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How does WEP work for a lump-sum pension payout?

How does the WEP (Windfall Elimination Provision) apply when you take a lump-sum payment from your non-covered pension plan?

GPO and WEP – When Do These Apply?

Do you know what benefits GPO and WEP may apply to? Each type of reduction applies differently, learn what the difference is.

Windfall Elimination Provision (WEP) for Social Security

WEP (Windfall Elimination Provision) can cause a substantial decrease in your Social Security benefit. This article explains WEP to help you understand it.

Why is there WEP (Windfall Elimination Provision) in Social Security?

WEP, or the Windfall Elimination Provision, is vexing to many folks. Why does WEP even exist? This article explains why.

Substantial Earnings With Regard to WEP

To reduce WEP impact, earn substantial earnings in a SS-covered job for at least 21 years. With 30 year of substantial earnings, WEP is eliminated.

Maximum WEP Impact

Rounding out our series of articles about the Windfall Elimination Provision, or WEP, I thought we should talk a bit about the maximum impact that WEP can have on you. In other articles we’ve discussed this in part, but it hasn’t necessarily been fleshed out completely.  As you may know, the maximum WEP reduction is equal to the lesser of 50% of the first “bend point” for each year or 50% of the amount of the pension from income that was not subject to Social Security taxation. In 2015 this is $413 per month at most. What’s important to know is that this reduction is against your Primary Insurance Amount (PIA), not necessarily against your benefit amount. Depending upon when you file relative to your Full Retirement Age, the WEP impact to your benefit could be more or less than that amount. Wait – what? As you may recall, the […]

When Does WEP NOT Impact My Social Security?

Recently 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 own situations, wondering if WEP would impact them.  So today we’ll cover those cases where you might be wondering about this, when WEP does NOT impact your Social Security. First of all, if you have worked all your life in a job where Social Security tax was withheld, WEP does not impact your Social Security at all. This is true even if you worked in a government job – as long as your wages (earnings) were subject to Social Security tax withholding, WEP will not impact you. As well, if you have worked and received substantial earnings from Social Security covered jobs for 30 or more years during your career, and you also have a […]

How Does WEP Affect My Dependents?

We’ve reviewed how WEP impacts your own benefits in prior articles. Briefly, when you’re receiving a pension based on work that was not covered by Social Security, your own Primary Insurance Amount will be reduced by as much as $413 per month (2015 figures) or 50% of the pension, whichever is less. But can this reduction to benefits affect my dependents’ benefits as well? Since the nature of the WEP calculation is to reduce your Primary Insurance Amount (PIA), that means any benefit that is based on your PIA will also be reduced. So, if your spouse is planning to receive spousal benefits based on your earnings record and your PIA is reduced due to WEP, the spousal benefit available to your spouse will also be reduced. For example, Jennifer, age 66 was a teacher for 25 years, and her employment was not covered by Social Security taxes. In addition […]

How to Eliminate WEP

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 […]

WEP Impact Calculation Factors

In this blog we’ve covered the Windfall Elimination Provision (WEP) from many different angles. Here we’ll go into some more depth on the actual calculation of the WEP, including how some of the factors are determined. As you are likely aware, the Windfall Elimination Provision or WEP impacts your Social Security benefit when you are receiving a pension based on work where Social Security tax was not applied to the earnings. The point of WEP is ostensibly to act as an offset, since the reason no Social Security tax was applied to the earnings is because the pension is intended to replace Social Security benefits for that worker. WEP impact is applied as a reduction to the first bend point of the calculation of the Primary Insurance Amount. (Calculation of the PIA is explained further here.)  

What is WEP?

WEP, in Social Security parlance, is the Windfall Elimination Provision.  So, if that’s all you wanted to know, you’re good to go. You wanted more though, right?  Okay, here we go: WEP is the provision of the Social Security rules that provides for reduction of your Social Security benefit when you are receiving a pension from a job that was not covered by Social Security.  Usually these jobs are government-related, including state and federal government employees, teachers, and the like.  In addition, pensions from work done in other countries would also fit into this category, as long as the work was not covered by US Social Security. How it Works When your Social Security benefit is calculated, if you’ll recall from this earlier article on benefit calculation, your Average Indexed Monthly Earnings (AIME) factor is divided into three portions, bounded by bend points.  The first bend point is multiplied by […]

The Affect of Earnings on Your Social Security Benefit

How do current earnings impact your Social Security benefit? Surprisingly, the impact can be felt in several different ways,

POMS References

Search POMS POMS Table of Contents https://secure.ssa.gov/apps10/poms.nsf/partlist!OpenView AIME Calculation https://secure.ssa.gov/apps10/poms.nsf/lnx/0300605015 Elapsed/Calculation Years https://secure.ssa.gov/apps10/poms.nsf/lnx/0300605016 https://secure.ssa.gov/apps10/poms.nsf/lnx/0300605017 PIA/AIME https://secure.ssa.gov/apps10/poms.nsf/lnx/0300605021 Definition of Spouse (includes info re: spouse benefit must be greater than own RIB if dually entitled) https://secure.ssa.gov/apps10/poms.nsf/lnx/0300202001 Definition of Divorced Spouse (includes info re: length of marriage; interruption of consecutive years of marriage) & Entitlement as “divorced spouse”: https://secure.ssa.gov/poms.nsf/lnx/0300202005 Exceptions to divorced spouse remarriage rule ending spousal benefits: https://secure.ssa.gov/poms.nsf/lnx/0300202045 Definition of “legal spouse” in determining marriage end: https://secure.ssa.gov/poms.nsf/lnx/0300202040 Spousal Benefit calculation BEFORE FRA: https://secure.ssa.gov/apps10/poms.nsf/lnx/0300615250 Spousal Benefit reduction or non-reduction (includes verbiage re: 50% of PIA vs. benefit) https://secure.ssa.gov/apps10/poms.nsf/lnx/0300615201 Spousal Benefit Calculations in various scenarios (includes RIB first, then spousal at FRA, for example) https://secure.ssa.gov/apps10/poms.nsf/lnx/0300615020 Spousal Benefit Calculations when DRC is involved (hint: spousal benefit can’t take total MBA to greater than 50% of worker’s PIA) https://secure.ssa.gov/apps10/poms.nsf/lnx/0300615694 Deemed Filing https://secure.ssa.gov/apps10/poms.nsf/lnx/0200204020#f SSA Acronyms https://secure.ssa.gov/apps10/poms.nsf/lnx/0300601002 Benefit Acronyms A = Original Numberholder’s Benefit B = Spouse Benefit DIB = […]

Your Social Security Benefits Statement

Here is a detailed explanation of the components of your Social Security benefits statement. You can get this statement online at any time.

Government Pension Offset for Social Security

Are you impacted by the Government Pension Offset (GPO)? Read on for more details on how this program works and why you’re impacted.

What income is used for the Annual Earnings Test?

Do you know what income is used to determine whether you’ve surpassed the Annual Earnings Test? At least one item may surprise you…

Why is there GPO (Government Pension Offset) in Social Security?

If the Government Pension Offset (GPO) is factored into your Social Security calculation, do you understand why?

Report pension changes to SSA

When you have a pension from non-SS-covered earnings, you must report pension changes to Social Security, so that WEP and GPO can be recalculated.

Social Security Changes for 2018

In 2018, there will be some slight changes to Social Security. For individuals receiving benefits, there will be a cost of living (COLA) increase of 2 percent. While 2 percent may not seem like a lot, it certainly does help. Additionally, it’s better than nothing. That is, Social Security remains one of the few retirement vehicles available with a COLA. Many defined benefit pensions (if an individual is lucky to have one) do not have COLA increases. Their payments remain fixed for the retiree’s lifetime. Individuals still working will see the wage base subject to the OASDI tax of 6.2 percent increase from $127,200 for 2017 to $128,700 for 2018. As always, the Medicare tax of 1.45 percent remains on an unlimited amount of wages, with an additional .9 percent tax added for those with incomes above $200,000 (single) or $250,000 (MFJ). For individuals receiving benefits yet continuing to work, […]

How to Get Your Social Security Statement

One of the requests we make when doing retirement or Social Security claiming plans for clients is for the clients to bring in their Social Security statements. As many readers are aware, these statements can be retrieved online from the Social Security website. Below is a step by step process to retrieve your statement online. Go to https://secure.ssa.gov/RIL/SiView.do Click on “Create an Account” and agree to the Terms of Service Enter your personal information on the following page You will be required to answer questions related to your identity and background (be careful – answering these questions wrong will require you to call or go into the local office) Set up your account with a username and password. You should then be able to view and retrieve your statement, earning history, etc. If you’re leery of giving your personal information online, you can go into your local Social Security office […]