The Windfall Elimination Provision (WEP) primarily affects individuals who have earned a pension from working for a government agency or organization where they did not pay Social Security taxes, and also worked at other jobs where they paid Social Security taxes long enough to qualify for Social Security retirement or disability benefits. It may also affect an individual who earned a pension in a job in which they did not pay Social Security taxes, such as work in a foreign country.
Under WEP, the formula used to compute a person’s monthly Social Security benefit amount is modified, giving them a lower benefit if they receive a pension from work not covered by Social Security.
• Social Security benefit amounts are figured with a weighted benefit formula that gives proportionately higher benefits to workers with low lifetime earnings.
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- When computing a person’s monthly Social Security benefit, the Social Security Administration (SSA) considers only earnings covered under Social Security to calculate lifetime earnings.
- A worker with a substantial period of non-covered work during their lifetime appears to have lower lifetime earnings than he actually had.
- By adjusting the benefit formula, WEP prevents workers who receive Social Security and a pension based on non-covered work from receiving the advantage of the weighted benefit formula.
- Before 1986 benefits for people who spent time in jobs not covered by Social Security were computed as if they were long-term, low-wage workers. They received the advantage of the higher percentage of benefits in addition to their other pension.
• The modified formula applies to persons who reach age 62 or become disabled after 1985 and first became eligible after 1985 for a monthly pension based in whole or in part on work where they did not pay Social Security taxes.
• Workers with relatively low pensions are protected because the reduction in the Social Security benefit under the modified formula cannot be more than one-half of that part of the pension attributable to earnings after 1956 not covered by Social Security.
• WEP applies to all benefits based on the retired or disabled worker’s earnings. It does not apply to survivors benefits.
There are several exclusions to WEP. Some of them are:
• It does not apply to federal workers hired after December 31, 1983.
• WEP also does not apply to employees of nonprofit organizations that were exempt from Social Security coverage on December 31, 1983, and became mandatorily covered under Social Security on January 1, 1984.
• Individuals who receive pensions based on railroad employment.
• If the only work performed on which an individual did not pay Social Security taxes was before 1957.
• A person with 30 or more years of “substantial” earnings under Social Security.
• A person receiving Social Security benefits under a Totalization Agreement with an Agreement country.
As of December 2008, there are over 1,040,000 retired and disabled workers who have their benefit partially reduced due to WEP.
• 98.5% are retired workers.
• The average reduction is $229.00 a month, the maximum reduction possible is $372.00 a month.
For more information go to www.socialsecurity.gov.
