? WEP - no pension

[newtoseattle]

I worked for the California University system for several years. They did not contribute to social security but put money into a ?403k? I don't even remember what the account was. I also made some voluntary contributions. At some point I rolled the whole thing over into a Vanguard IRA (along with other accounts).
When I read about WEP I think that I may have some deduction based on the lump sum they contributed - but I have no idea how to figure out what that even is/was!? I was young and had no idea the ramifications and don't have records?

Any thoughts/ideas? (I won't have 30 years of substantial contributions to make the issue null)

My social security history lists the 6 years that I paid medicare and not social security taxes, but I don't know how they calculate those years re: WEP since there is no formal "pension"

Thanks

 

[samclem]

They did not contribute to social security but put money into a ?403k? . . . .

Any thoughts/ideas? (I won't have 30 years of substantial contributions to make the issue null)

Probably a 403(B) account? I believe any type of retirement system (403(B), pension, etc) that allowed you (and your employer) to avoid SS contributions is going to be subject to the WEP.
I'd contact SS and ask them about the computation of your benefits. It would seem that's the best way to get the "no guessing" answer, and that's probably what you want.

 

[Sunset]

Hopefully you have records of your contributions.. especially the voluntary ones.

I'm currently looking for my records from 16 yrs ago

 

[MichaelB]

The thread was moved to the FIRE and Money forum.

 

[nun]

Probably a 403(B) account? I believe any type of retirement system (403(B), pension, etc) that allowed you (and your employer) to avoid SS contributions is going to be subject to the WEP.
I'd contact SS and ask them about the computation of your benefits. It would seem that's the best way to get the "no guessing" answer, and that's probably what you want.

403b accounts are voluntary and do not count against WEP....a mandatory 401a account (either DC or DB) would be included in a WEP calculation.

 

[fosterscik]

403b accounts are voluntary and do not count against WEP....a mandatory 401a account (either DC or DB) would be included in a WEP calculation.

I think we need to be careful here. Not all 403b's are voluntary. I believe it's fairly common to have mandatory participation. I've been a participant in three mandatory 403b plans as a University employee. Two systems also contributed to SS; one did not. Fortunately (good planning?), I have 30 years of substantial SS earnings in the SS contributing states and I will not be subjected to WEP.

I have seen conflicting online comments about 403b contributions and WEP. I have read that if the 403b is rolled to an IRA before you are eligible to draw a pension then it doesn't trigger a WEP penalty, but there seems to a number of conflicting statements out there. I strongly advise talking to the SS office to get information for the OP's case.

 

[fosterscik]

OP: You don't need to determine how much you or your University contributed to the 403b plan. The only new number that matters if the number of years of substantial earnings. I think this SS publication should be helpful
https://www.ssa.gov/pubs/EN-05-10045.pdf

The last table is especially relevant. If you are subject to WEP (maybe/maybe not) you should be able to multiply your PIA (primary insurance amount) by your claiming age scaling:
https://www.ssa.gov/OACT/ProgData/ar_drc.html

You calculate your PIA benefit by reducing the usual 90% at the 1st bend point to the tabulated WEP percentage; the higher bends are unaffected. It's hard to give you an answer without more details, but for example If you are currently 63 with 25 years of substantial earnings the 1st bend scaling is reduced from 90% to 65%. It's relatively easy to calculate if you know your average monthly earnings (AIME) as calculated by SS but too complex to do for a general case.

 

[Sarah S]

Does not this apply?
DO I AVOID THE REDUCTION UNDER THE WEP IF I MOVE FROM NON-SS-COVERED EMPLOYMENT TO SS-COVERED EMPLOYMENT?
No, you won't unless you forfeit your right to the government pension from the non-SS-covered employment. You forfeit it by withdrawing your contributions and interest before you are eligible to receive such a pension. If you withdraw your contributions and interest after you are eligible to receive such a pension, SSA treats the withdrawal as a lump-sum pension and your Social Security benefit is subject to the WEP. It makes no difference whether you are working in Social Security-covered or non-SS-covered work before you are eligible for your Social Security benefit. The rule turns on whether you are eligible for the pension from the non-SS-covered work.

Example: Chris is a teacher and works in California, a state in which teachers are not covered by Social Security. She withdraws her employee contributions and interest before she is eligible to receive a pension from such work. She then moves to the state of Washington, where teachers are covered by Social Security. She begins to teach there and remains there for the remainder of her career. Because Chris has forfeited her right to a government pension from the California employment by withdrawing her employee contributions and interest, the WEP will not apply to her.
Taken from this page
NEA - FAQs About the Windfall Elimination Provision

Or is this wrong information?

 

[nun]

I think we need to be careful here. Not all 403b's are voluntary. I believe it's fairly common to have mandatory participation. I've been a participant in three mandatory 403b plans as a University employee. Two systems also contributed to SS; one did not. Fortunately (good planning?), I have 30 years of substantial SS earnings in the SS contributing states and I will not be subjected to WEP.

I have seen conflicting online comments about 403b contributions and WEP. I have read that if the 403b is rolled to an IRA before you are eligible to draw a pension then it doesn't trigger a WEP penalty, but there seems to a number of conflicting statements out there. I strongly advise talking to the SS office to get information for the OP's case.

The critical factor here is whether there were employer contributions to the plan...if so the it will be WEPable. I had a mandatory 401a plan with employer contributions. and voluntary 403b and 457 plans where there was no employer match. The 401a account is the only one used to calculate WEP.

 

[fosterscik]

I agree with nun's statement about employer contributions. In my case all three systems had employer contributions to my 403b.
Sarah's NEA FAQ reference agrees with some comments I've seen (I spent time reviewing this issue when I was deciding when to retire; it became moot when I stuck it out for 30 substantial earning years), but I have seen some online sources which dispute this.
Given SS will apply their rules, I continue to recommend talking to them.

 

[newtoseattle]

Thank you all.
I found this https://secure.ssa.gov/poms.nsf/lnx/0300605364
that seemed to help (a table from social security on how they value lump distributions-seems very generous (aka I wish I could buy an annuity that paid that)) Given that WEP can't reduce your benefit by more than 1/2 the "pension" amount - I think this will be closer to the actual amount than just taking the hit to the 90% bend point.

So I'm getting a vague idea by taking the date I rolled over to vanguard (I'll have to find records for the actual amount).

I'm still a ways a way from social security and so who knows how much it'll change by then - but I wanted to get some idea. I think this gets me close!

Thanks to all.

 

[fosterscik]

That link is very interesting. The NEA FAQ "Chris has forfeited her right to a government pension from the California employment by withdrawing her employee contributions and interest, the WEP will not apply to her" appears to be incorrect because of section 2C in the official SS guidance:

Any separation payment, withdrawal, or refund consisting of both employer and employee contributions is a pension; for WEP purposes whether made before or after the employee is eligible to receive a pension.

 

[Sarah S]

In the example of Chris there was no mention of employer contributions. I think the example is correct if she had only her own contributions and interest and took them before she qualified for a pension. Your quote applies to a situation with employer contributions

 

[fosterscik]

In the example of Chris there was no mention of employer contributions. I think the example is correct if she had only her own contributions and interest and took them before she qualified for a pension. Your quote applies to a situation with employer contributions

I'm sure you are right but it does seem to be a major point of confusion online. It's nice to see a definitive statement. I had puzzled over this for a while - it's one reason I decided to retire in May of this year instead of a year earlier to ensure I had 30 substantial SS years and avoid any WEP penalty.