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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.