SS Windfall Elimination Provision for early retiree

[CRLLS]

I was just reading about the Teachers retirement system in Illinois. According to them, anyone can participate in Medicare Part B. There is no requirement for paying into SS etc for 40 quarters. To be eligible for Medicare Part A, one must meet the 40 quarters in SS OR have a spouse who has paid into

Medicare
If you are eligible for Social Security coverage on your own work record, you will receive Medicare Part A coverage at age 65. You may have Medicare Part A coverage (hospital insurance) at age 65 if your spouse is at least age 62 and has worked in Social Security-covered employment long enough to be insured, even if your spouse is still working. Anyone may enroll in Medicare Part B (medical insurance); there is no work requirement.

 

[NoiseBoy]

WEP is simply an equalizing rule that keeps Higher income earners who did not pay much into SS from collecting a benefit as though they were low income earners. ( SS pays a bigger % to low income people, that's the social part of Social Security.)

If WEP did not exist, people who contributed little to SS would be collecting a much bigger portion of the contributions than those who have contributed most or all of their lives. It's really a matter of simple fairness.

This is the most succinct description of WEP that I have read. I am impacted by WEP because both my student job, and then my civil service job, at my alma mater didn't pay Soc Sec taxes and my civil service job was covered by a State pension plan. It took me a while to understand WEP, but now that I do, I defend it on social media whenever a teacher friend starts to cry about not getting their full Soc Sec benefit. FWIW I hope to have 27 years of substantial earnings when I retire.

To the OP; the reason you see articles warning people about WEP is that there doesn't seem to be any connection between the various systems before retirement such that the Soc Sec benefits projections do not automatically know who is impacted by WEP.

In my state there are several large pension plans that cover K-12 teachers and many state university employees which do not include paying Soc Sec taxes so WEP will be around for a very long time. I also feel that step #1 in fixing my state's pension woes is to have all workers pay into Soc Sec.

 

[steelyman]

Complicating things are situations where government employee contributions through payroll taxes change. The payroll (FICA) tax includes a SS component and a Medicare component.

In my situation, neither were taken from pay but at some point later on in my career, employees like me who hadn’t contributed to Medicare were given the choice to opt in going forward (newer employees were paying in to Medicare by default).

So the choice was to determine if you wanted Medicare. People who had paid from some other employment may have earned enough credits to be close to 40 quarters but not quite there. In that case, they could consider getting the additional needed credits through outside work or opting in through payroll.

I attended a very worthwhile seminar that included a discussion covering this choice. A statement by one of the speakers stuck in mind: “Once you have the 40 quarters, you’re in. You can’t over-qualify for Medicare”. That is, there is no extra benefit.

 

[Chuckanut]

WEP, and its spousal alternate GPO (Government Pension Offset) will probably be in existence forever. In TX, 96% of the school systems do not pay into SS, so WEP is a conversational football that gets kicked around often by the older employees. The depth of conversation is often: WEP is unfair!!! (it's a very short conversation ).

As a former teacher I've always been embarrassed by teachers who claimed WEP was unfair to them.

If I was a public employee I would not make a long-term career working for any government agency that did not participate in SS.

 

[Teacher Terry]

When I worked for the state we would sometimes hire people in their 50’s who had always paid into SS and didn’t know about WEP. Unless you want to work until 80 it would be a big deal to them so I would explain that getting vested at 5 years with the state is a bad idea unless you have a lot of years of substantial income. After they checked it out most would leave. The district manager told me to stop telling people and I said no. It’s too important a issue.

 

[Chuckanut]

This is the most succinct description of WEP that I have read. I am impacted by WEP because both my student job, and then my civil service job, at my alma mater didn't pay Soc Sec taxes and my civil service job was covered by a State pension plan. It took me a while to understand WEP, but now that I do, I defend it on social media whenever a teacher friend starts to cry about not getting their full Soc Sec benefit. FWIW I hope to have 27 years of substantial earnings when I retire.

To the OP; the reason you see articles warning people about WEP is that there doesn't seem to be any connection between the various systems before retirement such that the Soc Sec benefits projections do not automatically know who is impacted by WEP.

In my state there are several large pension plans that cover K-12 teachers and many state university employees which do not include paying Soc Sec taxes so WEP will be around for a very long time. I also feel that step #1 in fixing my state's pension woes is to have all workers pay into Soc Sec.

NoiseBoy, A few more posts like this and I may soon have to add you to my list of dangerous radicals who infest this site.

Often the decision to not be in SS took place before many people working today where even alive. But, the real cure is to just make nearly everybody participate. Any exceptions should be few and far between, with the worker acknowledging he/she is massively limiting SS payouts in the future.

One question is I have is "what what happened to all the money people did not pay into SS?" Granted, most of it most likely went into the pension plan but rarely all of it. There is usually a few percent that the employer and employee get to keep. Where did it go?

 

[Sunset]

WEP, and its spousal alternate GPO (Government Pension Offset) will probably be in existence forever. In TX, 96% of the school systems do not pay into SS, so WEP is a conversational football that gets kicked around often by the older employees. The depth of conversation is often: WEP is unfair!!! (it's a very short conversation ). From long ago, DW has enough quarters in for her own SS account, and will be affected by WEP due to her non-SS work pension. And if she receives SS benefits via my account, she will be affected by GPO. Neither of us have a problem with it because of what it addresses. Meanwhile, some in the "to be WEP'd" crowd, are convinced that the US congress will soon see the light and "correct this injustice" (their words). T'aint gonna happen. SS would need a new source of revenue in the billions to handle the halt of WEP and GPO. If a person is slowly drowning, throw him a cement block


EDIT - Sunset, my post was NOT a response to your post. I am a very slow typer, and when I started, your post was not there.

Not a problem, lots of folks have various opinions about everything, and I have no hope Congress will fix this issue, or lots of the other issues of SS.

I will tell you, I'm not happy about WEP, mostly as it was a surprise to me, and even the SS site does not truly handle the WEP calculations well, so they fudge it all by claiming at most they will reduce by 50% of the non-SS pension. All of which created uncertainty.

I have reduced my WEP impact as much as possible, and will watch to see what SS does for a reduction.

 

[Vacation4us]

My spouse is effected by WEP or GOP. He has always paid more than the $ amount of FICA toward his pension and so has the state. Halfway through his career the state dumped health care coverage at 65 so he has paid Medicare tax ever since. He is ok with the amount of his pension compared to what SS would have paid.

Now he had a close coworker that came on late paid into SS,was forced out at 60 based on his age alone who got divorced and lost half his pension, pays alimony too and will never see SS. That guys not a fan of WEP.

Personal situation vary.

My SS dies with me since dear husband can't collect. That's kinda a bummer but again we rather have hubby's cola'd pension.

 

[beowulf]

"Now he had a close coworker that came on late paid into SS,was forced out at 60 based on his age alone who got divorced and lost half his pension, pays alimony too and will never see SS. That guys not a fan of WEP."

If he never sees SS, how does WEP affect him? The government is not going to reduce a payment that's zero to begin with. If he paid his 40 quarters, he will get some amount from SS, though that could be offset by WEP. If not, then he simply won't qualify. I know ex feds who worked in private industry when they were very young, but only got up to 20 or so quarters. They didn't qualify for SS. That was their choice.

 

[Teacher Terry]

It sounds like most of his career was paying SS and then went to a non paying one late so he is losing more in SS then he will gain in his pension.

 

[beowulf]

It sounds like most of his career was paying SS and then went to a non paying one late so he is losing more in SS then he will gain in his pension.

Sorry, I don't get that impression at all. Once you have 30 years under SS, the WEP starts to drop with each year under SS until it disappears at 30 years of contributions. I had 6 years active military, became a fed not paying SS, but did pay for medicare, then another 9 years under SS. That comes to 17 years, so I am subject to the full WEP on my SS benefit. That wasn't the law when I became a fed, but, when it was implemented during the Reagan years, I became subject to it. If this individual came into non SS covered employment late in his career, he should have known the consequences. Hating the WEP may make him feel better, but I say again, it was his decision, his choice and, most importantly, the law was in effect many years before he took the non SS job.

 

[Chuckanut]

Thanks for pointing out the 30 year WEP rule.

I think it should be pointed out that nobly is ‘hurt’ by WEP. WEP simply prevents people who did not pay into SS every year they worked from getting a better deal than those who did pay in every year. They are not being hurt, they are simply not getting a bonus by mistakenly being treated like lower income earners.

Tom Margenau’s SS and You blog has some excellent examples of this, how it works, complete with the math.

 

[Teacher Terry]

Many people that came to work in our state had no clue until their first paycheck that SS was not taken out. The state doesn’t tell you that at hiring. I had no clue that some states didn’t pay in.

 

[Sue J]

DH got a yearly statement from his state pension system. There was always a reminder that employees in the pension system may also be eligible for Social Security for work outside their current employer and that WEP may reduce their SS benefit.

Early on in his career I learned about WEP and GPO and understood the impact. But I'm number and detail oriented especially when it comes to OUR MONEY. I think there were many employees who never looked at their yearly statement and didn't realize the effect of not paying into Social Security.

 

[Teacher Terry]

After I received my first paycheck I realized no SS was taken out and inquired about it. I then researched WEP, etc and educated myself. At that point I had moved across the country for a new job and loved it. At that point I made the decision to stay.

 

[Vacation4us]

"Now he had a close coworker that came on late paid into SS,was forced out at 60 based on his age alone who got divorced and lost half his pension, pays alimony too and will never see SS. That guys not a fan of WEP."

If he never sees SS, how does WEP affect him? The government is not going to reduce a payment that's zero to begin with. If he paid his 40 quarters, he will get some amount from SS, though that could be offset by WEP. If not, then he simply won't qualify. I know ex feds who worked in private industry when they were very young, but only got up to 20 or so quarters. They didn't qualify for SS. That was their choice.

I miss stated. He will get a reduced SS. A smaller pension due to divorce and years of service, and alimony. I am sure he regrets some of his financial decisions.

People make choices not always to their own benefit. Like spending less and saving more.

 

[2177V]

I turned 62 earlier this year and have been contemplating whether I will start Social Security. Recently for the first time I heard of the Windfall Elimination Provision. For years I have looked at my annual SS statement or logged on to the ssa.gov to see what my benefit would be for 62, FRA, and 70. I have no pension -- just my savings, investments, and an IRA. I have never worked at a job that did not pay FICA. But, I have just 29 years of paying FICA. Of those 29 years I have 24 years of working full time.


I have read information about the Windfall Elimination Provision in several places, including on ssa.gov, but it is still confusing. Everywhere it says it is meant to reduce the SS benefit for people who have another pension for a job where they did not pay FICA. That does not apply to me, but then when I look at other information it seems to actually reduce the benefit for anyone who has paid FICA for less than 30 years. Can someone please explain this to me. Will my SS benefit be reduced to less than what is shown on my SS benefit report?

I was affected because I had 7 years of military service and I later worked as a government civilian employee. The purpose of the WEP is to eliminate a double benefit for people who only contributed to one system.

In my case, I had 7 years of military but in order for me to get 7 years of credit for my military service on my government civilian employee pension, I had to contribute funds (7%) on my military pay.

I believe WEP for SS works similarly. If you did not contribute to SS during a portion of your career, you may not get SS credit for those years because you did not contribute into the SS system.

I suggest going to a local SS office and talk to a live person working in the SS office who can give you the correct information on how you may be affected by the WEP. When you do discuss your situation, make sure you provide all the correct earning information so you can get the correct response.

 

[beowulf]

If you didn’t contribute to SS in some years, you just don’t get credit for those years. Period. It’s not the same as WEP - no windfall is being eliminated. Calling lack of SS contributions for not working is not WEP. Calling it that just confuses those who have not worked for an entity that does not withhold for SS.

 

[ShokWaveRider]

The more I read about WEP the more I get confused, I even called SS and I think they told me incorrectly that I would not be subject to it. I have since found out, from the learned folk in this group that they are incorrect.

Here is the scenario.

I currently get a VERY small pension from Canada ($131 US a month).
I have not claimed SS yet. I have 25 substantial earning years in the USA
I am entitled to a larger pension from the UK. Not claimed yet.

As I currently understand, WEP will be applied when I take my US SS on the $131 from Canada. I do not plan on taking my UK pension till some time after that.

Will WEP then be recalculated on the Totals?

 

[Alan]

The more I read about WEP the more I get confused, I even called SS and I think they told me incorrectly that I would not be subject to it. I have since found out, from the learned folk in this group that they are incorrect.

Here is the scenario.

I currently get a VERY small pension from Canada ($131 US a month).
I have not claimed SS yet. I have 25 substantial earning years in the USA
I am entitled to a larger pension from the UK. Not claimed yet.

As I currently understand, WEP will be applied when I take my US SS on the $131 from Canada. I do not plan on taking my UK pension till some time after that.

Will WEP then be recalculated on the Totals?

I believe that you are asked to list existing and future pensions, of which your UK pension would come into effect. (I have just been asking questions about this).

For the UK equivalent of SS you are able to make voluntary contributions for years where you were not working a job that paid into it, such as working overseas. When doing the WEP calculations those years of voluntary contributions are exempted from the WEP calculation since they were funded with after tax dollars just like you would do while funding a regular annuity.

 

[msanniee]

Ah the wonderful WEP.

I worked in the private sector for 24 creditable years and was a public school teacher for 18 years.

I will loose about $300 a month from my social security payment because I 1) failed to have 30 creditable years of paying social security; 2) taught in a state in which teachers did not pay into social security.

This provision affects many teachers who decide to take a drastic cut in pay to become a teacher after working in the private sector.

Yes I get a pension as a teacher calculated on service credit and salary. If I got social security based upon the same formula non- teachers use, I would not be shorted approximately $3600 a year.

This is a sore point for teachers, such as myself, who worked in school districts that paid lower wages due to serving families who were at the lower end of the socioeconomic scale.

My teacher’s pension didn’t really offset the loss in social security benefits. That being said, I still hear from students that I taught, which is a reward that I value.

 

[youbet]

FWIW I hope to have 27 years of substantial earnings when I retire.

Since you won't be impacted by WEP, naturally you think WEP is OK. The problem with WEP is that loophole you'll be taking advantage of. IMHO, the "years of substantial earnings" work-around should not exist.

I also feel that step #1 in fixing my state's pension woes is to have all workers pay into Soc Sec.

Yes. And, generally, state employees who are not covered by SS would like to join and pay in. It's the local employers, such as school districts, who are fighting it since they would have to pay their 50% too significantly increasing their costs.

 

[Teacher Terry]

Msa, I am losing 450/month which is the maximum you can lose. I think it’s fair if people work 30 years and don’t pay in because they will have a large pension and probably low earnings from SS probably working as a college student, etc. But for people like you and me that split their time between the 2 systems it’s not.

 

[youbet]

One question is I have is "what what happened to all the money people did not pay into SS?" Granted, most of it most likely went into the pension plan but rarely all of it. There is usually a few percent that the employer and employee get to keep. Where did it go?

Hmmmm....... don't think you have that right. At least not for Illinois, the "infamous pension state."

Here, non-SS state pension participants pay MORE into their pension plan that they would pay into SS (9.x%). For folks hired within the past seven years, the state pension benefits (well, speaking for teachers) are approximately the same as SS. It's an apples to oranges comparison with some aspects being more generous, some less generous, but roughly equivalent overall. Yet, participants pay about 3% more.

The real question, rather than "what what happened to all the money people did not pay into SS?" is "what happened to the money the state employees paid into the pension fund?"

 

[msanniee]

Msa, I am losing 450/month which is the maximum you can lose. I think it’s fair if people work 30 years and don’t pay in because they will have a large pension and probably low earnings from SS probably working as a college student, etc. But for people like you and me that split their time between the 2 systems it’s not.

Agree. It penalized people who decide to make a contribution through teaching.