By Mark Miller

(Reuters) – Social Security is an earned benefit, available by paying payroll tax during working years. The benefit amount correlates with wage history, except for one significant rule.

Since the 1980s, some public sector workers have faced substantial cuts to their earned Social Security benefits due to a little-understood regulation called the Windfall Elimination Provision (WEP). This provision, along with the Government Pension Offset (GPO), has reduced benefits by over half, resulting in widespread anger from affected workers and calls for reform.

Recently, Congress repealed the WEP and GPO under the Social Security Fairness Act. Critics argue that these provisions address overpayments to those who split careers between Social Security-covered jobs and public sector plans. They warn that repeal could further deplete Social Security trust funds and potentially increase the federal deficit. However, Social Security operates on a dedicated funding stream separate from the general budget, so these claims are misleading.

Only about 2.5 million Social Security beneficiaries, or 4% of the total, will be positively impacted by the repeal. While it is estimated that this change could accelerate insolvency by six months, it is a separate issue Congress must tackle.

Why the WEP?

The differing treatment of public sector workers arises from the distribution of Social Security benefits, which favors lower-income earners. The benefit formula is progressive; thus, public sector workers seem to earn less than they do over their careers, leading to a higher unadjusted benefit. WEP seeks to correct this perceived disparity.

Critics argue that giving full benefits to these workers is “double-dipping,” but this ignores that the benefits come from different funding sources. The term “windfall” inaccurately suggests unfair additional benefits to these workers, who assert they earned their benefits.

With WEP and GPO now repealed, public employees like firefighters, police officers, and teachers will find retirement slightly easier, with retroactive payments anticipated in 2024.

Some advocate for broader reforms to address Social Security's solvency and fairness issues. Suggestions include maintaining the current retirement age, improving the funding of the Social Security Administration to reduce backlogs in Disability Insurance claims, and enhancing 401(k) access for all Americans.

Ultimately, everyone should receive what they’ve earned.

The opinions expressed here are those of the author, a columnist for Reuters.