Many Illinois teachers have worked jobs outside of teaching. These jobs have had Social Security taken out, among other deductions. However, when they came to collect those Social Security benefits between the ages of 62 and 70, they found that those benefits had been significantly reduced. Alternatively, if they have a teacher’s pension of their own and are looking to collect spousal or survivor Social Security benefits, they have found that these have been phased out, sometimes completely.
A new bill being voted on at the time of writing is looking to eliminate all of those provisions and make these benefits collectible. It has been passed by the House, and is now pending a vote in the Senate.
The Social Security Fairness Act is proposed legislation aimed at eliminating two rules in the Social Security system that reduce benefits for certain public sector workers:
- Windfall Elimination Provision (WEP):
- It affects workers who receive a pension from employment not covered by Social Security (such as an Illinois teacher) but also qualify for Social Security benefits through other jobs.
- It reduces their Social Security benefits based on their earnings record.
- Government Pension Offset (GPO):
- Reduces Social Security spousal or survivor benefits for individuals who receive a pension from a government job (like teaching) not covered by Social Security.
- In some cases, it can eliminate the entire benefit.
The Social Security Fairness Act seeks to repeal WEP and GPO, ensuring that public servants (like teachers), can receive full Social Security benefits, regardless of other pensions they may have earned. This will be retroactive to benefits payable after December 2023.
It sounds like I could get more money. But how does this affect my pension?
It’s true. If this bill passes, it will have the following impact:
- If you have earned Social Security benefits during your career, you can do so without any calculations decreasing your benefit.
- Suppose you do not have any benefits available under your record but are collecting an Illinois TRS pension. In that case, you can now file to receive spousal benefits on your current or deceased spouse.
- Suppose you are collecting an Illinois TRS pension, are currently single, and divorced after being married for over 10 years. You can claim divorced spousal benefits without reducing the Social Security benefits.
While this bill won’t affect your pension directly, it will cause more money to be in your pocket if you file for Social Security.
Watch out for taxes on your Social Security benefit
One thing to watch out for is once you hit a certain income threshold, the benefits you receive from Social Security start to become taxable. Once your income goes above $32,001 (if you’re married), a portion of your benefits becomes taxable (see table below for more information). While you can elect to have taxes taken out of your Social Security benefit, it’s sometimes hard to know how much to have taken out.
One thing I do with my clients is to run tax projections for them each Fall so we can see how close they are to being adequately withheld across all of their income sources. If you are starting to receive Social Security benefits, or your benefit will be changing (if this law change occurs), I suggest going through this exercise to determine how your withholding will need to change in the following years. If you have any questions about these changes or your situation in general, please don't hesitate to reach out.
