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Nuances of WEP question
Old 03-04-2018, 04:59 PM   #1
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Nuances of WEP question

I've been looking at the WEP rules and have discussed it with a few FA. [note, the FA's don't seem to keep up on WEP, even the ones that say they target government employees ].

My question is in regards to the Social Security Program Operations Manual System (POMS) RS 00605.364 Determining Pension Applicability, Eligibility Date, and Monthly Amount; Effective Dates: 10/12/2017 - Present. https://secure.ssa.gov/apps10/poms.n.../0300605364#c4

The document goes over the usual stuff, including what to do if a defined contribution plan provides a lump sum upon retirement. However, at the very bottom of the document, under 'Part D. Change in pension amount' there is this phrase: "However, if the pension ceases and the NH is no longer entitled to the pension, recompute the PIA without considering the pension effective with the first month for which the claimant is no longer entitled to the pension. " (NH=number holder)

So my question is what does this mean? Does it only apply to a defined benefit pension? Or if a person in a defined contribution pension has lump sum or variable payments as determined by that person and the funds are exhausted, does that count an 'no longer entitled'? That would seem to be contrary to section 5 'Entire pension paid in a lump sum'. Under the lump sum scheme, a person could end up with a 'phantom pension', as in one that they do not receive a benefit from but it is still counted against their SS.

In DW case, she went for the 10 year payout option of her defined contribution pension. Because she can determine the monthly payout amount, that may not apply to the statement in Part D? as opposed to a defined benefit pension that only was scheduled to last 10 years.
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Old 08-17-2018, 08:01 PM   #2
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Bump. Iím interested in this topic, too.
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Old 08-17-2018, 08:56 PM   #3
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Since my post in march, I found this article. https://www.onefpa.org/journal/Pages...rovision-.aspx

My current FA says that when the money stops being distributed to you, then you don't have to claim a pension when applying for SS. But I read differently in the rules. It looks like that if one has a pension where they get to set (or change) the monthly amount, either as a lump sum or lifetime payout of a pension, a person could end up with a 'phantom pension' amount to be subtracted from your SS amount. Even though you have no pension payments remaining.

In the SS document I listed in the OP, there was a condition where if a WEP infected pension had defined duration, when that time ran out the pension would no longer be WEP eligible for the WEP rules. Because DW took the 10 year option on her payout, I've been pushing her to get a letter from Empower (who has her pension) to state that. One other proof that it was a 10 year election is that it is subject to 20% mandatory tax withholding, whereas the lifetime election is not subject to that 20%. So her 10 years will be up the year after she reaches full retirement age.
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