Social Security WEP Reduction?

[obgyn65]

Acording to the SS own website :

Social Security Publications


"The Windfall Elimination Provision does 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 based on railroad employment;
• The only work you did where you did not pay Social Security taxes was before 1957; or
• You have 30 or more years of substantial earnings under Social Security." (emphasis mine)

My question is: how long does someone need to be a federal worker (if hired after 12/31/1983) for the WEP not to apply ? 10 years ? 40 years ? 2 months ?

To the best of my knowledge WEP disappears at 30 years of earnings. ( any social security earnings)

 

[obgyn65]

OK. So I should not be affected by the WEP if I work for some time in the future for the federal government, correct ? My question is: how long do I need to work in a government position not to be affected by the WEP ? As mentioned above, theoretically I could find a couple of locum tenens positions in Indian reservations government-run clinics for example, providing medical care a few weeks a year, and not be impacted by the WEP when I reach 62 or 67, correct ?

No federal employees who began working after the early to mid-80's are affected by the WEP. They fall under the FERS retirement system, and contribute to SS just like other non-fed workers.

 

[obgyn65]

I wish sscritic from Bogleheads would help us here too with these types of questions.

 

[Alan]

I wish sscritic from Bogleheads would help us here too with these types of questions.

You could pop over there and ask him - then let us know what he says

I would think that if you have worked and earned a pension in another country then working for the federal government as you suggest would not reverse that.

The WEP is applied one time only - when you first apply for SS. So, timing is all important.

Take a look at this discussion.

1. one problem is the 'substantial earnings'. SS defines it for each year. I missed one year by 50 cents, so that year of work wasn't counted.

2. you only get WEP'd once. So if you know you are getting a UK state pension of, say, £1000 a year and know you will get a UK private pension of £10,000 a year, you'd want to start receiving the UK state pension, get WEP'd, then start receiving the UK private pension.

3. the exchange rate of WEP is the day the administrator does your case. And it can never be changed. So if the exchange rate is $2.00 your £1000 UK state pension will be equal to $2000. If it's $1.5 your UK state pension will be valued at $1500 (remember - this will result in a lifetime decrease in your SS payments so it's in your interests to have that value as low as possible).
http://talk.uk-yankee.com/index.php?topic=74287.0

http://talk.uk-yankee.com/index.php?topic=74287.0

 

[rothlev]

Acording to the SS own website :

Social Security Publications


"The Windfall Elimination Provision does 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 based on railroad employment;
• The only work you did where you did not pay Social Security taxes was before 1957; or
• You have 30 or more years of substantial earnings under Social Security." (emphasis mine)

My question is: how long does someone need to be a federal worker (if hired after 12/31/1983) for the WEP not to apply ? 10 years ? 40 years ? 2 months ?

That is referring to federal hires after 12/31/1983 who PAY into social security verus the prior employees under CSRS who did not pay in. You will be subject to WEP if you have a pension from earnings where you did not pay into social security.

 

[Mulligan]

I think the more substantial and length of years worked in SS, the less the bite. I have a friend who is retiring this year with a government non SS contributing pension, that had a little over 20 years of substantial SS earning before a career change. He was worried the WEP would buzz cut him. He went in to SS office and found out he would be getting over a $1000 a month still, and only losing a couple hundred bucks. He was very pleased he said. His other pension will be around 50k, so he must have had some protection of his SS, by his extended contributing years of all substantial income even though it wasn't 30.

 

[martyb]

Yeah, that's my problem...none of the years I contributed to SS was at or above the "substantial" threshold. An enlisted reservist only earns a few bucks a year. I think my highest year ever was maybe $13000, and that was a one-time only circumstance. From the 80's, we're talking about $2000-$3000 a year, up through the 2000's. Not counting the one year year where I earned the $13000 (still not quite enough to be considered "substantial earnings" for SS, I was earning in the range of $6000-$7000_$10,000. We're talking about one weekend a month, typically here. My final year, prior to retirement, I was getting paid a little more than $600 for a 2-day weekend drill ($7200-$7300 per yr) plus $1000-$1500 for my 2 week annual tour. Only around $9000. Still...Social Security was witheld, along with state & federal taxes. I feel like that SS contribution should add up to something for me...especially since it was cumulative over all those years. The way I read it, unless the amount of SS paid income reaches the "substantial earnings" threshold...it counts for nada. I'd sure like to be proven wrong.

 

[rothlev]

The way I read it, unless the amount of SS paid income reaches the "substantial earnings" threshold...it counts for nada. I'd sure like to be proven wrong.

Using the WEP calculator and putting in and then taking out those earnings ( and comparing the output) you could certainly figure out how much, if any, difference they make

 

[Mulligan]

I have to believe they are counting for something, Marty, just not as much as if it had been substantial. I mirrored your type of of income, except for only about 12 years and only 2 substantial years. In today's dollars with WEP mine will be $125. So they had to count for something, or I would be getting nothing. I used to think I was getting ripped off, then learning through this forum, I learned about the "bend points" and the emphasis of the program being directed at "lower income" workers getting a higher percentage of their pay vs. "higher income". So, I "get it", so it doesn't bother me now at all. But it doesn't explain how a person without a pension such as a spouse can do what we did, and not be subject to WEP, even though they deliberately worked part time.
But then again, I would gladly give up all my social security to get rid of this part of SS.

http://www.investmentnews.com/article/20120716/BLOG05/120719949

I an old geezer over 66 can marry a young wife (as young as he wants, or as young as the women is willing, I guess) and start a new family and SHE gets benefits AND the child does too. What in the world is that all about. A reward for old age virility? Why have your children young, wait until your old and have the government pick up the tab! This has been called the "Viagra College Fund". So a 66 year old man can marry a 40 year old woman, and she get SS benefits until the child is 16 and the child gets the benefits until 18. Somebody tell me this is not right, as it is the craziest thing I ever heard of!

 

[akck]

The way I read it, unless the amount of SS paid income reaches the "substantial earnings" threshold...it counts for nada. I'd sure like to be proven wrong.

You still get the SS credit. It just means you'll get 40% of the first $767 of income versus the 90% you'd have gotten without WEP. Substantial earnings only helps you if you have 20+ years of them. After 20 years, you get a 5% increase each year up to 30 years where you get the full 90% benefit.

In the past, I've recommended as a rule of thumb, that you figure you'll get 40% of your SS income. It works for most because most people falling under WEP have SS incomes near or below the $767. It used to work for me, but then I switched jobs and my SS income increased.

 

[martyb]

Thanks for all the feedback!

 

[BLS53]

I have to believe they are counting for something, Marty, just not as much as if it had been substantial. I mirrored your type of of income, except for only about 12 years and only 2 substantial years. In today's dollars with WEP mine will be $125. So they had to count for something, or I would be getting nothing. I used to think I was getting ripped off, then learning through this forum, I learned about the "bend points" and the emphasis of the program being directed at "lower income" workers getting a higher percentage of their pay vs. "higher income". So, I "get it", so it doesn't bother me now at all. But it doesn't explain how a person without a pension such as a spouse can do what we did, and not be subject to WEP, even though they deliberately worked part time.
But then again, I would gladly give up all my social security to get rid of this part of SS.

Older clients' young children a Social Security windfall - InvestmentNews

I an old geezer over 66 can marry a young wife (as young as he wants, or as young as the women is willing, I guess) and start a new family and SHE gets benefits AND the child does too. What in the world is that all about. A reward for old age virility? Why have your children young, wait until your old and have the government pick up the tab! This has been called the "Viagra College Fund". So a 66 year old man can marry a 40 year old woman, and she get SS benefits until the child is 16 and the child gets the benefits until 18. Somebody tell me this is not right, as it is the craziest thing I ever heard of!

+1 The problem with the spousal and dependent payments, is the laws were written in the era of the full time housewife, who had never been in the workforce, and having dependent children after age 60 was rare. Yet, now with dual income marriages, and people having children late in life, the law remains status quo. I've never seen these nuances of SS discussed in any of the reform plans.

There's numerous ways to manipulate these laws to an individual or couple's benefit. Just look at the threads on this forum from time to time. Yet, if a food stamp recipient is sited with an iPhone, all hell has broken loose.

 

[Mulligan]

+1 The problem with the spousal and dependent payments, is the laws were written in the era of the full time housewife, who had never been in the workforce, and having dependent children after age 60 was rare. Yet, now with dual income marriages, and people having children late in life, the law remains status quo. I've never seen these nuances of SS discussed in any of the reform plans.

There's numerous ways to manipulate these laws to an individual or couple's benefit. Just look at the threads on this forum from time to time. Yet, if a food stamp recipient is sited with an iPhone, all hell has broken loose.

Thanks for the historical prospective as it brings sense to its original intent. I am sure this flaw in the system is not the reason the SS system finances are in danger. Yet, one would think this should be addressed. If you were 66, had one 8 year old child with a 45 year old wife, and you filed and suspend on say $2400 monthly benes of SS, the child would get around $1200 a month for 10 years, and the wife would get about $1200 too for 8 years. That is about $250,000 in "free bee" benefits just because you have children late in life. If they are going to means test health insurance subsidies, you would think means testing would be a good idea for this.

 

[obgyn65]

Thank you Alan -

However, regarding your point below, someone who would be a federal worker in the US first hired after December 31, 1983 and who earned a pension in another country would reverse that or not ? If not, what is meant by this sentence as one of the exceptions for WEP :

"You are a federal worker first hired after December 31, 1983; "

I would think that if you have worked and earned a pension in another country then working for the federal government as you suggest would not reverse that.

 

[obgyn65]

but if I become a federal worker in the US, as explained in my previous post above, I would pay into SS, correct ?

This WEP thing is unfair to those of us who have worked abroad.

That is referring to federal hires after 12/31/1983 who PAY into social security verus the prior employees under CSRS who did not pay in. You will be subject to WEP if you have a pension from earnings where you did not pay into social security.

 

[obgyn65]

Regarding timing, since the UK state pension begins at 66 or 67, and if I begin my US SS at 62, I will have about 5 years without WEP then, correct ?

The WEP is applied one time only - when you first apply for SS. So, timing is all important.

 

[DMGO]

Regarding timing, since the UK state pension begins at 66 or 67, and if I begin my US SS at 62, I will have about 5 years withtout WEP then, correct ?

This is a VERY interesting question... How would SS even KNOW about a foreign pension that starts several years AFTER you begin SS payments? I would think you would NEVER get hit with WEP.

 

[nun]

This is a VERY interesting question... How would SS even KNOW about a foreign pension that starts several years AFTER you begin SS payments? I would think you would NEVER get hit with WEP.

It's your responsibility to tell the SSA about foreign non-SS wage pensions. To not do so is breaking the law.

Also I don't see how WEP is any more unfair to those that worked abroad than it is to say State workers. WEP is still adjusting your SS payments so that your low lifetime SS earnings is not interpreted as low average wages.

 

[nun]

Regarding timing, since the UK state pension begins at 66 or 67, and if I begin my US SS at 62, I will have about 5 years without WEP then, correct ?

Yes. In fact you can defer your UK state pension indefinitely. For every 5 weeks that you defer you get an extra 1%. So if you defer for 4 years and the standard pension level at that time is say 100 GBP a week you'd get an extra
100*(4*52)/(5*100) GBP = 41.60 GBP

 

[Nodak]

I had my 40 quarters in SS before I went to work for the government in June 1983. WEP reduced my SS by almost 40% from $800 to $500 per month.

 

[obgyn65]

I would not try to cheat the system, and will follow the law. I want to make sure I optimize my cash flows during retirement but will not take shortcuts.

. How would SS even KNOW about a foreign pension that starts several years AFTER you begin SS payments? I would think you would NEVER get hit with WEP.

 

[Alan]

but if I become a federal worker in the US, as explained in my previous post above, I would pay into SS, correct ?

This WEP thing is unfair to those of us who have worked abroad.

As to your first question then you would need to ask someone more knowledgeable than me. Maybe sscritic at Bogleheads.

I don't think the WEP is unfair to foreign workers even though I am affected myself. Plenty here disagree but I believe SS is designed to keep lower income workers out of poverty when they retire and the 'bend' points that provide % of salary replaced favor the lower earners.

That is why WEP exists and I think that it is right for WEP to be at its maximum for workers who have earned less than 20 years of credit but have other pensions from earned income where they did not pay into SS. The USA taxes on worldwide income so non-SS earned income pensions abroad should be treated the same as non-SS earned income pensions in the USA.

Regarding timing, since the UK state pension begins at 66 or 67, and if I begin my US SS at 62, I will have about 5 years without WEP then, correct ?

Yes, I believe that would be true, but then again I am far from being an expert here.

 

[Alan]

This is a VERY interesting question... How would SS even KNOW about a foreign pension that starts several years AFTER you begin SS payments? I would think you would NEVER get hit with WEP.

Once you start receiving a foreign pension you report it to the IRS on your tax return using a replacement 1099-R since foreign companies don't send you a 1099-R. I doubt that the IRS reports this to the SSA but I don't know for sure.

If FATCA gets fully implemented then I believe foreign companies have to report all pensions paid to US citizens. Again, I don't know if the SSA will get informed and follow through.

 

[martyb]

but if I become a federal worker in the US, as explained in my previous post above, I would pay into SS, correct ?

Yes, that is a correct statement. You would come on board with the fed as a FERS (Federal Employees Retirement System) employee, and as such you would indeed be paying into Social Security, the same as any other person working for a non-governmental agency in the United States...with a few exceptions of course. There are ALWAYS a few exceptions...lol. But yes, you would be paying into, and therefore covered under Social Security.

As for the question about your non-US earnings...I don't know the answer to that one.

 

[DMGO]

Ok, this morning I did the whole retirement application on the SS website. Took about 20 minutes, with double-checking everything, to make sure there were no mistakes. Got a confirmation number, and an e-mail saying to check back in 5 business days. Same as my spouse got when she did hers a few months back. But, she got her temporary password in the mail just 3 days after doing her on-line application. Of course, there was no WEP involved in her retirement, though. I hope mine comes through quickly, as well. Just a matter of waiting, now. It's not like it's going to be a lot of $$. Happy Holidays, everyone.