Photo courtesy of Samuel Zeller via Unsplash.com.
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 to her teaching job, she also worked part-time and during the summer breaks in a job that was covered by Social Security. She earned 20 years of coverage as substantial earnings, not enough to reduce WEP, but enough to generate a Social Security retirement benefit.
Jennifer’s PIA (before WEP) is $1,400 per month, and since her pension from the teaching job is $1,500, the total WEP reduction factor for her PIA is $413. Her WEP-reduced PIA is $987.
Jennifer’s husband Scott is also 66. When Jennifer files for her own retirement benefit, Scott intends to file a restricted application for Spousal Benefits. Since Scott has not filed for benefits previously, he will be eligible for a Spousal Benefit equal to 50% of Jennifer’s PIA – $493.50 (50% of $987).
See How to Eliminate WEP for details on what happens to Scott’s benefit if Jennifer dies while he’s collecting Spousal Benefits (spoiler alert: it’s an increase).