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 or watch our webinar from March 2024:
[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.
These numbers are not quite right. The WEP reduction is calculated on your eligibility year (age 62) and increased with inflation. Therefore, those eligible in 2019 are told the max reduction is $463, yet if they wait until FRA they find out that the reduction is actually inflated to currently be about $566. The WEP penalty will increase each year with inflation.
Jerry
You are correct that the WEP reduction is increased for inflation each year. When someone is subject to WEP, their WEP reduction is determined in the year they turn 62. This will be the amount of their WEP reduction if they wait to retire at their FRA. Even though you don’t take your Social Security benefits until you reach your FRA, that is still the maximum WEP reduction you will be subject to.
For example, someone turning 62 this year,2024, will have a maximum WEP reduction of $587, but someone that turned 62 in 2019, will still have a maximum WEP reduction of $463.
You may contact us by emailing [email protected] or calling (888)750-2622.
Sharon Kleczka, Social Security Advisor
AMAC Foundation
http://www.AmacFoundation.org
I am Italian and I have also the American citizenship. have more than 30 years of Social Security contributions in Italy and 11 years of contributions in US . I have been very surprised and disappointed then that SSA benefits have been reduced by around 40% . I do not understand why, because with the Italy /US Convention contributions in one State are recognized by the other State.
I understand my wife benefits will be based upon my WEP-reduced benefit amount. And that WEP will not apply again for her as survivor. This different rule GPO may apply . Can you please explain us how works the Government Pension Offset for the survivor?
Daniele
You mention your wife is receiving a spousal benefit based on your WEP reduced benefit. The Government Pension Offset (GPO) affects any spousal or survivor benefit that the spouse with a non-covered pension is eligible for. As your pension is from Italy, the GPO does not apply to you, as foreign pensions are not subject to being reduced by the GPO.
WEP and GPO never affect the surviving spouse, unless they are the spouse that earned the non-covered (earned in a position that didn’t pay into Social Security). If your U.S. Social Security benefit is higher than your wife’s U.S. Social Security benefit and she is the surviving spouse she will receive 100% of your Social Security benefit, even if she is eligible to receive a portion or all of your pension.
If your wife’s Social Security benefit is higher than your own, GPO will not affect your spousal or survivor benefit.
Please contact us if you have further questions.
You may contact us by emailing [email protected] or calling (888)750-2622.
Sharon Kleczka, Social Security Advisor
AMAC Foundation
I am a Registered nurse, and didn’t start working for the county until I was 44 yrs old. Everything before that and after those years is caught up in the WEP. I know people that has worked half the amount of years I did and and earned less than are receiving more Social Security benefit than me. My monthly pension income is less than what I would have received if SS paid me in full. This is totally unfair.
Sharon
While we understand your feelings, which are shared with most affected by WEP, all we can offer is information about why WEP was created in 1983. There have been quite a few bills that have been presented to Congress over the years to appeal WEP and GPO, but to date, none of them have succeeded. Use the following link to view the current ones: https://www.congress.gov/bill/118th-congress/house-bill/4583/related-bills
If you want, I recommend you contact your local representative and ask them to support the appeal of WEP: https://www.house.gov/representatives/find-your-representative
Please contact us if you have further questions.
You may contact us by emailing [email protected] or calling (888)750-2622.
Sharon Kleczka, Social Security Advisor
AMAC Foundation
I don’t understand exactly how it works for my situation. I turned 62 in 2017 and am currently working in a non social security job where I will get a govt. pension when I retire. I began collecting SS at FRA in 2021 and am collecting $1507 month with inflation increases. Will my SS be reduced by $587 if I retire this year?
Vickie
Your maximum WEP reduction is determined in the year you turn 62 and doesn’t change. The maximum WEP reduction for someone that turned 62 in 2017 is $442.50.
It will seem larger when you receive your reduced benefit due to the way Social Security calculates it. When someone turns 62 Social Security starts applying the cost-of-living increase to their benefit, whether they are taking it or not, at age 62. When Social Security applies the WEP reduction to your benefit they start by first removing all cost-of-living increases since you were 62 from your primary insurance amount (PIA) which is equivalent to your FRA benefit amount.
They will then take your PIA and subtract $442.50 (if you have more than 20 years of substantial earnings it will be less), then they will reapply all the cost-of-living increases since you were 62 to your WEP reduced PIA.
It is very important that you notify Social Security in advance of your retirement with your pension information and the month you will start receiving it to give them time to calculate your reduced benefit properly so you don’t wind up with an overpayment that you will have to pay back.
Please contact us if you have further questions.
You may contact us by emailing [email protected] or calling (888)750-2622.
Sharon Kleczka, Social Security Advisor
AMAC Foundation
CONFIDENTIALITY NOTICE: The contents of this message, including any attachments, are confidential and are intended solely for the use of the person or entity to whom the message was addressed. If you are not the intended recipient of this message, please be advised that any dissemination, distribution, forwarding, printing, copying, or use of the contents of this message, and any attached documentation, is strictly prohibited. If you received this message in error, please notify the sender. Please also permanently delete all copies of the original message and any attached documentation. The opinions and interpretations expressed in this message are the viewpoints of the message’s author, a trained advisor accredited under the National Social Security Advisors program of the National Social Security Association, LLC (NSSA). The author, the NSSA, and the AMAC Foundation are not affiliated with or endorsed by the United States Government, the Social Security Administration, or any other state government.
This article states that members of the clergy are exempt from WEP, but other articles state the rules differently:
https://www.thestreet.com/retirement-daily/social-security-medicare/3-social-security-facts-unique-to-pastors
https://churchfiduciary.com/are-pastors-subject-to-the-windfall-elimination-provision/
Tom
Members of the clergy Have the option to opt out of Social Security and be exempt from paying Social Security taxes on their clergy earnings. Within two years of becoming a licensed minister, they can file Form 4361 (Application for Exemption) with the IRS. When the IRS approves the exemption, they can get any Social Security payroll taxes withheld while waiting refunded to them.
The Windfall Elimination Provision does not apply to ministers and other members of the clergy. POMS RS 00605.362 clearly states that “A monthly periodic payment to a minister based on service as a minister is not considered a pension for purposes of WEP.”
This means that ministers can receive a pension for their exempt ministerial employment, and it will have no effect on their Social Security benefits from other SS-covered employment. If WEP is incorrectly applied when SS benefits are first claimed, the minister will need to submit a request to Social Security to have it corrected.
Because a minister’s pension is not subject to WEP, any spousal or survivor benefits they may be entitled to are not subject to the Government Pension Offset (GPO). Also, a married minister with a spouse eligible for Medicare is eligible for Medicare based on the spouse’s record. This means they will receive Medicare Part A for free (without an eligible spouse they must pay for Part A). The clergy member is also eligible for Social Security spousal benefits or survivor benefits, subject to normal reductions if claimed early.
Please contact us if you have further questions.
You may contact us by emailing [email protected] or calling (888)750-2622.
Sharon Kleczka, Social Security Advisor
AMAC Foundation
CONFIDENTIALITY NOTICE: The contents of this message, including any attachments, are confidential and are intended solely for the use of the person or entity to whom the message was addressed. If you are not the intended recipient of this message, please be advised that any dissemination, distribution, forwarding, printing, copying, or use of the contents of this message, and any attached documentation, is strictly prohibited. If you received this message in error, please notify the sender. Please also permanently delete all copies of the original message and any attached documentation. The opinions and interpretations expressed in this message are the viewpoints of the message’s author, a trained advisor accredited under the National Social Security Advisors program of the National Social Security Association, LLC (NSSA). The author, the NSSA, and the AMAC Foundation are not affiliated with or endorsed by the United States Government, the Social Security Administration, or any other state government.
Thanks, Sharon. That’s the way I took that as well, but saw some others state differently. Also, the Soc Sec POMS now reads a little differently in that section: https://secure.ssa.gov/apps10/poms.nsf/lnx/0300605362.
It now states “Payments to a minister based on service as a minister. A minister’s income can be self-employment for Social Security coverage purposes, as explained in RS 01802.060.”
Hi, I am retired from teaching with a disability retirement pension (retired early for mental health disirder) so I receive only 50% of the pension I would have been entitled to if I had reached full retirement age. I am now considering starting my Social security benefits at age 65 because I need medicare. I know I am subject to WEP because teaching was my second career. I turned 62 in 2021. What is the maximum WEP I can expect?
Jill
The maximum WEP reduction for someone who turned 62 in 2021 is $498.00 and the WEP reduction can never be more than 50% of your pension. If you have more than 20 years of substantial earnings from paying into Social Security your WEP reduction will be reduced for each extra year. If you have 30 years of substantial earnings, the WEP reduction ends. The following link is to the WEP calculator on the SSA website: https://www.ssa.gov/benefits/retirement/planner/anyPiaWepjs04.html
You may contact us by emailing [email protected] or calling (888)750-2622.
Sharon Kleczka, Social Security Advisor
AMAC Foundation
Hello, I have been notified by the SSA that my SS benefits have been reduced due to WEP. I am from Finland and moved to usa in 1992. I have been working in the US for 31 years. Some of the years my taxable social security earnings were below the substantial income levels that are in the wep document. It’s now 2024, if i work 5 more years and meet the substantial income level, will my SS stop being reduced after that time period?
Jouni
If you already have 25 years of substantial earnings, 5 more years of substantial earnings will end the WEP reduction. This amount tends to increase yearly, so you will need to check each year to make sure you earn the proper amount to meet the substantial earnings test. This figure is released between October and November each year.
You may contact us by emailing [email protected] or calling (888)750-2622.
Sharon Kleczka, Social Security Advisor
AMAC Foundation
I know the WEP reductions are based on number of years of substantial earnings. Are these earnings indexed in this determination?
Dan
You are able to determine your years of substantial earnings by comparing the substantial earnings chart to your earnings statement. Even though your earnings through age 59 have been indexed for inflation, they do not show that amount on your earnings statement. The amount showing on your earnings statement is the amount used to determine your substantial earning years pertaining to WEP.
Your maximum WEP reduction is determined in the year you turn 62 and doesn’t change. Then the WEP reduction is reduced for every year of substantial earnings over 20.
The WEP reduction will seem larger when you receive your WEP reduced benefit due to the way Social Security calculates it. When you turn 62 Social Security starts applying the cost-of-living increase to your benefit, whether you are taking your benefits or not. When Social Security applies the WEP reduction to your benefit, SS will start by removing all cost-of-living increases since you were 62 from your primary insurance amount (PIA), which is equivalent to your FRA benefit amount. After applying the WEP reduction to your PIA, they then apply any decreases or increases based on the age you start taking your Social Security benefits, before reapplying any cost-of-living increases.
It is very important that you notify Social Security in advance of your retirement with your pension information and the month you will start receiving it to give them time to calculate your reduced benefit properly so you don’t wind up with an overpayment that you will have to pay back.
I recommend using the SSA WEP calculator online: https://www.ssa.gov/benefits/retirement/planner/anyPiaWepjs04.htm
You may contact us by emailing [email protected] or calling (888)750-2622.
Sharon Kleczka, Social Security Advisor