourage your clients to stay informed as well. Understanding the details of their benefits and any future changes will empower them to make informed decisions about their financial futures.

Exclusive Access to Public Sector Employees

This recent change in legislation and the unexpected expedited payments shed light on a historically underserved segment of the retirement planning market — the trillion-dollar 403(b) space. SMS is the only field marketing organization to remove the longstanding barriers between independent advisors and these clients.

If you would like more information on how to unlock access to these clients, watch this webinar, read this SMS blog or fill out the form below to have an SMS marketing consultant contact you.

FOR AGENT USE ONLY. NOT TO BE USED FOR CONSUMER SOLICITATION PURPOSES.
This article is intended solely for general educational purposes and the content developed from sources believed to be providing accurate information. Not connected with, affiliated with or endorsed by the United States Government or the Social Security Administration. The information in this material is not intended as tax or legal advice and is not a recommendation to buy, sell or roll over any asset, adopt a financial strategy or use a particular account type. Consumers should consult with their tax or legal advisor regarding their individual situations before making any legal or tax-related decisions.