Questions about WEP

[MichaelB]

A friend of DW’s called, asking me to help her with a SS/WEP matter. It looks like she has 20 years of SS earnings and 3-4 years of non-SS, but the WEP reduction is significant, at first glance much larger than i would expect. WEP is something I’ve seen in multiple threads but just glanced over.

In this case, it looks like she appealed and went to some type of court or hearing. The judge urged her to get an attorney and rescheduled the hearing. I’m going to try an help her figure out how to deal with this and what she should do next.

Is there a rule of thumb or simple calculation to ballpark how much the WEP reductions should be? Is there a worksheet to lay out all the numbers, do the math, and figure out the exact numbers? Is this something that really needs a SS Attorney? They all seem focused on disability, not WEP.

Any other thoughts, suggestions or advice?

 

[Brat]

If the judge urged her to get an attorney she should follow his recommendation, find someone who specializes in SS law. At a minimum, she will learn if it is worth her while appealing the determination.

 

[txtig]

My wife had a similar situation, except fewer SS years and more non-SS years. One of the options we looked at was for her to “withdraw” her contributions to her TRS plan (teacher retirement plan) and thus forfeit her right to her teacher pension and avoid any WEP impact. In her case, the numbers did not favor that option.

If your friend has the option of withdrawing from her government pension plan, given the relative short duration of it (3-4 years), the numbers may favor that option for her.

 

[LRDave]

I assume no spouse, so no GPO (which makes it even worse...). We expect DW's SS benefit to get completely whacked by the WEP/GPO 1-2 punch.

I had no idea anything about it could be appealed. Your friend's situation sounds like a SS nightmare.

Following, but no guidance to offer....

 

[MissMolly]

Have you checked out the WEP calculator on the SS site:

https://www.ssa.gov/planners/retire/anyPiaWepjs04.html

 

[Philliefan33]

I assume no spouse, so no GPO (which makes it even worse...). We expect DW's SS benefit to get completely whacked by the WEP/GPO 1-2 punch.

I had no idea anything about it could be appealed. Your friend's situation sounds like a SS nightmare.

Following, but no guidance to offer....

I don’t understand this. As far as I know, WEP and GPO do not stack.

WEP will reduce DW’s SS benefit. GPO reduces any spousal benefit that DW may be eligible to claim.

 

[timo2]

I put a couple of links in this thread that might be useful http://www.early-retirement.org/forums/f28/nuances-of-wep-question-91079.html

 

[timo2]

Here is a Q&A section from Maximize my social security
https://maximizemysocialsecurity.com/tags/non-covered-pension-wep-gpo

 

[MichaelB]

Thanks for the responses, and the links. They're very helpful. I'll read them this weekend. It's not my intention to represent her but I would like to give her a good idea of what she should expect to receive in pension income, then help her hire counsel and evaluate the strategy they recommend.

Just from these responses and links it's clear I need more detail from her. GPO needs to be ruled out (or in). From our conversation yesterday it appears she has a state pension, of which some years were contributory to SS and others not. That looks a little messy and a potential source of trouble.

 

[youbet]

I assume no spouse, so no GPO (which makes it even worse...). We expect DW's SS benefit to get completely whacked by the WEP/GPO 1-2 punch.

I had no idea anything about it could be appealed. Your friend's situation sounds like a SS nightmare.

Following, but no guidance to offer....

Well.......

While GPO can indeed "completely whack" your DW's entitlement to any of your SS benefits, WEP can never "completely whack" her own SS. It can sure lower her SS significantly though.........

For my DW, after GPO eliminated any spousal benefit for her based on my SS, WEP took her own SS down to where it's less than her monthly Part B Medicare premium. So, instead of a monthly SS check with the Part B premium deducted from it, she gets a monthly bill which she dutifully pays........

 

[youbet]

Thanks for the responses, and the links. They're very helpful. I'll read them this weekend. It's not my intention to represent her but I would like to give her a good idea of what she should expect to receive in pension income, then help her hire counsel and evaluate the strategy they recommend.

Just from these responses and links it's clear I need more detail from her. GPO needs to be ruled out (or in). From our conversation yesterday it appears she has a state pension, of which some years were contributory to SS and others not. That looks a little messy and a potential source of trouble.

As long as she has the data regarding her income and SS contributions (in the years she worked at jobs covered by SS which should be right on the SS site, right?) and the amount of her state pension, it's a pretty straight forward calculation for both WEP and GPO. I'm curious as to what numbers are being challenged. I'll guess that since her job was covered by SS some of the time and not covered some of the time, the issue may have its roots there. Can you share the state she worked in?

 

[youbet]

I don’t understand this. As far as I know, WEP and GPO do not stack.

WEP will reduce DW’s SS benefit. GPO reduces any spousal benefit that DW may be eligible to claim.

+1 Yes

 

[steelyman]

The IRS publishes tables for what it considers “substantial earnings” for each year that factor in to the WEP calculations for reductions.

Years worked for less than substantial earnings (e.g. a part time job) may not count even if SS contributions were taken.

 

[MichaelB]

As long as she has the data regarding her income and SS contributions (in the years she worked at jobs covered by SS which should be right on the SS site, right?) and the amount of her state pension, it's a pretty straight forward calculation for both WEP and GPO. I'm curious as to what numbers are being challenged. I'll guess that since her job was covered by SS some of the time and not covered some of the time, the issue may have its roots there. Can you share the state she worked in?

I don't know much, and didn't ask many questions, just offered to help. She said her SS pension was reduced by $400 because of WEP. She told me she worked in Georgia as a teacher, 3.5 years non-SS contributory and 10 contributing to SS, and then another 10 elsewhere contributing to SS.

She is married, so it looks like I need to find out if she is collecting on her record or spousal. She also needs to provide details on those years in Ga. I'm still in the far left of the learning curve here and appreciate the interest and advice.

 

[youbet]

The administrators of her Georgia state pension may be able to help. Since it sounds like that pension system changed horses mid-steam, changing from non-SS contributory to SS contributory, their members likely have SS issues in regard to determining how much of the state pension was earned while contributing and while not contributing to SS.

Also, while she says her reduction is due to WEP, it's quite common for folks to get WEP and GPO confused.

 

[LRDave]

Well.......

While GPO can indeed "completely whack" your DW's entitlement to any of your SS benefits, WEP can never "completely whack" her own SS. It can sure lower her SS significantly though.........

For my DW, after GPO eliminated any spousal benefit for her based on my SS, WEP took her own SS down to where it's less than her monthly Part B Medicare premium. So, instead of a monthly SS check with the Part B premium deducted from it, she gets a monthly bill which she dutifully pays........

Yes I exaggerated. GPO will whack any spousal benefit and WEP will drive her own SS benefit to a pittance. Mea culpa.

 

[timo2]

One small glimmer of a silver lining is many pensions are not COLA'd. So as SS benefits get their COLA, that bit by bit reduces the impact of the WEP /GPO.

 

[MichaelB]

Update

After brushing up about WEP over the weekend, I sat down yesterday with DW’s friend to look at her case. We spent a couple of hours talking about WEP, reviewing all the letters SSA sent on this, then looking over her work records. We also crunched some numbers, just to see if the amount being withheld for WEP was correct.

My conclusion was the WEP withholding was about what it should be. She was confused, which is understandable given that SSA changed the amounts 4 times, did a poor job of communicating the changes, and never gave her a simple & straightforward summary of the numbers. This led her to believe more was being withheld.

I think the other issue is, she learned about WEP for the first time when the SSA reduced her pension, which was a shock. She’s fortunate in that she has only a few WEP years, so the penalty is low and her retirement is not at risk. It does affect her lifestyle, thought, and she is back working part time.

This has been an eye opener for me. Like I said in the OP, I’ve seen this mentioned in many posts but just glanced over, never giving it a second thought. This could do serious damage to someone’s retirement plan, and even more if spousal benefits are needed.

Thanks for the links and posts, they were helpful.

 

[BeachOrCity]

If you haven’t already I would suggest you look at Mike Piper’s writings on the subject. He has an inexpensive book that I would think covers this “social security made simple”.

 

[steelyman]

This has been an eye opener for me. Like I said in the OP, I’ve seen this mentioned in many posts but just glanced over, never giving it a second thought. This could do serious damage to someone’s retirement plan, and even more if spousal benefits are.

It was good of you to help out, it’s confusing and can come as a shock. I learned of it while helping my mom (career Chicago school system) unravel SS issues. She took a hit on my dad’s (private sector) SS benefits.

Depending on what other income sources are available it can be a meaningful reduction for retirees.

 

[youbet]

Depending on what other income sources are available it can be a meaningful reduction for retirees.

For sure. For us, GPO was the real killer. GPO punishes the spouse more than the state pension recipient his/herself. When we discovered that DW would not be eligible to collect anything from my SS as a survivor, it forced me to:

1. Start my SS at 62 and invest the money so she would at least have that if I predecease her. (That's worked OK.)

2. Reduce our current SWR a bit to compensate for the fact that my death results in my SS completely disappearing from her income as a survivor.

If she was a widow that had never worked at all, she'd be entitled to SS survivor benefits. It's kinda strange. I just made the necessary adjustments and everything has been OK. But it does seem like GPO really gives the SS earning spouse a kita since he/she loses the benefit of having SS be a partial provider for his/her surviving spouse through survivor benefits and other accommodations must be made.

 

[Philliefan33]

I found this article that explains the "why" of WEP and GPO.

https://www.fool.com/retirement/2018/06/19/can-my-pension-lower-my-social-security-benefits.aspx

 

[Accidental Retiree]

After brushing up about WEP over the weekend, I sat down yesterday with DW’s friend to look at her case. We spent a couple of hours talking about WEP, reviewing all the letters SSA sent on this, then looking over her work records. We also crunched some numbers, just to see if the amount being withheld for WEP was correct.

My conclusion was the WEP withholding was about what it should be. She was confused, which is understandable given that SSA changed the amounts 4 times, did a poor job of communicating the changes, and never gave her a simple & straightforward summary of the numbers. This led her to believe more was being withheld.

I think the other issue is, she learned about WEP for the first time when the SSA reduced her pension, which was a shock. She’s fortunate in that she has only a few WEP years, so the penalty is low and her retirement is not at risk. It does affect her lifestyle, thought, and she is back working part time.

This has been an eye opener for me. Like I said in the OP, I’ve seen this mentioned in many posts but just glanced over, never giving it a second thought. This could do serious damage to someone’s retirement plan, and even more if spousal benefits are needed.

Thanks for the links and posts, they were helpful.

I just filed for SS, knowing that with 21 years of substantial earnings, I’m still going to be affected by WEP; fortunately that WEP decrease will be offset for a few years. My husband will file a restricted application on my record later this year at his FRA.

I have a few friends, teachers and a librarian, who were also shocked to learn how WEP will affect their SS. One was getting ready to quit her part-time job and file for SS when I asked her whether she’d be impacted by WEP. (She worked in Illinois.) She’d never heard of WEP.

I did some research and suggested she might want to check out WEP before giving notice.

Two years later, she’s still working, as is my 70-year-old teacher friend.

 

[Chuckanut]

WEP is all about fairness. WEP simply makes sure that people who worked and earned a descent income but did not pay into SS get the same percentage return as those who did pay into SS. Otherwise the non-payers would come out far ahead since they would be treated as low-income earners, who get a higher percentage return in their payment. That would not be very fair to the rest of us who earned similar amounts of money, paid into SS, but get the lower percentage return of higher income people. Nobody is getting ripped-off.

Here is a good explanation:

https://www.creators.com/read/your-...explaining-the-windfall-elimination-provision

And that has always been one of the basic tenets of the Social Security program: to raise the standard of living of lower-income workers in retirement. That is accomplished via a benefit formula structured to give poor people a better deal than their wealthier counterparts.

But if you are someone who spent your lifetime as a teacher or a police officer, or a federal government employee like me, you are simply not in the same boat as Maria. And you shouldn't get a poor person's Social Security return rate. You should get a rate similar to all average-income Americans — about 40 percent. And that's what the windfall elimination provision is all about.

IMHO, Congress should do away with the SS exemption and required everybody to pay into it. That would eliminate the confusion and help people whose other retirement income sources may be at risk. If not that, at least require that the non SS payers get a yearly letter explaining to them that WEP will reduce their SS payments, and they might want to invest some of the money they are not paying into SS.

 

[Teacher Terry]

Yes if you have 30 years pension for a state that didn’t pay into SS WEP is fair. If you have a 11 year pension (DH’s) and 15 year like me it’s not fair. My SS will be 340 instead of 800.