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How to Eliminate WEP

Photo courtesy of ahmadreza sajadi via Unsplash.com.

Photo courtesy of ahmadreza sajadi via Unsplash.com.

If you are receiving a pension from a non-Social Security covered job and you’re also entitled to receive Social Security benefits, the Windfall Elimination Provision (WEP) may reduce your Social Security benefit. There are ways that this WEP reduction can be eliminated.

How to Eliminate WEP

As discussed in other articles, it is possible to reduce the impact of WEP by working in a Social Security-covered job and earning “substantial earnings” ($22,050 in 2015) for 21 or more years. For the first 20 years, there is no reduction to the WEP impact. For each year of substantial earnings greater than 20, the impact of WEP is reduced by 10%. When a total of 30 years of substantial earnings have been recorded on your earnings record, WEP is eliminated completely.

Another way to eliminate WEP is when the primary numberholder (the individual subject to WEP) dies. This is because WEP only impacts your PIA when you are receiving a pension based on non-covered employment. If the primary numberholder dies, she is no longer receiving the pension – therefore, WEP no longer applies. If the surviving spouse chooses to continue (or begin) receiving a Spousal Benefit, the PIA against which the spousal benefit is calculated is restored to non-WEP impact.

In addition – when a pension from a non-covered job is received in a lump sum, SSA calculates a number of years over which the lump sum would have been spread had it been received as an annuity. The recipient can eliminate WEP impact if he or she out-lives that time span determined for the deemed annuitization of the lump sum. After that time has elapsed, your PIA will be restored to the pre-WEP level.

30 Comments

  1. Mike MaskalyNo Gravatar says:

    I hav several years where I was just under the substantial earnings cutoff and 25 that are way over. Do you get partial credit for the years that did not reach the substantial floor?

    1. jblankenshipNo Gravatar says:

      Unfortunately, no. It’s black or white, you either earned above the threshold or you didn’t. And there is no combining years, either.

  2. RimmaNo Gravatar says:

    I receive SS pension and pension from Russia. My husband (79 years old) work years in USA are not enough for his SS pension and he receives ½ of mine. Russian pension when I reported it was about $260-270 and $1=32 rubles. Now $1=65-70 rubles. The deduction from my SS pension cannot be more than ½ of my Russian pension. Right now almost all my R. pension is deducted from my SS pension, because they do not do recalculation based on “fluctuation” in currency, but it is not “fluctuation”, it is crush! and as the result, our combine SS pensions even less than if I do not have R. pension.
    It is written, that deduction cannot be more than ½ from the case (my husband and I), but I am notified it is not our case.
    What can I do?
    Thank you, and I apologize for possible mistakes

    1. jblankenshipNo Gravatar says:

      I am sorry but I don’t know the answer to your question. I suggest talking to the Social Security Administration to see if they will do a re-calculation for your benefits. Best wishes to you.

      1. RimmaNo Gravatar says:

        I did, and they will not. Thank you.

      2. RimmaNo Gravatar says:

        My husband receives SS benefits based on my record, may be you know, if they should deduct from our combined pension no more than ½ my Russian pension. Here is the statement I copied from SS.org:
        The examples above apply only to benefits paid to the worker and do not include future COLA increases. The WEP reduction may be larger if family members qualify for benefits on the same record. However, the total WEP reduction is limited to one-half of the pension based on the earnings that were not covered by Social Security.
        Does the statement applies to us also?

        1. jblankenshipNo Gravatar says:

          The WEP reduces your benefit as the worker, and since your benefit is reduced then if your spouse is receiving benefits based on your record, his benefit would also be reduced as a result.

          1. RimmaNo Gravatar says:

            but what about that” the total WEP reduction is limited to one-half of the pension based on the earnings that were not covered by Social Security”? Thank you.

          2. jblankenshipNo Gravatar says:

            WEP reduction to your benefit is limited to one-half of the pension. WEP reduction to your husband’s benefit is also limited to one-half of the pension.

  3. Carlton LoomisNo Gravatar says:

    I was a firefighter for 25 years where we did not pay S.S. but have worked 52 years on other jobs paying in. We did not have a defined benefit pension but had a 401k. I was placed under the WEP penalty when I got my SS but a fellow firefighter that worked under the same retirement program as I at the same time in the same department was not because it was considered a lump sum payout. I converted half of my payout to an IRA and the rest to an annuity. When the Ira moneyis all gone will I no linger be under the WEP penalty?

    1. jblankenshipNo Gravatar says:

      No – when there is a lump sum distribution that becomes subject to WEP impact, there is an actuarial table (SSA supplied) that is used to determine the life of the funds. The tables can be found at this link: https://secure.ssa.gov/apps10/poms.nsf/lnx/0300605364

  4. Bernard FlathNo Gravatar says:

    If I continue to work in a social security qualifying (and withholding) company and I continue to meet the substantial income minimums (per IRS minimums), do the years worked AFTER AGE 62 continue to reduce my WEP? I had 24 qualifying years at age 62 and I want to further reduce my WEP. Is this possible? Thank you!!!

    1. jblankenshipNo Gravatar says:

      Any “substantial” income earned where Social Security taxes are withheld will continue to add to your potential WEP-reducing or eliminating records. The definition of “substantial” is not an IRS definition, but rather it is from a table produced by Social Security. I have reproduced the substantial earnings table at this link.

      jb

      1. DavidNo Gravatar says:

        I read on the SS website that the WEP is applied in your “Eligibility” year. Are you certain that years worked after your “Eligibility” year count towards reducing the WEP penalty? Thanks.

        1. jblankenshipNo Gravatar says:

          Yes I am certain.

          WEP is applied in your eligibility year, but every year thereafter your PIA can be recalculated if something has changed (additional years of work, whether substantial or not, can make a change to your PIA).

          1. DavidNo Gravatar says:

            Thank You. But I don’t think I made myself clear. I understand that additional work will change your PIA. In my case I had 20 years of substantial work at age 62. 20 years does not reduce my WEP. 21 years does, 22 years does and so forth all the way to 30 years. I am still working (I am 64) and I plan to work for several more years. I was hoping that these substantial years worked after 62 would reduce the WEP penalty, independent of the effect of additional earnings changing my PIA just like anyone that is not subject to WEP. Thanks again.

          2. jblankenshipNo Gravatar says:

            Perhaps I didn’t make myself clear: substantial earnings years at any time after your age 62 will cause a recalculation of your PIA, reducing the WEP impact for future years. This is regardless of whether you are actively collecting benefits at that point or not.

          3. DavidNo Gravatar says:

            Thanks for your patience. Much appreciated.

  5. JimNo Gravatar says:

    How does rolling over a prior university retirement account (e.g. TIAA variable annuity) into an IRA account well in advance of retirement age impact the calculations for WEP and GPO. I have both covered and non-covered employment but slightly less than 20 years under SS. If rolled into a Roth and not withdrawn, does WEP and GPO apply?

    1. jblankenshipNo Gravatar says:

      I bet you’ll still have an impact even though it’s not a traditional pension (as we would normally see). SSA receives documentation on all withdrawals and transfers of funds to and from retirement plans, and it’s likely that you’ll have this showing on your record when you file for benefits.

      However, I can’t say definitively either way.

  6. Bill HustonNo Gravatar says:

    I currently have 22 years of substantial earnings. In 2015 & 2016 I will earn more than enough for two more years of credit, bringing my total years to 24. I will turn 62 in 2016. I turn 66 in 2020.

    If I earn substantial earnings in 2017, 2018, 2019, & 2020, will those four years also reduce my WEP or does the door close on credit years when you turn 62? What if I delay taking benefits until I turn 70? Will that too reduce my WEP.

    1. jblankenshipNo Gravatar says:

      Substantial years of credit can be earned at any age. If you’ve already begun to receive benefits, each year your new earnings will be included in the computation (re-computation of WEP) for the coming year’s benefit adjustment.

      jb

  7. ElaineNo Gravatar says:

    I am wondering if I understand this correctly. I need to compare my years of paying Social Security to be sure they fall within the “substantial amount” to earn the credits needed in order for the Windfall to not affect me? I have worked at this job for 18 years and it has been where I have earned the most money, and not paying social security. I am trying to figure out if my many years of work previously qualifies for “substantial” earnings.

    1. jblankenshipNo Gravatar says:

      If you have had 20 or more years (up to 30 to eliminate) of earnings that are “substantial” and that were covered by Social Security in order to begin reducing the effect of the WEP.

      jb

  8. […] we covered the Windfall Elimination Provision a bit more completely, including how to eliminate WEP and how WEP can impact your dependents. This prompted quite a few folks to write to me about their […]

  9. […] How to Eliminate the Windfall Elimination Provision (WEP) from Jim Blankenship […]

  10. agribleNo Gravatar says:

    Can we get around the negative impact of WEP using the following scenario:

    My wife stops working at 62, delays taking her teacher pension until 66 (FRA) but does claims early Social Security at 62 based upon her prior work record when she was covered by Social Security. Lastly, she switches to her SS spousal benefit at her FRA and then also begins to collect her teacher’s pension? Thank you.

    1. jblankenshipNo Gravatar says:

      Well, that would eliminate WEP impact for the years prior to taking the pension. When she switches over to a spousal benefit, this would be reduced by GPO, which is likely to be a much higher impact.

      Also – since she’s already filed for her own benefit, she isn’t really “switching” to spousal benefit, she’s adding the offset amount to her own benefit. Her own benefit would begin to be impacted by WEP as soon as she starts receiving the pension, and if she files for spousal benefit as well, this will be reduced by GPO.

  11. LizNo Gravatar says:

    Regarding the WEP being eliminated after the time span determined by the deemed annuitization of the lump sum distribution, is GPO affected in any way?

    1. jblankenshipNo Gravatar says:

      The same effect would apply – after the timespan has passed for annuitization of the lump sum, GPO would no longer be a factor.

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