The Windfall Elimination Provision, usually referred to as “WEP,” is a Social Security rule enacted in 1983 to close a loophole which paid higher-than-warranted benefits[1] to some beneficiaries. WEP applies to anyone who has contributed enough to Social Security (SS) to be eligible to collect retirement benefits, but who also has a separate retirement pension earned while not contributing to Social Security. Those affected consist mostly[2] of retired State employees in any of 26 U.S. States which have, either fully or partially, opted out of the Federal Social Security program. In such cases, neither the state employee nor their state employer, contribute to Social Security during the employment which results in a state pension, and WEP will reduce the Social Security benefit for those retirees. WEP is hugely unpopular, especially with state employees such as police, firefighters and schoolteachers who dedicate their career to public service. It is, nevertheless, still law which reduces Social Security benefits for many state retirees who also earn SS retirement benefits by working outside their state employment.

The WEP reduction to a person’s Social Security retirement benefit will be based upon either the number of years of substantial[3] earnings while contributing to Social Security or the maximum WEP reduction. The maximum WEP reduction is either 50% of the monthly amount of the state (non-covered) pension, or the maximum reduction for the person’s “eligibility year” (the year the person becomes eligible for SS, usually age 62)

Unless half of the non-covered pension is less, the WEP reduction will be based upon the number of years of substantial earnings while contributing to Social Security. For those with 20 years or less of substantial SS-covered earnings, the maximum WEP reduction applies. For those with between 21 and 29 years of substantial SS-covered earnings the reduction will diminish in size with each additional year of substantial earnings up to 30. Those with 30 or more years of substantial SS-covered earnings are exempt from WEP.

To illustrate, for someone who first became eligible for SS in 2020 the maximum WEP reduction (for those with less than 21 years of SS-covered earnings) is $480/month. Those with 22 years of substantial SS-covered earnings would see a reduction of $384/month; those with 25 years of SS-covered earnings would have their SS benefit reduced by $240//month; and those with 29 years of substantial SS-covered earnings would have only $48 per month deducted from their Social Security benefit due to WEP.

The exact reduction amount will be determined when Social Security is applied for, using a complex formula which applies a percentage to the first segment of your lifetime Average Indexed Monthly Earnings (AIME). Both the size of that first segment of your AIME and the percentage applied vary, depending upon your eligibility year and number of years of substantial SS-covered earnings.

A few additional points:

1. WEP will not apply until you are collecting both your Social Security and your non-covered pension.

2. The WEP reduction cannot eliminate your Social Security benefit; it can only reduce it by no more than half of the monthly amount of your non-covered pension.

3. WEP applies only to your SS retirement benefits; it does not apply to any spousal benefits or survivor benefits you may be entitled to (but a different rule known as the Government Pension Offset, or “GPO”, may apply to those).

4. Any benefits to your spouse from your record will be based upon your WEP-reduced benefit amount.

Because of WEP’s unpopularity, legislation has been introduced in many recent years to either reform or eliminate the Windfall Elimination Provision. All such legislation has made no progress beyond being “referred to committee” but typically attracts many co-sponsors eager to demonstrate that they support their constituents engaged in, or retired from, public service.  The outlook is bleak for any near-future Congressional action on WEP outside of broader Social Security reform.

The AMAC Foundation’s Social Security Advisory staff is intimately familiar with the Windfall Elimination Provision and how it affects Social Security beneficiaries. For more information about WEP, or any other Social Security provision, contact us via phone at 1.888.750.2622, or via email at [email protected]. You may also visit our Social Security information website at www.SocialSecurityReport.org for more information about WEP.

[1] SS benefits are weighted to lower-earning workers. Those with a pension earned while not contributing to SS artificially appear as low-earning workers, resulting in a higher-than-warranted SS benefit.

[2] WEP also applies to Federal employees who retired under the old Civil Service Retirement System (CSRS), and to foreign nationals eligible for US Social Security who also have an earnings-based foreign state pension. Members of the clergy are exempt from WEP.

[3] Social Security’s definition for “substantial” earnings differs each year.