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MASON & ASSOCIATES, LLC

FEFP: Social Security Shake-Up Part 2: WEP and GPO Eliminated (EP85)

February 17, 2025

Did you know that the recent passage of the Social Security Fairness Act could significantly increase retirement income for many Americans? In this episode, John and Tommy break down the elimination of the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO), explaining how these changes impact public sector employees and their Social Security benefits. They discuss how financial advisors can help clients navigate these shifts, optimize their benefits, and prepare for potential tax implications.

Listen in to learn how these changes affect spousal and survivor benefits, why the “marriage penalty” is a crucial factor, and how retirees can take advantage of new financial planning opportunities. John and Tommy also highlight the importance of verifying Social Security benefit calculations and staying updated on policy changes to maximize retirement income.

Listen to the full episode here:

What you will learn:

  • The positive impacts of the elimination of GPO and WEP. (4:10)
  • What happens now that the elimination of WEP and GPO has passed. (9:00)
  • What Social Security is there to do. (11:00)
  • Who was not impacted by WEP. (13:15)
  • How Social Security spousal benefits work. (20:00)
  • What happens now that GPO is eliminated. (25:00)
  • How some of our clients have just made upwards of $500,000 - $1 million. (30:35)
  • Potential tax implications of higher Social Security benefits. (39:30)

Ideas worth sharing:

  • “Regardless of our personal beliefs, we're going to take whatever the situation is and apply it as best we can for our clients.” - Mason & Associates
     
  • “We can’t tell people what to do with their money. We can’t tell people what to do with this increase in income. But at the end of the day, we’re a consumer-driven economy, which means more spending is better. Maybe it’ll drive a little bit of inflation, but in general, people going out, doing things, buying things, and consuming things is good for the U.S. economy.” - Mason & Associates
     
  • “At the end of the day, the system, our lawmakers … the people who have championed this throughout the country—it is now law and we get to officially celebrate with our clients now because their financial plans are better.” - Mason & Associates

 

Resources from this episode:

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Read the Transcript Below:

Congratulations for taking ownership of your financial plan by tuning into the Federal Employee Financial Planning Podcast, hosted by Mason & Associates, financial advisors with over three decades of experience serving you.

John Mason: Welcome to the Federal Employee Financial Planning Podcast. I'm John Mason, President and Certified Financial Planner at Mason & Associates. And in today's episode, my co-host, my friend, my business partner, Tommy Blackburn, Vice President, CPA, CFP, PFS. Your credentials are so long, I almost forget them every time.

Tommy, how we doing?

Tommy Blackburn: Hey, man, I appreciate it. You don't have to run through all of that. It's great. We just had a wonderful recording with one of our trusted partners, Brian Gay, and we did some Medicare updates. So that was a lot of fun. Always fun us getting to do these together. So thank you for the introduction and looking forward to this one.

We've got an update on some legislation that happened—is something—we’ve probably beat around the bush for years. I think that could potentially happen or our thoughts on it. And now it's actually hit the road.

John Mason: Sure. Yeah. So for our audience, today is January 14th, 2025.

This is our second recording of today, and it is a follow-up episode. We are going to link to every WEP, Windfall Elimination Provision, any Government Pension Offset episode that we've done previously. But this is an update to what we've recorded in November that unfortunately the timing for us didn't work out great.

Because I think when we released our most recent episode on Social Security Fairness Act, it had not been signed into law, it had not been passed by both houses, and unfortunately our timing. We released the episode a few days after it was approved by both Houses and awaiting President Biden's signature.

So we looked maybe a little silly on our timing, but hopefully you all saw that we recorded in advance of this law becoming law. But as of today, January 14th, 2025, Social Security Fairness Act has been passed. It has been signed into law by President Biden, and officially, we are reporting to you today on January 14th that the Windfall Elimination Provision and the Government Pension Offset have been eliminated for all of you CSRS, CSRS Offset, CalSTRS if you don't pay into Social Security, State of Illinois, any New Jersey, if you are a public sector person with a pension that did not pay into Social Security, WEP and GPO have been eliminated.

Mr. Tommy, so now I think we get to officially maybe do our first flip-flop on this—what do you think? We’re going to do a little flip-flop here?

Tommy Blackburn: I don't know about flip-flop. I think for one, I want to go back to you said we look a little silly and I was thinking to myself, perhaps we were just is it omniscient or I guess another would be like clairvoyant.

We just got ahead of it. We knew it was coming. And so maybe we were just ahead of the crowd and releasing that episode. We're thrilled for our clients that this impacts positively. So we don't want any mistake about that. We're happy to celebrate this with them and the improvements in their financial plans and their families that this means.

So we're going to dance to the music that's being played, take full advantage of it. I think we still have thoughts from the bigger picture that we ultimately have some disagreement with this change, but we can't do anything about it. The past is the past. It's time to go forward into the future and dance to the music that's being played, make the most out of the situation, which it is very positively impactful, at least in the immediate future for a decent number of our clients.

John Mason: It's something that, Mike Mason, my father, has been doing financial planning for, almost 40 years now, and he's been chirping in our ear for quite some time about Social Security Fairness Act, the elimination of GPO and WEP and why he believes that it wasn't a good thing for, let's just say, for the system, like the system we can all acknowledge is already broke.

We already know potential reduced benefits, yada yada yada, like social security. I'm confused. None of it really makes sense. So if you take a step back for a second and say, okay w hat makes the most sense for the entire population?

Maybe we would disagree that WEP and GPO are a good thing. If you step back and you just look at the entire context of the social security system, what it was designed for, how it should work, what is fair and what is not fair, Tommy, me, and you versus our audience we may disagree a little bit, but now it's time to celebrate.

Like at the end of the day, the system, our lawmakers, the people who—NARF, the people who have championed this throughout the country, it is now law and we get to officially celebrate with our clients now because Their financial plans are better. They're not going to need as many distributions from their portfolio.

Tommy Blackburn: Get to have more fun. Yeah, number of things. It could be even more fun if they actually somehow repeal the taxation of Social Security while we're at it, which is, again, from a system-wide thing, doesn't feel encouraging to me that we're talking about that, but it would certainly be a another windfall of sorts to those receiving Social Security, who now there are even more people eligible.

It's just amazing.

John Mason: And maybe it'll actually cause inflation. So maybe it'll be the Social Security Fairness Act slash some inflation, because now, we've already come up with hundreds of thousands of dollars that our clients are going to be receiving and benefits.

One in my head, draws $150,000 CSRS pension, and she's going to get a $20,000 Social Security check right now. And, that's going to go towards travel.

Tommy Blackburn: Yeah, and when you say that, is that just the retroactive? Or do you mean just like per year she's going to get $20,000?

John Mason:She's going to get $20,000 annual as a spousal benefit.

Tommy Blackburn:Yeah, dude, and that's completely believable. I think because I had written down numbers as I was notifying the clients that I am primarily responsible for and one of them, yeah, $22,000 extra a year, and it's the exact same situation where we have a CSRS, a very nice retirement benefit there.

$150,000 maybe about, and actually that's probably not a stretch at all. And then now she is going to get part of his Social Security, half of that benefit since GPO was repealed. So I think we jumped into it. Maybe we should step back, quickly address what WEP and GPO are.

And talk about that a little bit. I, probably shouldn't go down this rabbit hole, but since we were going down it before we step back and do the celebration and how this all works, how it's impactful. The only thing I can think, John, is that maybe we're just trying to bankrupt the system as fast as we can to force a solution faster.

It's the only thing that like logically makes sense at this point is let's just go ahead and drain it down so that we're all forced to collectively make some decision to repair. It is the only thing that I can wrap my head around.

John Mason: You're right. At the end of the day, Social Security Fairness Act, I think some of the proposals said it would force the system to get into a scenario where we can't pay 100% of benefits a few months earlier.

So if the system can't pay benefits by 2035, and now it's June of 2034, at the end of the day, yeah. I think people just thrown the towel and they're like, “Broke is broke is broke. Dead is dead is dead is dead.” And this isn't really adding too much fuel to the fire when you look at it that way.

It's amazing. And I will define WEP and GPO audience for you. But it's amazing how the thought of WEP and GPO being eliminated, maybe as a client or a listener of this, it was like a very positive thing for you. Maybe as a listener, you were like very anxious and you really wanted this. And then now it passed.

And I'm curious how that sits, how that resonates now that it's passed. For us, it was, okay, like we fundamentally disagree with this potential change and we want to talk about it. We want to help educate people on why we think maybe it's not really the Fairness Act. Maybe it's a little unfair, and then it literally as soon as it was passed, it was like flip-flop or like everybody's plan just got better.

So like we turned from being like a voice or an educator to just being able to celebrate and come alongside our clients with this big win. And it's like we don't have anything to fight anymore. It doesn't matter whether we're right. It just matters that all of our clients' financial plans got better and we're going to help them maximize it.

Tommy Blackburn:Even if you flipped it right, if they got worse, that's our job as their advisors. We very much were paying attention to this and monitoring the progress of it. So more than it's always great to have good news and that we get to share that with clients and help them think through this now.

As well as even navigate how this change is going to get implemented as more information becomes available. But even if it was negative, and we get that with tax laws all the time, right? Where it's okay. Here's how this impacts the plan and are there any adjustments we can make to maybe take this thing off of this?

Are there advantages that don't even appear on the surface that we now can take advantage of? So I think it all just comes around regardless of our personal beliefs. We're going to take whatever the situation is and apply it as best we can for our clients.

John Mason: Very good. So Windfall Elimination Provision for the audience, WEP. The Windfall Elimination Provision, what that did is if you were a public sector pension person who did not pay into Social Security for the bulk of your career, but then you had a part time job or a second career where you began paying into Social Security, Social Security would pay you a reduced benefit based on your earnings history within the Social Security system.

There were different bend points, different calculations, but essentially Social Security is designed to provide the highest return on the lowest amount of income. So somebody that makes $40,000 receives a higher Social Security benefit proportionate to their income than somebody that makes $80,000.

And what the Windfall Elimination Provision did is it made it seem like these public sector pensions, they wouldn't get that same enhanced benefit for the lower income, they would get a reduced benefit.

Tommy Blackburn: And yeah, to go a little further, which is wonderful what you're saying. I guess I think about it. Maybe a desire to educate here is Social Security looks out over your highest 35 years of earnings.

And so if you had a non-covered career, CSRS or some type of public employment where you didn't pay into Social Security, and then you dabbled—I say dabbled. You had a second career. You put your 10 years and now they're looking at you and they're saying, they’re still looking out across 35 years.

And what they do is they average your monthly earnings, so they see a lot of zeros. That brings your average way down. And that’s, John, to your point of they're trying to play. At first, Ben's point is like 90%. And I forget what the dollar threshold is. But they're averaging that across 35 years, and you had a lot of zeros, even though you could have been very high earning that back part, and they don't even see the earnings that you had while you were in that non-covered position.

So what WEPe was trying to do was correct those years of zeros, essentially. It was just trying to say, that wasn't really the story here. The story is that you had a different system available to you and then your time inside of Social Security. Here's what you earned. So let's try to get that average more accurate.

And that, of course, would then reduce the amount you are receiving. So that's a kind of high level what we was attempting to accomplish. And I think, John, on average, maybe what we were seeing is. Probably somewhere between $450 and $550 a month reduction. And I think, was it if you had 30 years of Social Security coverage, you wouldn't even be impacted by a WEP?

John Mason: Correct. If you had 30 years of substantial earnings, you were not impacted by the Windfall Elimination Provision. And there were different rules for CSRS defers, transfers, and CSRS Offset, and what have you. But at the end of the day, Social Security was originally created as a social safety net, and it's morphed into a retirement vehicle, and I think that Windfall Elimination Provision, our firm has largely understood why it's there because the safety net or the safety net need for people that had public sector pensions wasn't the same as somebody who didn't have a public sector pension, but like we said in the last episode, we understand hustle, too.

We can really understand the frustration behind maybe you had a $50,000 public job and a $50,000 private job, and you weren't like a super high earner as a CSRS, and you just hustled more than other people. We could understand where you're coming from in some aspects of WEP, folks, it's gone.

We know a number of clients are going to get impacted by this, and spouses of clients, because spouses of these folks are also impacted by the Windfall Elimination Provision. So it's done, it's gone. I'm honestly kinda happy.

Tommy Blackburn: I was thinking the same thing. One, I'm happy I don't have to have this conversation or even really try to educate or, who knows, I probably can't give up the education.

But one last thing to think about. It actually seems like something will get simpler for us.

John Mason: Something will get simpler and one, one client in my head right now has a big pension and has many years of substantial earnings. And with Windfall Elimination Provision, Tommy, we always—I shouldn't say always.

It was like, when do these people apply for Social Security? Do they do it at 62, 67, 70? And you were like basing your decision based on a couple of things. It was like you're going to be impacted by WEP. Maybe we should just turn it on early. We're like, we should definitely turn yours on early because you're never going to get any of Sally's because you've got GPO.

So from a social security claiming scenario, strategy, and standpoint, it was pretty complicated, fully thinking through we're going to delay yours because your spouse isn't subject to WEP, but you are as a survivor, or we're going to delay yours, or we're going to do this because your spousal—it just was a mess.

It was a lot to think about. It was very complicated. This has simplified. We get to literally delete buttons out of MoneyGuidePro and RightCapital. Entire systems that have been put in place get to be Ctrl-Alt-Deleted. And now we can do social security planning for these folks the same as we're doing it for other people.

I won't forget where we've come the last 14 or 15 years, but I'm excited not to have to do all that. That mental gymnastics going forward.

Tommy Blackburn: I agree. It's a relief from a little bit of a lighter mental load going forward. And yeah, it's really nice that clients are getting substantial benefits here.

A substantial increase that they probably, honestly, largely were not expecting. So it is very much found money, I think, for many of them. Regardless of whether you think it's right or wrong, it's a good news and it simplifies it for all of us involved, and I guess on that social security claiming, you went through maybe why we take it early.

And yeah, you say and I'm like, yeah, I agree anytime you had those situations. It's like, oh, this is so just a nuisance thinking through this particular situation. And because it wasn't black and white, it wasn't a black-and-white answer, right? It was very much you having to weigh different variables.

And it was just an art to it. You would weigh and think about it mathematically. But then we don't know the future. We don't know how long people are going to live. We don't know how things are going to change. So there's where the art came into that decision. Reason we might've delayed it was because the survivor wasn't subject to the WEP.

So we could be, “Hey, this is to protect your survivor. We should actually delay it even though it doesn't even grow it that much because the WEP is taking a good bite out of it.” But all of that's gone now, so this is a happy day for everybody. And I don't know if we want to talk more about WEP or if we now want to go into GPO.

John Mason: Yeah. So GPO, Government Pension Offset. Again, we're still talking CSRS, CSRS offset. Not first transfers because GPO didn't apply to you. New Jersey, California, Illinois, same folks. Government Pension Offset impacted your ability to get benefits on your spouse's record. In a very simple form, Tommy and I are married.

He's got a $60,000 CSRS pension. I've got a $40,000 Social Security. Under the old rules, Tommy was not eligible for any Social Security while I was alive. And under old rules, Tommy was not eligible for any Social Security at my death. No spousal benefits, and no survivor benefits. Now folks, double-check my math, but the offset on GPO is a two-thirds, one-third.

So, essentially, two-thirds of your CSRS pension would offset what you would get from your spouse. Hopefully, the examples I gave would still hold true in that 60/40 scenario. But it impacted Tommy's ability to get any Social Security from me while I'm alive or dead. GPO has been eliminated, Tommy.

So you just got, because we're married and we're both alive, you just got a $20,000 pay raise.

Tommy Blackburn: Yeah, and this is the one where you've really seen a substantial change. WEP, that's not to—a $400 or $500 increase per month under Weep is by no means insignificant. But GPO, when we look at those numbers and are sharing the good news with our clients, it's usually a minimum of $1,000 a month and easily approaching $1,700 to $2,000 a month because now there you get to pull half of your spouse's full retirement age benefit.

Now, depending on when you do it, there could be a reduction. You're still subject to the normal social security rules. But yeah, I'm looking at a spreadsheet right now. It's interesting. I've got four GPOs looking at me in the face and the amounts were $1,250, $814. So a smaller benefit there.

$1,800 and $1,600. And these are the amounts. The half that's already been cut in half, right? This is the amount the client will receive. That's a pretty significant, I think, monthly increase for anyone.

John Mason: It's a game changer. And, I don't know what the maximum social security benefit that can be paid out at 67, which is currently full retirement age, but I think it's about $3,500 a month, maybe?

Tommy Blackburn:Seems real.

John Mason:So it's certainly over $3,000. So for all of you who are about to retire that are in this situation or similar age to turning on 67 benefits now $1,500 a month is an easy number, and to Tommy's point E could be even higher than that.

Tommy Blackburn: At least a quick Google review says in 2025, it's $4,018 a month, so let's just call it $4,000. So $2000.

John Mason:For a 67-year-old?

Tommy Blackburn: Yeah. Basically a full retirement age.

John Mason: Unbelievable. So we're probably approaching almost $5,000 a month for a 70-year-old then too. Yeah, $4,982 if I did my math right for a 70-year-old.

Tommy Blackburn: Yeah, sounds right. I mean, I have every reason to believe. Yeah, I don't need to check it. Sounds good.

John Mason:Yeah. So folks, this is a game-changer. So, this is a big impact. We've seen it across the board. It's going to be a substantial net increase to folks' take-home pay.

And then let's just go ahead and kill me in this example too. So remember Tommy was receiving a $60,000 pension and $20,000 a year. $60,000 pension, $20,000 spousal, but I just kicked the bucket. He's now going to receive $40,000 in Social Security for the rest of his life. And if the government does make that tax-free, then that'll be tax-free too, which is interesting.

Tommy Blackburn:And it's tax-free in Virginia, right? So yeah, quite the win.

John Mason:Yeah, I mean, it’s… I wish I had a better vocabulary than huge and great and phenomenal, but it's a big deal.

And the other thing that's a nuance about this is that for me to pass on my Social Security to Tommy, I didn't have to pay anything, Tommy, to do that. I didn't have to elect survivor benefits. I didn't have to make a choice. I didn't have to take a reduction in my pay to provide that benefit to you.

Tommy Blackburn: No, yeah, that's all just part of how Social Security’s spousal benefits work, and because you had no record, I think, if I have my scenario correct, I think you're the one that, or am I the one?

John Mason:You're the CSRS.

Tommy Blackburn:I'm the pension. Yeah, I had no Social Security work record, so I get half because I have no Social Security benefit. What is strange—well, not strange, but this is a government system that's gone awry. As we said, it was originally a safety net, and it has morphed in so many ways to be so many different things.

So why do you have these issues now is originally it was really designed with this idea that it was the stay-at-home spouse who would have no work. That's why they would have no work record. And this was to protect them, to say that, hey, for that used-to-be-very-traditional household where one person worked and earned, their spouse would also get half the benefit while you're both alive. And when that Social Security wage earner passed, you lost your half, but you stepped into their shoes to pick up, in our example, I think it was the $40,000.

That is obviously, I mean, I think we can all agree regardless of your thoughts on this, that's not the case now when we have a spouse who has a CSRS pension. They don't have the work record, but they worked and they have a pension. But regardless, because that is how the system is set up, Social Security sees nothing. You get half while the Social Security spouse is alive, and you step into their shoes, you do lose your half. So $20,000 goes away. In our example, I pick up the $40,000 that John was receiving, but I didn't pay anything for it. And from a fairness perspective, I think this is where John and I—or not John and I—I think most people could agree to this.

What is strange in this scenario is we've painted the picture of here's the CSRS spouse and the Social Security spouse. We've done this in other episodes, which we'll link to, but if we take two Social Security earning spouses where they're both going to work and pay Social Security taxes, what do we get, John?

John Mason: ?Good point. Good point. So, before we go there—because I think we want to introduce the real—and don't get mad at us, audience—but the real Social Security Fairness Act 2.0 that Tommy and I are going to present to you now because we're going to try and bankrupt the system even faster, right? Now that we've already sped up the clock a little bit, we're going to try and do it even faster. Let's see if we can bankrupt it by 2026, right? And I'm just making up numbers here, but I want to point out that Tommy's CSRS—and I'm private—and he's receiving $100,000 a year and an income after I pass away—60 and 40.

Let's kill Tommy now. So I'm still getting my $40,000, and I get half of his. So now, I'm getting $40,000 plus $30,000 = $70,000. And oh, by the way, Tommy had to pay roughly 10% of his income to provide that survivor benefit to me. So the Social Security Fairness Act has produced an unfair survivor difference in income.

Because CSRS doesn't all transfer over, but all of Social Security does. So I find that fascinating—that whichever spouse dies first could have a $30,000 difference in survivor income. That's certainly a planning opportunity that we need to talk about. But let's go, Tommy, to your example, where we're both highly compensated. We did an entire career in the private sector. You make $40,000 in Social Security, and I make $40,000 in Social Security. And we're both married.

Tommy Blackburn: We both paid in.

John Mason:We both paid in.

Tommy Blackburn:Neither of us are not paid in. We both have paid an entire career into Social Security.

John Mason: So it's the identical scenario. Two working spouses, the difference is two privates versus one CSRS.

In our example, folks, there is no spousal Social Security benefit for Tommy or John because we both have earned a benefit that's higher than half of each other's. Yeah. Alive or dead. While we're both alive, my benefit's higher than half of his, and his benefit's higher than half of mine. That means there's no spousal benefit for us.

Now, Social Security Fairness Act 2.0 would give us both spousal benefits on each other's record. So, I would get $20,000 off of Tommy, and Tommy would get $20,000 off of me. And we'd be making $120,000 a year in retirement instead of $80,000. That's what we just did by eliminating GPO. We gave spousal benefits, right? So, if we were to give each other spousal benefits, we'd both be making $60,000 a year in Social Security.

Further, at my death, Tommy would get his $40,000 plus my $40,000, so he'd be at $80,000. Well, under the current rules, Tommy only gets $40,000; mine goes away, poof. So, we're going to start talking now about Social Security Fairness Act 2.0 and 3.0, which would maybe allow me to pay for a survivor benefit, so my Social Security could go to Tommy. Or, what would be really fair is just to allow Tommy to make $80,000 after my death, rather than have an entire income stream go away.

Tommy Blackburn: the purpose is we, again, it's just in our hearts to provide some education here and why were things maybe the way they were, even if they were imperfect? But hey, we're not there anymore. So, if the true goal is, John, as you said, is fairness, 2.0 and 3.0, these sound pretty fair if you want to take the same logic we just applied to get to where we are now with WEP and GPO being eliminated.

Because in those scenarios, you were just basing it all off of this one person's work record and what they contributed to social security. So, we would argue that it's unfair for dual-income social security households that are both paying in, that they never receive any type of spousal benefit in many scenarios, so they've paid in an entire career to have those benefits negated.

John Mason: It's like a marriage penalty, right? We both pay 7—6.45%, or whatever the number is, into Social Security.

Tommy Blackburn:Social Security and Medicare, right? So 6.2%, I think, for Social Security.

John Mason:Yeah, 6.2%. So we both pay for the privilege of not being able to get what would have been had for free, which is the spousal benefit. So let me give you another example, audience, of the marriage penalty in full force. So let's say Tommy has earned a retirement benefit of $20,000, and I've earned a retirement benefit of $40,000.

He had the privilege of paying in 6.2% of his pay his entire career to get the exact same Social Security retirement benefit that he could have had for free if he had never worked and just took my spousal benefit, so it's that person. It's that person that we kinda just like… Ouch.

Tommy Blackburn:It's not fair to them. I don't know how you can say that. Yeah, it’s definitely not fair.

John Mason:That person literally, they donated to the pot, right? They paid Social Security their entire career to get something they could have had for free. And nobody's talking about that.

Tommy Blackburn: And maybe they will. Maybe that's the next thing to talk about. And again, if the logic is to make things fair and we won't worry about the budget until it is imploding around us completely and we need to make fixes.

Maybe that's where we need to get to. Let's just make it fair and speed up the clock to the demise so that we can reinvent a new fair system that also fiscally works from the beginning.

Maybe that's where we need to get. But hey, it's not where we are today. I was thanking John—So the GPO again is the one we're seeing the largest cash flow impact to our clients, which is all—it’s so fantastic to share this news with clients. You're going to have another $15,000 to $2,000 a month. That's impactful to anyone, I believe.

And so if you just take $2,000 or I even said just the $20,000 a year, assuming 30 years of life, that's $600,000 without any math around it, right? If we then say it's cost of living adjusted, it may be tax-free, it's state tax-free, you could easily say you just basically got a million dollars.

John Mason: Easily. Yeah, the government basically just gave everybody somewhere between $500,000 and a million bucks cash or more awesome.

Tommy Blackburn: It is because, and what made me think about that is what you were saying, I'm trying to think about it in a more impactful way than just saying huge, it’s like, well, let's start with some numbers behind it.

Maybe that gives the impact.

John Mason: Yeah, dude, I mean, you’re spot on. It’s the government just wrote our clients a check for half a million, $1 million, $1.5 million, depending on how old you are when all this happens.

Like if you’re a CSRS person and you’re 62 years old or 66 years old and you collect survivor benefits for the next 30 years, that’s a big number because it’s not the $20,000. It’s probably closer to $40,000. So that is to be determined how valuable this was, but we’re celebrating with you. Again, planning software just got better.

I’d be curious if you’re working with a financial planner, audience, and they’re not aware of how this impacts you. You certainly want to make your financial professionals aware of the Social Security Fairness Act and make sure they understand how this changes things for you, your children, your spouse, and your family.

Tommy, I occasionally listen to Dave Ramsey. You know that. And he’s a great communicator. He’s a great communicator and he says things like, “Live like nobody else today so you can live like nobody else tomorrow,” or, “Live like nobody else today so you can live and give like nobody else tomorrow.”

We can’t tell people what to do with their money. We can’t tell people what to do with this increase in income. But at the end of the day, we’re a consumer-driven economy, which means more spending is better. Maybe it’ll drive a little bit of inflation, but in general, people going out, doing things, buying things, and consuming things is good for the U.S. economy.

Many of our clients are charitable. If you’re a 10% tither or you donate 10% of your income, now we’ve got $2,000, $3,000, $4,000, $5,000 a year now more going to charitable goals and donations and 501c3s.

At the end of the day, maybe this wasn’t fair, maybe it is fair. We can debate that, but our clients are going to do so much good with this.

Tommy Blackburn:A lot of good. I was thinking the same thing. A lot of good is going to come from this. In another example, everything you said is absolutely we're going to see with our clients.

Particularly the charitable piece, but we also have very family-driven families that we work with. And I suspect a lot of this is going to also go to,,, is there a generation that could use some help? Is there a generation that needs some shoring up with college savings and this will go to that, or? Is there some generation, multi-generation trips that are going to be had out of this money?

I can see that happening a lot. Let's go as a family and take this money so that we can make memories together.

John Mason: It's going to be fun to watch. And as their financial planners, this could be one of those steps that helps people just really propel them into enjoying their financial plan. Maybe we've been trying to get them to spend a little more money and get them to do a little more upgraded trips or longer trips or take the family on travel.

And if this is the shot in the arm that they can have impacts for generations to come, then a lot of good is going to come from it. And I can't wait to see pictures and see clients smiling faces and hear the stories. Yeah, now the hard part goes in is verifying that everybody's getting what they should be getting.

Tommy Blackburn: Yeah, so Social Security Administration, this is not like it meant to be a dig on anybody. Just I believe is the facts. They seem to be overwhelmed as it is already. And so now we've added this to it. And many of these—this is going back decades, these records. So it's, you could see that There's going to be some logistical challenges.

I do think they'll get it right. But having your own numbers and your own checks of things is going to be critical. We'll certainly be sharing information as we get it. It seems like what I've read is that they're going to try to automatically handle WEP because those people are already receiving a social security benefit.

I imagine there's going to be some way to push back if you disagree with a calculation, but it seems like that one maybe will be a little more automatic. GPO I think is going to probably require more of an active participation on those impacted versus stuff happening automatically. So we'll wait to see.

And maybe it's no different than the current system where it'll just be, “Hey, you just need to go submit an application, make some notes and we'll go from there.”

Some other things. So the Social Security Administration piece of it's going to be the most pressing. You got something to add there?

John Mason: Yeah. So you just made me think about multiple marriages and divorces.

And you mentioned higher involvement. Imagine this for an example, audience. Imagine that you were married to somebody that paid into Social Security. And then that person died. And then you got remarried after age 60 to somebody that's CSRS. Maybe you're CSRS. And now all of a sudden, you have a survivor benefit on a marriage that happened two marriages ago. It's not just your current spouse, I don't think, so you follow the rules.

And you think about the bouncing balls here. And you think about divorces and tenure rules, it gets hard to find all these people. And that's true also with divorces for living spousal benefits too.

Tommy Blackburn: Yeah. So it just had to be one of those checkpoints or stop points of, have you had a previous marriage of any, and if you have, okay, we need to do some more digging. All right, we need to think about maybe there's an uncommon scenario apply here before we just move on.

That's a really good point. Some other things I was thinking of ramifications. So getting the benefit in place to begin with. That's step one. Most pressing piece of it. But then it's adjusting cash flow strategies, whether that's have more fun or dial back portfolio distributions. We've got to update our tax plans.

Maybe even have some thought around, I wouldn't plan around it, but have some thought around what if Social Security becomes tax free is probably should at least be on the radar. That one seems less likely, but keep it on the radar.

But what does this do? Because now we've got social security income coming in, most likely 85% of it's going to be taxable income, things like Medicare premiums based on IRMAA could be affected, and this could ripple throughout the tax return, a lot of things based on income could impact capital gains rates, what ordinary tax rate we're in, we need to—so there's some updating that needs to be done and some consideration to the greater plan.

This is a positive development, no matter what. But we do need to think about all of the ripples through this.

John Mason: Well, as we understand it currently, Tommy, it looks like benefits are going to be retroactive to January 1. I'm going to pull up in a second, socialsecurity.gov and read this for everybody who can't see it.

Benefits are going to be retroactive to January 1. So let's just say, $20K, $30k, $40k, $50k could be—What happens if it takes them all year and then you get $50,000 dropped onto your tax return on December 31st? Taxes aren't withheld and you didn't make an estimated payment by January 15th. I'll be curious to see how that 1099 works because 1099s say that your income occurred throughout the entire year.

Tommy Blackburn:You're going to have to be on your game.

John Mason:Yeah, you’re going to have to be on our game from a tax planning perspective. Luckily for our clients, we will help them adjust withholdings, make estimated payments, and make sure they are on time for this stuff. It could be interesting if it takes 9, 10, or 11 months to get this passed. You don't have a lot of opportunities for tax planning.

Tommy Blackburn: That's true. Yeah. And just even being aware that it's taxable because you're writing your scenario, which is really not unrealistic that it could take a while towards the back part of the year for them to get it figured out completely.

But even if it hit early on in the year, just realizing, hey, that's taxable income. You need to be preparing for that and also thinking through what other taxable income do you have hitting and do things need to be adjusted.

John Mason: I can already see it. It's going to be like, “We paid you this in December.” Then, in April, everybody's going to go crazy because it was like, “Oh my gosh, my taxes.” And the government's going to say, “You know what, we didn't give you enough time, but we'll just make last year tax-free,” you know?

I don't know, audience, if that's really going to happen, but that's what happened when the SECURE Act passed. They kept issuing SECURE Acts 1 and 2. They kept issuing extensions on all these rules because they couldn't provide accurate guidance. So it'll be interesting to see how the guidance around all of this happens.

Tommy Blackburn: Maybe they'll give you longer to pay. I would imagine that it could happen, but Congress would have to, I don't think the IRS could just do that. I think they'd have to make it tax-free, which would require a majority act of Congress. But yeah, you're right. A lot of times they give extensions they kick things down the road so that it can be implemented.

But you shouldn't plan around that.

John Mason: That's right. Let me share this screen with everybody. So this is socialsecurity.gov, last updated January 6, 2025. So I'm going to go ahead and read it for those people who aren't watching on YouTube.

The Social Security Fairness Act, HR 82, concerning the Windfall Elimination Provision and Government Pension Offset, was signed into law on January 5, 2025. Upon implementation, the Social Security Fairness Act eliminates the reduction of Social Security benefits while entitled to public pensions from work not covered by Social Security. The Social Security Administration is evaluating how to implement the Act. We will provide more information as soon as available.

I previously filed for Social Security benefits and they are partially or completely offset.

At this time, you do not need to take any action except to verify that we have your current mailing address and direct deposit information if it has recently changed. Most people can do this online.

Visit www.ssa.gov to create an account. We will provide ongoing updates regarding implementation on this page. I have not previously filed for Social Security benefits.

If you are receiving a public pension and are interested in filing for benefits, you may file online at ssa.gov/apply or schedule an appointment.

So Tommy, I think what I'm understanding from this is that if you are impacted by windfall elimination provision, And you're already receiving social security. You're good. You don't need to do anything. But in my CSRS example, that lady, she needs to go ahead and apply for spousal benefits.

Tommy Blackburn: Maybe. It's probably a conversation that still needs to happen with you. Without knowing the particular situation.

So even what I was saying is we read that last paragraph there about apply for benefits. They said you may want to or schedule an appointment. So it's kinda and what I'm thinking to be clear in your example is well maybe the impacted, CSRS person, maybe they're 62.

And maybe they don't want to take a reduction on their spousal. So perhaps we still want to delay them. So that's where maybe applying now is not the advisable course of action. That's where, yeah, come back to your plan. If we want to get it started, then it sounds apply now. Otherwise you need to understand your situation.

John Mason: And it's fascinating, too, because I maybe get these rules backwards. We see so many scenarios. But again, if you and I are married and you're 66 and you've never worked, and I'm 66 and I retire and start my social security, I think you get half of mine without you having to apply for anything.

I don't think you have to go in and apply for spousal benefits. Do you?

Tommy Blackburn: Typically. Yeah, you're right. No. No, I think you do. You still need to apply for your half. I think what you're thinking about is if you're entitled to spousal benefits or your own, it's your deem to file for whatever the greater is, right?

You file for both in that scenario. But just the one spouse applying, and from my recollection, and based on what I thought was some recent experience with clients, the spouse that's completely spousal, they have no record of their own, still had to go apply after the primary one.

John Mason:Okay, that's good to know.

Tommy Blackburn:Yeah, that's based on my experience, I think that is the case.

John Mason: Well, I’m sure we're going to find out soon because we're going to be helping clients navigate this situation. We're certainly going to send this podcast out to all clients. We know some of you are listening already, but we're going to blast this out to all of our active client base, as well as obviously YouTube podcast, et cetera.

So Tommy, I think we've done this justice.

Tommy Blackburn: I think we have. We've opened up Pandora's boxes on spousal benefits. So that's the important thing to think about too. You've got the primary spouse whose records you're thinking about pulling off of the age that they filed at doesn't necessarily impact your spousal benefit, but the age you apply it does.

So some considerations to be had here.

John Mason: And we'll just say, audience, if we actually do get a wild hair to propose Social Security Fairness Act 2.0 and 3.0, we ask for your support, and helping Tommy and I share in spousal benefits for each other one day as two people covered by Social Security. We say that a little tongue in cheek.

I don't think we're that politically motivated to work that hard. We'd rather just take care of our clients and try to do the best job we can in our little community here that we've built at Mason & Associates and on this podcast. So Tommy, thanks for a great episode. This was a lot of fun.

Tommy Blackburn:All right. As always. Thank you, sir. It's been a blast. I'm looking forward to continuing to produce some more.

John Mason: Folks, thanks for being a part of another episode of the Federal Employee Financial Planning Podcast. If you're a client, thank you so much for trusting us to be your financial planning team, as well as being on this journey.

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The topics discussed on this podcast represent our best understanding of federal benefits and are for informational and educational purposes only, and should not be construed as investment, financial planning, or other professional advice.

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