Navigating Social Security Fairness With Clients

Upon its passage, the SSFA was hailed as the most significant piece of Social Security reform in years due to its elimination of the so-called Windfall Elimination Provision (WEP) and Government Pension Offset (GPO). Essentially, these decades-old provisions barred certain types of public-sector employees, like firefighters and teachers who may have already enjoyed special federal benefits, from accessing the full benefits their fellow citizens could.

Many considered the provisions to be unfair penalties on those who selflessly choose to serve others; however, some experts have pointed out the original point behind them was to prevent these employees from “double-dipping” and claiming both full Social Security and other government benefits that would put them head and shoulders above their fellow citizens. They also say that without restrictions on how much Social Security benefits they can claim, the program overall may come under greater stress and run out of money more quickly — perhaps as soon as 2032.

As Professor of Practice Steve Parrish, JD, RICP®, CLU®, ChFC®, AEP® puts it, “The challenge with the SSFA is that Congress used a hatchet rather than a scalpel. Instead of addressing the unfairness that the current law subjects certain government workers and their spouses to, it just threw out the decades-old protection provisions. So now, some government employees and spouses will, arguably, enjoy a benefit windfall that is not available to workers in the private sector — and this entails a significant fiscal cost during a time when Americans are worried about the depletion of the Social Security Trust Fund in the next decade. We have an expensive new law that many will believe to be unfair.”

While it remains to be seen what, if anything, the government will do to address persistent Social Security funding issues, here are a few things you can do right now to address the SSFA’s impact on your clients.

1. Check Your Clients’ Tax Bracket

Receiving a bigger Social Security check in the mail may be an exciting prospect for your clients — but with bigger benefits come potentially bigger tax obligations. In some cases, your clients’ upgraded benefits may move them into a higher tax bracket, as well as make them subject to greater surcharges from Medicare. Higher benefits may make these charges easier to pay, but they can be painful if unanticipated.

2. Review Clients’ Benefit Eligibility

In many cases, receiving these new government benefits puts the onus on recipients to have knowledge of and apply for them — and in cases of major regulatory change, it’s important to ensure your clients don’t fall through the cracks. Experts recommend talking with your clients about the benefits they receive and examining whether the SSFA’s changes may open up greater opportunities for them in retirement.

3. Take a Long View of Potential Changes

Experts examining the SSFA acknowledge that as the law is gradually phased into effect, it may take a while before your clients notice changes in their benefits. Some estimates put the delay at up to a year while the SSFA is implemented and the kinks worked out — so it would be a mistake for clients to up their spending or change their plans immediately. 
Furthermore, changes in benefits may impact your clients’ future retirement plans now that they may have thousands of additional dollars. Working with them to see how they can maximize their wealth and get the best retirement experience for their assets is, as always, a critical consideration.

Looking for an education that plugs you into all the latest knowledge and insights from experts in Social Security, retirement planning, benefits navigation, and more? Check out the Retirement Income Certified Professional® (RICP®) Program now.

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