Show If during your career, you worked for both an employer who did withhold Social Security taxes and an employer who didn’t (while earning a pension), this provision may apply to you. In 1983, Congress passed the Windfall Elimination Provision (WEP) to prevent employees who received non-covered pensions from the “windfall” of receiving the higher Social Security benefit calculation typically used for longtime, low-wage earners. These earners have the advantage of receiving a Social Security benefit representing a higher percentage of their income while they were working. A non-covered pension is a pension paid by an employer who didn’t withhold Social Security taxes from your salary. In December 2021, about 2 million people (or about 3% of all Social Security beneficiaries) were subject to the WEP according to a 2021 Congressional Research Service report (PDF). Does the WEP Apply to Me?Not all CalPERS members are affected by the WEP. To check if it may apply to you, look at your pay stub to see if Social Security taxes have been withheld. If they haven’t, then you may be earning a non-covered pension. Important Points to Know
Resources From the Social Security AdministrationFor more information about how the WEP works and a list of exceptions, and a list of substantial earnings, review Windfall Elimination Provision (PDF). Create your personal my Social Security account and obtain a copy of your earnings record. Use the WEP Calculator to get an estimate of your Social Security benefit after the WEP deduction. The Windfall Elimination Provision (WEP) is a formula that can reduce the size of your Social Security retirement or disability benefit if you receive a pension from a job in which you did not pay Social Security taxes. Such a “non-covered” pension might have been earned, for instance, by work for a state or local government agency that does not participate in
FICA payroll-tax withholding. If you collect such a pension, the WEP could reduce your Social Security benefit by up to half of the amount of your pension. (By law, it cannot eliminate your benefit entirely; Social Security sets maximums on the dollar amount, as detailed in its WEP Chart.) About 1.9 million people, or 3 percent of Social Security beneficiaries, are affected by the provision, according to a November 2021 report by the Congressional Research Service. Congress approved the Windfall Elimination Provision in 1983 as part of a larger package of Social Security reforms (including an increase in the full retirement age). The intent was to remove an unintended advantage for workers who collect non-covered pensions (typically from government employment) but also did some "covered" work in jobs that paid into Social Security. Because relatively little of their lifetime income was reflected in their Social Security earnings records, these workers benefited from Social Security’s progressive formula for figuring retirement payments, which is weighted in favor of low-wage workers. In other words, someone who collected a healthy government salary for decades received the same advantage in Social Security calculations as did a longtime low-income worker. The WEP eliminates this advantage by tweaking the formula for people also receiving non-covered pensions in a way that reduces their Social Security retirement benefits. Keep in mind
Updated December 27, 2021 How does the Windfall Elimination Provision work?The Windfall Elimination Provision reduces your Eligibility Year (ELY) benefit amount before it is reduced or increased due to early retirement, delayed retirement credits, cost-of-living adjustments (COLA), or other factors.
How do you avoid the Windfall Elimination Provision?The WEP can reduce eligible Social Security benefits by as much as 60%. It has a maximum deduction equal to one-half of your pension payment. To avoid the WEP, you'll need to work at least 30 years in a qualifying (Social Security-eligible) position with substantial earnings (for 2021, this is $26,500 or more).
What is the max WEP reduction for 2022?The WEP includes a guarantee that the reduction in the benefit amount caused by the WEP formula can never exceed more than one-half of the noncovered pension. Thus, for workers who become eligible for benefits in 2022, the maximum reduction under the WEP may be less than $512.
Who falls under the Windfall Elimination Provision?You qualify for Social Security retirement or disability benefits from work in other jobs for which you did pay taxes. The Windfall Elimination Provision can apply if one of the following is true: You reached age 62 after 1985. You developed a qualifying disability after 1985.
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What is the windfall elimination provision in social security
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