For example, if you worked as an engineer for 20 years before you began teaching, you may be able to do enough part time work between now and when you retire to completely eliminate the monthly WEP reduction. This phase-out of the WEP reduction offers an incredible planning opportunity if you have worked at a job where you paid Social Security tax. Source: Devin Carroll, Data: Social Security Administration At 30 years of substantial covered earnings, the WEP does not apply. If you have more than 20 years of substantial covered earnings (where you paid Social Security tax), the impact of the WEP begins to diminish.For those filing at full retirement age, this reduction is capped at a monthly reduction of $558 (for 2023). The maximum Social Security reduction will never be greater than one-half of your pension amount.The normal Social Security calculation formula is substituted with a new calculation that results in a lower benefit amount.Ĭovering the topic exhaustively would require a multipage essay, but the necessary components of the WEP can be distilled to a few simple points: The Windfall Elimination Provision (WEP) is simply a recalculation of your Social Security benefit if you also have a pension from “non-covered” work (no Social Security taxes paid). Many teachers came to education as a second career, after they’d spent years working in a job where Social Security taxes were withheld. Police Officers will often retire at an early age and move on to another “covered” job. ![]() For example, Firefighters often work second jobs where they pay social security tax. Many individuals find themself in this situation for a variety of reasons. That’s especially true if you’ve paid into the Social Security system for enough quarters to qualify for a benefit. For workers in these states, the rules for collecting a non-covered government pension and Social Security can be confusing and maddening. Instead, they have their own state-run pension plan. However, there are still several states who do not participate in Social Security. However, over the years, many states dropped their own pension plans and adopted coverage agreements with the Social Security Administration. In the beginning, Social Security didn’t cover any public sector employees. 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. This new provision began to reduce Social Security benefits for those who worked in a job in which:ġ) They did not pay Social Security taxesģ) Worked at another job where they qualified for Social Security benefits. The Social Security Amendments of 1983 introduced the Windfall Elimination Provision (WEP) as part of an effort to keep individuals from “double dipping.” This was defined as receiving both a pension from a job where they did not pay Social Security taxes and a Social Security benefit. It starts by understanding the mechanics of the Windfall Elimination Provision. Understanding if a reduction in benefits will apply to you, and how much that will be, does not have to wait until you file for Social Security. ![]() ![]() The Social Security Administration will wait until you file to tell you how much the reduction is if you qualify for both Social Security and a non covered pension. This may surprise you but your Social Security statement does not reflect any reduction in benefits due to this provision. How do you know if you’ll be impacted? Don’t expect it to be on your Social Security benefits statement. If you have a pension from a job where you did not pay Social Security taxes, your benefit may be reduced by the Windfall Elimination Provision (WEP).
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