Windfall elimination: w2 jobs, now state

[columbus]

Does anyone have any advice to plan for trying to avoid or reduce wep? My dw worked w2 jobs for about 16 years but has been with Ohio state for the last 4.5 years with arp 401a.

Is it possible to get a short term part time w2 job on the side to count as w2 income each year to get to 30 years, getting a high income w2 job right before retirement to increase benefits?

Any other strategies? She's 37 so wondering if staying at state would be good or bad idea since its not a pension but a 401a. If she left in the near future she could work the rest of her career as w2 but staying has it's its benefits too.

Any advice is much appreciated!

 

[gayl]

Trying to avoid WEP? Always hold a job that withholds social security

 

[Chuckanut]

WEP exists to make the system fair for those have paid SS for many years. If any thing it needs to be strengthened.

 

[Sunset]

RANT:
SS is not paid out based on what you paid into it, but rather they socialized it to make it more rewarding for lower income earners (and best for non-earners like a spouse who does not work).
Therefore, they have to add more ways to make it adjusted, like putting tape on a rusty car.
So WEP, came about as another piece of tape.

As to OP question, Will she get a pension from the State, or just the 401a. ?
Perhaps the 401a is very generous as some folks would rather have something like that instead of SS

 

[akck]

She would need 14 years of substantial earnings in order to not have her SS reduced by WEP, assuming her 16 years qualify. For 2017, substantial earnings are $23,625 that pay into SS. Here is a link on past earnings amount needed:

https://financialducksinarow.com/4415/substantial-earnings-with-regard-to-wep/

 

[Alan]

Does anyone have any advice to plan for trying to avoid or reduce wep? My dw worked w2 jobs for about 16 years but has been with Ohio state for the last 4.5 years with arp 401a.

Is it possible to get a short term part time w2 job on the side to count as w2 income each year to get to 30 years, getting a high income w2 job right before retirement to increase benefits?

Any other strategies? She's 37 so wo(ndering if staying at state would be good or bad idea since its not a pension but a 401a. If she left in the near future she could work the rest of her career as w2 but staying has it's its benefits too.

Any advice is much appreciated!

If a 401a is the equivalent of a 401k then I don’t think WEP comes into play. Many of us earned both a defined benefit pension (DBP) while contributing to a 401k and it sounds from what you say that your wife does not get a DBP. I believe that when starting WEP you are asked if you have any other non W2 pension income and I don’t believe potential or planned distributions from deferred retirement investment vehicles counts.

 

[columbus]

She chose the 401a instead of the pension option since she didn't know how long she would be there. The 401a is pretty generous but it is like a 401k, she'll get no actual pension or anything.

 

[Rianne]

RANT:
SS is not paid out based on what you paid into it, but rather they socialized it to make it more rewarding for lower income earners (and best for non-earners like a spouse who does not work).
Therefore, they have to add more ways to make it adjusted, like putting tape on a rusty car.
So WEP, came about as another piece of tape.

As to OP question, Will she get a pension from the State, or just the 401a. ?
Perhaps the 401a is very generous as some folks would rather have something like that instead of SS

Speaking of socialized, I guess they have to put tape on our infrastructure, our police and fire departments, our public schools, park and recreations, not to leave out our beautiful national parks, all the subsidies we pay to the rich for tax deductions and other deductions that assist the poor, medicare, medicaid, the elderly in nursing homes that cannot afford the nursing homes. What have I left out? Socialized social security, really?

 

[gayl]

To reiterate: it's not whether or not she gets a 401a from the state it's whether or not she pays into Social Security. If Social Security is being withheld from her paycheck, she will get Social Security. If it is not being withheld from her paycheck then WEP and WPO come into play. So she may be concerned about absolutely nothing.

[On soapbox] this s*** about continually rehashing whether or not people should have Social Security, whether pensions are fair or unfair, and how much people are entitled to is tiresome [off soapbox]

 

[columbus]

So if social security was withheld for 14 years she will get that based on an average of 35 years with no other reductions?

 

[columbus]

P.s. I have always had social security withheld so would she actually just get 1/2 of my benefit of it is higher then her avg?

 

[gayl]

No. They will withhold $1 in SSA for every $1 of non-SSA benefit. Examples:

1. I worked for the government for 22 years and always paid into Social Security, pension, and 457. I also had other employment for 20 years. Yes I worked a really long time all the way from age 16. So I will get a full social security check, as well as my pension check. Because I always put into Social Security.

2. My sister worked 10 years for liquid air, then 20 years for the government retiring at age 50, and then another 7 years for somewhere else. She is under WEP because she worked for the probation department and they do not pay into Social Security. So instead of paying into Social Security they withheld 25% of her pay for their program. When she goes to withdraw from Social Security she will get absolutely no social security. Because the amount of the pension that she gets ($4500 a month) is greater than what she would have gotten on Social Security. Her social security check will be figured out at approximately $1,800 a month

$1800
-$4500
No shortage -- WEP

It is because of this formula that she will not get Social Security on her own account nor will she get it on her husband's. But let's say her Social Security check would have been $2,500 a month and she was only getting $1800 in her pension. Then she would get $700 a month from Social Security. This formula carries over as to what she would get as a wife as well. So she actually won't ever get it. But she gets 4500 a month. Which is a better deal but then she also had to deal with hard core felons the whole time so I guess that works out in her favor.

That's just two examples from people who work for the government and who were technically under WEP / WPO. It never affected me because I've always paid in. It supposedly negatively affected her however her pension more than offset that so she's better off. Everyone still paid in for Medicare so everyone still gets Medicare no matter what.

HELPFUL LINK: https://www.ssa.gov/planners/retire/wep-chart.html

 

[Bryan Barnfellow]

OP, If you search the SSA site online you can find a calculator that allows you to enter manually your annual social security earnings (alas, cannot just input automatically from your "mysocialsecurity" table) and the expected benefit amount of a non-SS program. It gives you an estimate of your WEP adjusted benefit. I did this and it wasn't as bad as I thought -- I had 29 of the 30 years needed to get the full benefit. So, about a 5% decrease.

-BB

 

[akck]

P.s. I have always had social security withheld so would she actually just get 1/2 of my benefit of it is higher then her avg?

No, assuming WEP applies to her, then GPO will apply to half of your benefit. This means anything she is entitled to under your benefit will be reduced by 2/3's of her pension. It’s likely her 401a will be calculated as an annuity to determine the reduction.

 

[akck]

No. They will withhold $1 in SSA for every $1 of non-SSA benefit. Examples:

2. My sister worked 10 years for liquid air, then 20 years for the government retiring at age 50, and then another 7 years for somewhere else. She is under WEP because she worked for the probation department and they do not pay into Social Security. So instead of paying into Social Security they withheld 25% of her pay for their program. When she goes to withdraw from Social Security she will get absolutely no social security. Because the amount of the pension that she gets ($4500 a month) is greater than what she would have gotten on Social Security. Her social security check will be figured out at approximately $1,800 a month

$1800
-$4500
No shortage -- WEP

It is because of this formula that she will not get Social Security on her own account nor will she get it on her husband's. But let's say her Social Security check would have been $2,500 a month and she was only getting $1800 in her pension. Then she would get $700 a month from Social Security. This formula carries over as to what she would get as a wife as well. So she actually won't ever get it. But she gets 4500 a month. Which is a better deal but then she also had to deal with hard core felons the whole time so I guess that works out in her favor.

That is incorrect. She will qualify for SS on her own SS earnings, however, it will be reduced. My situation is similar to your sister and I get a pension and SS. You are correct that she likely wouldn’t get a benefit based on her husband's record.

 

[ulrichw]

No. They will withhold $1 in SSA for every $1 of non-SSA benefit. Examples:

2. My sister worked 10 years for liquid air, then 20 years for the government retiring at age 50, and then another 7 years for somewhere else. She is under WEP because she worked for the probation department and they do not pay into Social Security. So instead of paying into Social Security they withheld 25% of her pay for their program. When she goes to withdraw from Social Security she will get absolutely no social security. Because the amount of the pension that she gets ($4500 a month) is greater than what she would have gotten on Social Security. Her social security check will be figured out at approximately $1,800 a month

$1800
-$4500
No shortage -- WEP

It is because of this formula that she will not get Social Security on her own account nor will she get it on her husband's. But let's say her Social Security check would have been $2,500 a month and she was only getting $1800 in her pension. Then she would get $700 a month from Social Security. This formula carries over as to what she would get as a wife as well. So she actually won't ever get it. But she gets 4500 a month. Which is a better deal but then she also had to deal with hard core felons the whole time so I guess that works out in her favor.

That is incorrect. She will qualify for SS on her own SS earnings, however, it will be reduced. My situation is similar to your sister and I get a pension and SS. You are correct that she likely wouldn’t get a benefit based on her husband's record.

A couple of references I found. First, in response to Gayl: In addition to akck's correction (it's not a $1 for $1 reduction of benefits), there is also this paragraph in the SSA's explanation of WEP:

A guarantee
The law protects you if you get a low pension. We won’t
reduce your Social Security benefit more than half of your
pension for earnings after 1956 on which you didn’t pay
Social Security taxes.

(source: https://www.ssa.gov/pubs/EN-05-10045.pdf)

Second, I found a reference that suggests that if you roll over the 401a before being eligible for receiving plan payments, that this would avoid WEP: https://maximizemysocialsecurity.com/are-wep-gpo-triggered-401a-defined-contribution-deductions

 

[gayl]

A couple of references I found. First, in response to Gayl: In addition to akck's correction (it's not a $1 for $1 reduction of benefits), there is also this paragraph in the SSA's explanation of WEP:

(source: https://www.ssa.gov/pubs/EN-05-10045.pdf)

that's great news! I'll have my sister go back to SSA and tell them they figured her WEP / WPO wrong! Afterall, she did pay in for 17 yrs, she should get some.

 

[bingybear]

I did a short web scan shortly after this post started, but did not reply. IIRC the 401a will be considered like a pension I the employer funded any part of the 401a. If the employee provided all the funding it would not be considered a pension for WEP.

So expect WEP to be calculated. In general I ignore WEP as we should not be affected by it.

Good luck

 

[gayl]

A couple of references I found. First, in response to Gayl: In addition to akck's correction (it's not a $1 for $1 reduction of benefits), there is also this paragraph in the SSA's explanation of WEP:

(source: https://www.ssa.gov/pubs/EN-05-10045.pdf)

that's great news! I'll have my sister go back to SSA and tell them they figured her WEP / WPO wrong! Afterall, she did pay in for 17 yrs, she should get some.

Must be how a friend of mine (retired from customs) gets $400 SSA - $187.50 Medicare = $212.50 net

 

[Teacher Terry]

The online calculator for the WEP reduction is very accurate because you enter in your actual earnings for each year. Our state does not pay in and for people that worked 30 years their pension is bigger then what their SS would have been. But for people like me that only have 15 years in with the state before retiring and then get our SS reduced by a lot it really sucks. We are worse off.