Let’s talk about Social Security

The 2025 Social Security Trustees Report has not yet been released, however, there are a lot of things that are worth looking at to help federal employees understand the role that Social Security will play in their retirement planning.  

With so many federal employees retiring and facing significant downsizing, it is more important than ever to reevaluate the retirement plans that you had in place last year, as one of the major “what-if” situations that can occur in a federal career may be becoming a reality: “What if I leave federal service early?”   

As most workers are now covered under the Federal Employees Retirement System (FERS), it is important to remember that retirement benefits come from three different sources: a Basic Benefit Plan, Social Security and the Thrift Savings Plan (TSP). Two of the three parts of FERS (Social Security and the TSP) are portable and they will go with you when you leave the federal government before retirement. 

The FERS basic retirement benefit is unique to federal employment and with a minimum of five years of creditable civilian federal employment, you will earn an immediate or a deferred annuity benefit based on your length of service and age at the time you separate from federal employment. Your agency withholds the cost of the Basic Benefit and Social Security from your pay as payroll deductions. 

Your agency is also responsible for paying the employer share of the contribution to the Civil Service Retirement and Disability Fund (CSRDF) and the Social Security Trust Fund along with making automatic and matching TSP contributions on your behalf. Later, after you retire, you receive annuity payments each month for the rest of your life from these benefits along with an array of distribution options for the money you and your agency have invested in the TSP.   

The good news is that even if your career changes from federal service to private sector employment, Social Security is a constant part of your retirement plan.  

The bad news is that according to the Social Security Administration’s (SSA) Office of the Chief Actuary and the Congressional Budget Office (CBO), the Old-Age and Survivor Insurance (OASI) Trust Fund—the “cash” retirement benefit part of Social Security—is forecast to exhaust its funds in 2033. When that happens, the available revenues to the OASI fund will be able to finance about 83% of scheduled benefits. In other words, the resulting gap means Social Security checks for these beneficiaries will shrink by about 17%. Last year, Social Security paid over $1.5 trillion in benefits to more than 72 million beneficiaries. 

What are some of the potential changes that may impact your Social Security retirement benefit? 

When researching information, it is important to try to find resources that aren’t politically motivated so that the facts can be trusted to be reliable rather than slanted to support a political agenda. I turned to research done by the Brookings Institute to learn more about the possible changes to fix the issue of the funding shortfall that can have a detrimental effect on the amount of retirement income expected from Social Security.  According to Georgetown College, an academic analysis of congressional records from 1993 to 2002 found that Brookings was referenced by conservative politicians almost as frequently as liberal politicians, earning a score of 53 on a 1–100 scale with 100 representing the most liberal score. It is listed as a centrist or nonpartisan think-tank, by the College’s Ensor Learning Resource Center.    

A Brookings report, Fixing Social Security Blueprint for a bipartisan solution, provides some insight to understand what changes might occur and how they would impact the future of Social Security. The blueprint proposed was designed to achieve solvency for the OASDI program’s actuarial balance over the 75-year period from 2023 to 2098. Another important goal is that the blueprint proposed strengthening child benefits and protections for Americans with disabilities and the survivors of workers who die. Shortly after the program’s 125th anniversary in 2060, it would achieve universal coverage for state, city and county employees in certain places who remain outside the federal retirement system and would make the system more progressive. This plan was constructed so that, over the 75-year period from 2023 to 2098, revenue increases would match the benefit reductions minus the benefit improvements. It is important to note that under the proposal,  people receiving Social Security benefits before the blueprint became law would not have those benefits lowered. 

Proposal 1: Increase revenue 

• Increase the taxable maximum ceiling (currently FICA taxes are only withheld on wages up to $176,100 in 2025). 

• Change rules for pass-through payroll tax   

• Increase payroll tax   

Proposal 2: Benefit reductions 

• Increase retirement age for high earners (currently 67 for everyone born in 1960 and later) 

• The average indexed monthly earnings, used in determining benefits, would be based on a new formula, so that, by 2040, it would rely on the highest 40 years of earnings, rather than the current 35 years. This gradual change, to begin in 2032, reflects increases in life expectancy, signaling that people need to work longer 

• To make the system more progressive, all Social Security benefits received by single people with adjusted gross income above $100,000 and couples with income above $125,000 would be taxed. That would set them apart from people with less earnings, who are taxed on half or 85% of their Social Security benefits, depending on their income range. 

• The dependent spouse benefit would be lowered by five percentage points a year starting in 2027 so that it disappeared by 2037—sooner for spouses whose partners have income in the top 25% of earnings. It would not apply to disabled spouses or widow(er)s, but this change reflects that the gap has shrunken between the labor force participation of women and men. This benefit is currently as much as half of the worker’s full benefit. 

• Replace the Windfall Elimination Provision and the Government Pension Offset (these were just repealed!)  

• Eliminate child retiree benefits (Your dependent child may get benefits up to half of your full benefit amount based on your earnings record when you start your Social Security retirement benefits.) 

Benefit Improvements: 

• Increase survivor benefits 

• Create a disability benefit for older workers with disabling conditions that make them unable to do their jobs 

• Widen student benefit for children whose parents are disabled or dead 

• Provide a child benefit to grandparents or certain other relatives caring for children 

• Improve benefits for disabled adult children 

Coverage and Transfers: 

• Devote all proceeds from taxes on Social Security benefits to OASDI trust funds 

• Expand the labor force by changing policies on legal immigration 

• Achieve universal coverage in Social Security 

On Feb.11, 2025, a letter signed by 16 U.S. Representatives — eight democrats and eight republicans — was sent to the Senate Minority Leader and Senate Majority Leader to call their attention to this Social Security solvency plan, noting that it is a centrist and thoughtful plan that also makes several key improvements to the Social Security program. The letter also stated that this plan is modeled after the 1983 Social Security amendments which achieved 50 years of solvency. Just like those amendments, the letter urges Congress to significantly improve the supplemental security income program and reduce elderly poverty, which has increased by over 50% in the last four years.

What were some of the changes that were enacted as a result of the Social Security Amendments of 1983? 

According to a 1984 report, there were major changes made to Social Security because of the 1983 Amendments that kept the Old Age Survivors and Disability Insurance (OASDI) programs (i.e. the “cash” benefits of Social Security) solvent until today.  A summary that was prepared by SSA’s Office of Legislation & Congressional Affairs, includes the following changes that were made more than 40 years ago when Social Security was facing a similar funding shortfall like we are facing today. However, additional changes are needed to keep Social Security available for future generations of beneficiaries.  Here are some of the changes enacted in the 1983 Amendments: 

• Provide coverage of newly hired Federal employees (except re-employed civil service annuitants) hired on or after January 1, 1984. 
  • Eliminates gaps in protection for Federal employees who shift between Federal employment and jobs already covered under Social Security.  
  • Windfall Social Security benefits will be eliminated for these employees.  
  • This is the change that prompted Congress to provide supplementary retirement protection for Federal employees covered under Social Security and, over the next three years, created the Federal Employees Retirement System Act of 1986. 
• Eliminates windfall Social Security benefits for workers who are first eligible after 1985 for both a pension from non-covered employment and Social Security retirement or disability benefits. (The Windfall Elimination Provision that was enacted as part of the 1983 Amendments was repealed under the Social Security Fairness Act of 2023 that was signed into law on January 5, 2025) 
• Delayed the June 1983 cost-of-living adjustment until December 1983 and provides for future adjustments payable in January rather than July of each year. It should be noted that since 1975, Social Security general benefit increases have been cost-of-living adjustments or COLAs. Before 1975, Congress sporadically approved COLAs through the adoption of legislation.  The 1975-82 COLAs were effective with Social Security benefits payable for June in each of those years; thereafter COLAs have been effective with benefits payable for December. The delay in the Social Security COLA and shift in the measuring period reduced program expenditures by $39.4 billion for 1983-89 and had a long-range savings of .30 percent of taxable payroll.  COLAs leading up to 1984 were high due to the inflation occurring in those years: 
  • 1975:  8.0% 
  • 1976:  6.4% 
  • 1977:  5.9% 
  • 1978:  6.5% 
  • 1979:  9.9% 
  • 1980:  14.3% 
  • 1981:  11.2% 
  • 1982:  7.4% 
  • 1983: 3.5% 
• Increased the Delayed Retirement Credit (DRC) in gradual steps from 3 percent for workers reaching full benefit retirement age (age 65) before 1990, to 8 percent for workers reaching full benefit retirement age after 2008.  This provision is intended to encourage people to continue working beyond age 65, by increasing the credit for people who delay retirement.  
• Advanced scheduled increases in Social Security tax rates. Social Security tax rates, which include the Hospital Insurance (HI) Tax (Medicare) rates, for employers and employees increased to 7.0 percent in 1984, 7.05 percent in 1985, 7.15 percent in 1986-87, 7.51 percent in 1988-89 and 7.65 percent (6.2% OASDI and 1.45% HI) in 1990 and thereafter. 
• Required the Chairmen of the House Ways and Means Committee and the Senate Finance Committee to appoint a panel to conduct a study concerning the establishment of the Social Security Administration as an independent agency. 
• Beginning in 1984, included up to one-half of Social Security benefits as taxable income for taxpayers whose adjusted gross income, combined with half their benefits and any tax-exempt interest they may have exceeds $25,000 for a single taxpayer and $32,000 for married taxpayers filing jointly. Benefits received by married taxpayers filing separately are taxable without regard to other income. Appropriates amounts equal to estimated tax liability to the Social Security trust funds. These dollar amounts have not changed in over 40 years! 
• Raises the age of eligibility for unreduced retirement benefits in two stages to 67 by the year 2027. Workers born in 1938 (46 years old in 1984) will be the first group affected by the gradual increase. Benefits will still be available at age 62, but with greater reduction.  Does not change age of eligibility for Medicare. 
• Extends the current limitation on payment of disability insurance benefits to convicted felons while in prison to include old-age and survivors insurance benefits. 
• Requires the establishment of a system under which the States can voluntarily contract with HHS to supply information derived from official death certificates to facilitate comparison with benefit program records to prevent payments from being made to deceased persons.