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Social Security Windfall Elimination Provision

Effect Of The Wep On The Pia

How Does the Social Security Windfall Elimination Provision Work?

For about 87 percent of the affected workers, there was enough information to estimate the PIA before application of the WEP. The application of the WEP substantially reduced the PIAs of both retired and disabled workers. For retired workers, the reduction in the PIA averaged $246 or 35 percent of the PIA before application of the WEP . Among disabled workers, the PIA reduction averaged $262 or 30 percent of the PIA before the WEP .

Table 9. Number of retired-worker beneficiaries affected by the WEP and average PIA before and after application of the WEP, by sex and age, in current-payment status, December 2006

Sex and age
NOTES: These figures exclude cases where pension amount is not available, or if benefit amount includes earnings prior to 1951.
WEP = Windfall Elimination Provision PIA = primary insurance amount.

The maximum reduction in the PIA due to the WEP depends on the year of first eligibility for benefits and was $328 for workers first eligible in 2006. Among retired workers aged 6264, the estimated reduction in the PIA was $273. As noted in Table 6, almost three-quarters of retired workers affected by the WEP had fewer than 21 years of substantial covered earnings and could be subject to the maximum PIA reduction. However, the PIA reduction averaged only $119 or 18 percent for retired workers aged 80 or older . These individuals were first eligible for benefits prior to 1989 and, thus, were affected by the gradual phase in of the WEP reduction .

Huge News: Our Legislation To Repeal The Windfall Elimination Penalty And The Government Pension Offset Is Headed To The House Floor

WASHINGTON, DC Public servants in Louisiana are some of the most impacted victims of the infamous Windfall Elimination Penalty and the Government Pension Offset a 1980s-era flawed federal law that can result in massive cuts including total elimination to their Social Security payments.

The struggle to repeal WEP and GPO is decades old. After years of negotiations, legislation U.S. Congressman Garret Graves co-authored H.R. 82, the Social Security Fairness Act of 2021 to fix these problems has reached over 290 cosponsors triggering action to force Speaker Pelosi to schedule the bill for a vote before the U.S. House of Representatives. The bill would fix this penalty, which punishes tens of thousands of Louisiana public servants.

If this legislation passes, Louisianas dedicated public servants and their spouses or survivors will receive the full retirement benefits they deserve, including those who have already retired.

Graves released the following statement:

How Do I Know If The Windfall Elimination Provision Applies

If youre eligible for multiple government based retirement benefits, your Social Security may be reduced due to the windfall elimination provision . The WEP may apply if:

  • You reached 62 after 1985 or
  • You became disabled after 1985 and
  • You first became eligible for a monthly pension based on work where you did not pay Social Security taxes after 1985, even if you are still working.

The WEP may not apply if:

  • You are a federal worker first hired after December 31, 1983
  • You were employed on December 31, 1983, by a nonprofit organization that did not withhold Social Security taxes from your pay at first, but then began withholding Social Security taxes from your pay
  • Your only pension is for railroad employment
  • The only work you performed for which you did not pay Social Security taxes was before 1957 or
  • You have 30 or more years of substantial earnings under Social Security.

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Avoiding The Gpo: The 60

If you’re a retired government employee who receives Social Security retirement benefits as a spouse or former spouse, you can avoid the GPO reduction.How? By working for at least the last 60 months of your career in a job in which you pay Social Security taxes.Take the case of Julie. For most of her career, she worked as a public school teacher. Because the school district offered her a pension at retirement, Social Security taxes were never withheld from Julie’s pay.Her husband, Bruce, works in the private sector and has paid Social Security taxes for the duration of his career. When they retire, both will claim Social Security benefits on Bruce’s earnings record.To avoid the GPO reduction to her spousal benefits, Julie retires early from her teaching position and takes a job at a tutoring center. She works in that position for 5½ years, and Social Security taxes are regularly withheld from her pay.The tutoring position is the last job Julie holds. Because she spent her last working 60 months paying Social Security taxes, the GPO won’t reduce her spousal benefits.

Pensions From Noncovered Work Limit Wep And Gpo Adjustments

Penalty for Public Service : Do the Social Security Government Pension ...

Congress did not go as far as it might have in setting the WEP and GPO adjustments on Social Security benefits. For the WEP, Congress recognized that the progressivity of the benefit formula enabled persons who spend part of their career in noncovered work to receive a proportionately better deal from Social Security. Nevertheless, Congress was unwilling to mechanically reduce basic Social Security benefits just because a person had also worked in noncovered employment.9 That is, Social Security benefits are not reduced simply because a person who worked in noncovered employment consequently enjoys a higher ratio of Social Security benefits to Social Security taxes paid. Such an individual must also have earned a pension from noncovered work for benefits to be reduced under the WEP. In that instance, the benefit reduction is limited to one-half of the value of the pension from noncovered work. We will show that limiting the WEP adjustment to one-half of the value of a public pension reduces the WEP offset by more than half.

Congress also would not augment the GPO adjustment to reduce spouse or survivor benefits simply because the spouse of an entitled worker had spent significant time in a noncovered job. As with the WEP, the adjustment applies only if the individual also earned a pension from work in noncovered employment.

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Understanding The Windfall Elimination Provision As Is Today

The WEP rule reduces Social Security benefits for those who worked in a job in which:

  • They did not pay Social Security taxes, and
  • They qualified for a pension from that job, and
  • They worked at another job where they qualified for Social Security benefits.
  • Teachers are one of the most common groups to be impacted by this rule, but it often includes other public sector workers like firefighters, police officers, and numerous other state, county, and local employees.

    Wep/gpo Repeal Would Mean Earlier Insolvency For Social Security

    Congress may soon consider legislation to repeal Social Security’s Windfall Elimination Provision and Government Pension Offset , provisions designed to reduce certain excessive Social Security payments. While the WEP and GPO provisions are imperfect, full repeal would lead to large overpayments in Social Security benefits and would advance Social Security insolvency by over a year, to 2034 or sooner. The legislation would also cost $150 billion this decade alone, worsening inflationary pressures and increasing debt held by the public.

    Currently, some workers pay into state and local pensions instead of the Social Security system. The WEP adjusts Social Security for retirees with some years of earnings covered by these state and local pensions and some years of earnings covered under Social Security, while the GPO makes similar adjustments for spouses and survivors. While neither formula is perfect, the goal is to avoid treating those with a limited number of years covered by Social Security as if they were low-income workers for purposes of Social Security’s benefit formula.

    A number of proposals have been put forward to improve or replace the WEP and GPO formulas, including from President Obama, former House Ways and Means Committee Chairman Kevin Brady, the Bipartisan Policy Center, and a number of experts on the left, right, and center.Instead, the so-called “Social Security Fairness Act” would eliminate the WEP and GPO provisions all together.

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    Showing Estimated Benefits With Psp Calculation On Statements

    Currently, Social Security statements do not reflect a benefit reduction due to the WEP. This results in serious retirement planning mistakes by individuals who plan their post-work income based on their estimated benefits in their Social Security statement.

    If the Public Servants Protection and Fairness Act of 2021 becomes law, the Social Security Administration will be required to show noncovered as well as covered earnings records, and to use the new PSP formula for calculating the projected benefits for workers likely to be subject to this formula. This will result in much more accurate benefit projections and confidence in retirement planning.

    As new reform proposals make their way through the legislative process, Ill be here to keep you informed and tell you what you need to know.

    Dont leave without getting your FREE copy of my latest guide: Top 10 Questions and Answers on the Windfall Elimination Provision. In this guide, I go over more detail on the WEP and answer questions like:

    • Can I avoid the WEP by taking a lump sum from my pension?
    • What about 457 accounts?
    • Does my pension affect my spouses Social Security?

    You CAN simplify the WEP rules and get every dime in benefits you deserve! Simply to download today. In addition, Id highly encourage you to check out some of the additional resources Ive created that will deepen your knowledge on the WEP.

    Social Security’s Standard Benefit

    Social Security Windfall Elimination Provision Info (WEP)

    Social Security benefits replace a portion of an insured worker’s average wages in covered employment, with those wages capped at a taxable maximum annual amount.3 The benefit-to-earnings ratio, or replacement rate, is designed to be greater for lower lifetime earners than for higher lifetime earners.

    To begin the benefit calculation, SSA converts a worker’s lifetime earnings in covered employment to AIME, which are indexed to nationwide wage growth. SSA indexes the worker’s earnings for each year worked until age 60.4 Wage indexing keeps retirement benefits comparable to current average earnings levels. Next, SSA sums the indexed earnings in the 35 highest earning years.5 Finally, SSA divides this sum by the number of months in the person’s computation years to obtain the AIME. The number of computation years for retired workers is 35, so the number of months in the AIME denominator is 420.6 To illustrate, a retired worker who earned $50,000 in wage-indexed dollars each year for 35 years would have AIME of $4,166.67, or 35 × $50,000 ÷ 420.

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    House Sets Up Potential Repeal Of Windfall Elimination Government Pension Offset

    Late last month, the Social Security Fairness Act reached a new milestone in the House of Representatives: 294 co-sponsors. Per House rules, bills with more than 290 co-sponsors are automatically placed on the Consensus Calendar, effectively ensuring a floor vote following the chamber’s recess.

    The passage of H.R. 82 would eliminate two provisions of the Social Security Act of 1935 to the benefit of more than 2 million retirees. This bill repeals the Windfall Elimination Provision , which in some cases reduces Social Security benefits for individuals receiving a pension or disability benefit from an employer who did not withhold taxes from their wages. In particular, the WEP applies to local, state, and federal retirees who began their employment in government before 1983 and are covered by the Civil Service Retirement System . The employees that fall under CSRS do not contribute toward Social Security and are therefore not eligible to receive any Social Security benefits when they retire.

    The National Active and Retired Federal Employees Association reports that WEP can result in a $512 reduction monthly in benefits compared to their colleagues who do not fall under the CSRS.

    NARFE has been a firm supporter of the legislation, citing its benefits for federal retirees burdened by these provisions.

    Rep. Rodney Davis introduced the bill in October 2021 and it garnered immediate bipartisan support.

    Fighting And Expanding Support For Full Repeal Of The Social Security Windfall Elimination Provision And Government Pension Offset


    For nearly four decades, the harmful and unjust Windfall Elimination Provision and Government Pension Offset have robbed millions of retirees of tens of thousands of dollars in hard-earned Social Security benefits and


    The WEP significantly reduces a retirees Social Security benefit simply because the retiree is also eligible to collect a public pension even if that retiree is entitled to a Social Security benefit from work in another non-public sector job and


    The GPO deeply cuts and in some cases completely eliminates any survivor benefit a spouse may be entitled to simply because that spouse has earned a public-sector pension even if that spouse is entitled to a survivor benefit based on their spouses work in a Social Security covered job and


    These deep cuts in Social Security benefits are made automatically despite the fact that the impacted workers paid the same Social Security tax over their careers as those receiving full benefits and


    Given these harmful provisions have been federal law for nearly four decades, the issue is no longer confined to a small group of states and now impacts retirees living in all 50 states and


    According to the latest available data from the Congressional Research Service, nearly 1.9 million people residing in all 50 states are hurt by reductions in their Social Security benefit as a result of the WEP and








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    How Much Is The Windfall Elimination Provision Penalty

    In cases where the WEP applies your monthly benefits are reduced using the following chart. Find the intersection between the eligibility year and the number of years you paid into social security. Keep in mind the WEP reduction limit is half of your pension from non-covered employment.

    Years of Substantial Earnings

    This Congressional Bill Could End Windfall Elimination

    How Social Security

    The windfall elimination provision and government pension offset both can reduce the Social Security payments a public employee collects. But theres a bill in Congress, which has strong backing, that could eliminate both the windfall elimination provision and the government pension offset. Heres what you need to know about both and how it might affect your Social Security payments. Consider working with a financial advisor as you create or update a retirement plan.

    Windfall Elimination Provision

    The wind fall elimination provision reduces the amount of Social Security benefits people can collect if they receive a government retirement plan in addition to Social Security. It applies only to workers who did not pay Social Security taxes, and so did not earn credits toward Social Security income during their working years.

    According to the Congressional Research Service, roughly 6% of workers dont receive Social Security credits in a given year. Most are local, state and federal employees who dont pay Social Security taxes because they qualify for government pensions instead. For example, these are federal civilian employees who receive their retirement through the Civil Service Retirement System. The rest are workers covered by alternative retirement schemes, such as Railroad Retirement, or poverty-level workers who earn too little to qualify.

    Government Pension Offset

    Why Public Employees Oppose WEP and GPO

    What Congress Is Poised to Do

    The Bottom Line

    Retirement Tips

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    Pensions And Years Of Coverage

    Table 5 shows the sources of pensions for retired and disabled workers affected by the WEP. Almost half of the retired workers and over two-fifths of the disabled workers received federal pensions. The percentages of retired and disabled workers receiving state and local pensions were similar, 36 percent and 38 percent, respectively.

    Table 5. Number and percentage distribution of retired and disabled workers in current-payment status with benefits affected by the WEP, by source of noncovered pension, December 2006

    NOTE: WEP = Windfall Elimination Provision.

    Almost three-fourths of workers affected by the WEP had fewer than 21 years of substantial covered earnings . Thus, almost three-quarters of the workers were subject to the maximum PIA reduction50 percent of the first bendpoint, unless they were covered by the WEP guarantee. Another 10 percent had 2124 years, and about 8 percent had 2529 years. Retired and disabled workers had similar distributions of years of covered earnings, but women tended to have fewer years than men.

    Table 6. Number and percentage distribution of retired and disabled workers affected by the WEP, by sex and years of substantial covered earnings, in current-payment status, at end of December 2006

    Years of substantial
    NOTE: WEP = Windfall Elimination Provision.

    Appendix A: Calculating A Totalization

    To calculate a Social Security benefit under totalization, SSA first identifies the worker’s years of covered earnings and determines the average annual ratio of those earnings to the national AWI. This ratio is called the REP. Table A-1 shows an illustrative REP calculation for a worker who was born in 1953 and who had covered earnings from 1975 through 1980.

    Table A-1.REP calculation for a hypothetical worker

    SOURCES: Author’s calculations and .
    NOTE: . . . = not applicable.

    For each year of covered earnings, SSA divides the worker’s nominal covered earnings by the national AWI that year. In 1975, when the AWI was $8,631, the worker’s nominal covered earnings were $10,000, or slightly more than the AWI . In 1976, the worker’s nominal covered earnings remained the same, but the AWI increased to $9,226, a ratio of 1.08 and so on. SSA sums the six annual ratios and then divides that sum by six to provide the REP .

    Next, SSA multiplies the average national earnings in each year from when the worker attained age 22 through the year in which she or he reached age 61 by the REP.17 For our hypothetical worker, SSA would multiply the AWI by the REP of 1.16 for each year from 1975 through 2014 to obtain this worker’s theoretical earnings record. SSA then wage-indexes each year of theoretical earnings to the year 2013 , as under current law. The 40-year sum of these years of projected indexed earnings is $2,084,659.

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