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The Social Security Administration has started issuing retroactive payments and will soon increase monthly benefits for some individuals as the Social Security Fairness Act kicks in.
But how will that affect the Social Security Old-Age and Survivors Insurance (OASI) trust fund? According to the latest Trustees report, the fund can pay full benefits until 2033, but after that, it will only be able to cover about 79% of scheduled benefits.
“Unfortunately, it’s not going to be a good result when the Social Security Fairness Act is rolled out,” Olivia Mitchell, a Wharton professor and executive director of the Pension Research Council, said in a Feb. 25 episode of Decoding Retirement (see video above or listen below).
The Social Security Fairness Act, which was enacted by the Biden administration, ended the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO) provisions. These provisions reduced or eliminated the Social Security benefits for more than 3.2 million public sector employees, retirees, spouses, and surviving spouses.
As a result, the new law “is going to hasten the system’s insolvency date by about half a year,” she added.
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That’s different than saying the system is bankrupt. However, Mitchell explained that there isn’t enough revenue coming in to maintain these benefits. At the current rate, there will need to be benefit cuts of around 25% after 2033, Mitchell said.
“The reality is that we’re facing a big problem,” she said. “The Social Security Fairness Act, which honestly raised benefits for a few public sector workers and their spouses, really didn’t help the problem. It actually made it worse.”
Read more: How to find out your 2025 Social Security COLA increase
So what can be done to keep the trust fund solvent?
“The reality is there’s no single magic bullet, unfortunately,” Mitchell said. “I think if it had been easy, it could have already happened.”
In 2001, Mitchell served on former President George W. Bush’s bipartisan commission to study Social Security reform.
“At that point, we still had a bit of a runway to do some reforms and avoid the big problems that we now confront,” she said. “But right now, it’s going to be very, very difficult and delicate.”
There is no shortage of proposals at the moment, most of which entail reducing benefits, increasing taxes, or a combination of both.
For instance, one proposed Social Security reform would raise the full retirement age — the age at which individuals receive their full, unreduced benefit — to 70 from the current age of 67.
