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Windfall Elimination Provision

Windfall Elimination Provision May Impact Spousal Benefits but not Survivor Benefits

When your Social Security retirement benefit is subject to the Windfall Elimination Provision (WEP), you’re likely painfully aware of the reduction to your own benefit by this provision. What you may not be aware of is that the effect goes beyond your own benefit – your spouse’s and other dependents’ benefits are also impacted by this provision. However, the impact of WEP does not continue after your death. 

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 […]

How to Reduce or Eliminate Windfall Elimination Provision Impact to Your Social Security Benefit

In prior articles we have discussed the Windfall Elimination Provision (WEP) which has the effect of reducing a portion of your Social Security retirement benefit if you’ve worked in a job that was not covered by Social Security which also provides a pension.  This article deals with two ways that you can remove the impact of the WEP from your benefit – neither of which is simple, and neither of which can be done after you’ve retired. The two methods are: Add years of “substantial earnings” to your record Take a lump sum distribution from your pension before you are eligible to receive the pension. Adding Substantial Earnings Years If you have the opportunity to work in a job that is covered by Social Security withholding and you have “substantial earnings” from that job, each year that you work in this SS-covered job adds to your ability to begin eliminating […]

Substantial Earnings With Regard to WEP

Image by London Permaculture via Flickr If you’re subject to the Windfall Elimination Provision (WEP), your Social Security retirement benefit can be reduced in the first bend point to as little as 40% from the normal 90% rate.  The WEP applies if you worked in a job that did not require Social Security withholding in addition to a job that was subject to Social Security withholding. However, if you’ve worked in the Social Security-covered job for a significant amount of time and the amount of earnings you received there was substantial, it is possible that the reduction due to WEP could be lessened and possibly eliminated. According to the Social Security Administration, substantial earnings is defined as an amount equal or above the amounts shown in the table below: Year Substantial Earnings 1937-1954 $900 1955-1958 $1,050 1959-1965 $1,200 1966-1967 $1,650 1968-1971 $1,950 1972 $2,250 1973 $2,700 1974 $3,300 1975 $3,525 […]