Teacher Pension and WEP

[rothlev]

Quote:

Originally Posted by Teacher Terry If you work 30 years and get a good size pension than WEP is fine. It hurts people that worked in both systems for part of their career. My SS should be 800 yet it’s only 370/month. I worked for the state for 15 years and paid into the pension system. 8 years ago mine was 19k/year and 8 years later with raises it’s 21. My husband is in a similar situation. We chose to leave our full pensions to each other but that comes at a loss of 450/month.

Exactly -- this in an example of where people who are not financially savvy could wind up with inadequate retirement income, especially when one passes. WEP is totally unfair in this scenario. WEP leaves plenty of retired teachers in a very bad place.

[Chuckanut]

Quote:

Originally Posted by Sunset WEP has lots of problems, here is a made up example. 2 fellows work 20 yrs at the same job contributing to SS. Guy A quits buys apple and google stocks and drinks beer until 65. Guy B quits, buys some bonds and few years later gets a job that does not contribute to SS (teacher, etc). Age 65 Guy A is worth $20 million dollars, Guy B is worth $400,000 When both retire Guy A gets more SS than Guy B. even though both have same SS history. Gov't rationalizes: because Guy B has his non-SS pension, he deserves less SS. But they don't deduct from Guy A because he is a multimillionaire and earns 10x in yearly dividends than SS pays. Guy B is punished for working longer.

SS has never been based on the recipient's net worth. Even Bill Gates get SS as far as I know. Perhaps it should also be based on net worth. That will take an act of Congress.

High earners do get a smaller percentage of their contributions back compared to low earners. That is why we need WEP - for people who are higher earners but appear to be low earners based upon their SS contributions.

Guy B is not being punished for working longer. He gets less SS because he put less into it. Suppose Guy A had sold short Tesla in 2019 and lost all his money in a short-squeeze, should he get a bigger SS check than Guy B because he lost all his money?

I do agree that your example is made-up.

[samm]

Minimizing WEP Cost
I took my non-SS covered pension at 60 and SS at 70. This reduces the WEP "tax" because the first pension monthly benefit is lower, and delayed SS is higher, so when SS starts the WEP tax is on a smaller amount from non-SS pension.

Taking SS first, or both SS & other pension at same time, is worst WEP strategy.

Windfall Elimination Provision
https://www.ssa.gov/pubs/EN-05-10045.pdf

[finnski1]

Quote:

Originally Posted by Chuckanut SS has never been based on the recipient's net worth. Even Bill Gates get SS as far as I know. Perhaps it should also be based on net worth. That will take an act of Congress. High earners do get a smaller percentage of their contributions back compared to low earners. That is why we need WEP - for people who are higher earners but appear to be low earners based upon their SS contributions. Guy B is not being punished for working longer. He gets less SS because he put less into it. Suppose Guy A had sold short Tesla in 2019 and lost all his money in a short-squeeze, should he get a bigger SS check than Guy B because he lost all his money? I do agree that your example is made-up.

No. Guy A and B contributed the same amount for 20 years each.
He did not put less into it.
Totally agree about the net worth aspect

[Sunset]

Quote:

Originally Posted by Chuckanut SS has never been based on the recipient's net worth. Even Bill Gates get SS as far as I know. Perhaps it should also be based on net worth. That will take an act of Congress. ... Guy B is not being punished for working longer. He gets less SS because he put less into it. .. I do agree that your example is made-up.

You seem to have missed the point: both put the same into SS

"2 fellows work 20 yrs at the same job contributing to SS."

[Sunset]

Quote:

Originally Posted by samm Minimizing WEP Cost I took my non-SS covered pension at 60 and SS at 70. This reduces the WEP "tax" because the first pension monthly benefit is lower, and delayed SS is higher, so when SS starts the WEP tax is on a smaller amount from non-SS pension. Taking SS first, or both SS & other pension at same time, is worst WEP strategy. Windfall Elimination Provision https://www.ssa.gov/pubs/EN-05-10045.pdf

This is what I'm doing.
Although how I figured it was, sure my "other pension" would go up if I waited many years.
However, it would effectively be cut in 1/2 due to WEP.
So all the increase would be cut in 1/2 - which makes waiting worth much less as the break-even age will be extended out (less likely to live longer).

[Tadpole]

This document is getting old now but is still one of the best on summarizing the purpose of and problems with WEP and GPO. In my opinion there is only one problem. The corrections were introduced before widespread use of computers. Assuming systems that do not pay into Social Security report the data on their salaries and pensions, it would be easy to develop a more data intense and fair correction to Social Security that is specific to an individual case. When first developed, the individual approach would not have been feasible.
Reforming the GPO and WEP In Social Security By Peter A. Diamond and Peter R. Orszag

[Teacher Terry]

When I took the job with the state I had no clue they didn’t contribute to SS. Moved there and when I got my first paycheck thought it was a mistake. 5 years later I get a letter saying if I become disabled I won’t have SSDI. Then I researched and found WEP. I was definitely not the only dummy because other middle aged new employees had no clue. If they were going to get a good SS I would warn them not to get vested by leaving before 5 years. Some did just that. The district manager got mad and told me to quit telling people. I said no.

[Chuckanut]

Quote:

Originally Posted by finnski1 No. Guy A and B contributed the same amount for 20 years each. He did not put less into it. Totally agree about the net worth aspect

OK, I see your point.

I need to think about that situation you described. It may just be one of the many injustices of our tax code. Lucky us.

[samm]

Quote:

Originally Posted by Rustic23 This has to be one of the most unjust laws on the books. Person never works a day and they get a monthly payment equal to one half of their spouses SS. Teacher works her entire life, and get and is not entitled to the same SS. It makes no since to me.

+ 1

Because of the way WEP was written, though possibly unintended, WEP also applies to immigrants that have earned pension benefits in home country BEFORE moving to US, BEFORE becoming citizens.

[rothlev]

Quote:

Originally Posted by samm + 1 Because of the way WEP was written, though possibly unintended, WEP also applies to immigrants that have earned pension benefits in home country BEFORE moving to US, BEFORE becoming citizens.

I think that the way it is written it is if they are social security equivalents

[Rustic23]

This should be an issue the enrages women! My guess is, when it was written, it applied disproportionately to women who made up a large percentage of the education work force. Teachers use to be able to sub in a school system for one day, pay social security tax, and become eligible to collect half their spouses SS. That loop hole was closed about 15 years ago.

[Kwirk]

Quote:

Originally Posted by Gumby I think the GPO is more unfair. Consider my neighbor and me. We both had identical jobs, worked the same length of time and got paid exactly the same amount. Which means we both paid exactly the same amount into social security. His wife stayed home and did not work at all, which means she did not pay into social security. Mine worked as a teacher and did not pay into social security. When he retires, his wife gets 1/2 his social security. And when he dies, she gets 100% of his social security. When I retire, my wife gets no spousal social security. And when I die, she gets no survivor benefit. So, in effect, he gets 50% more social security than me while he is alive. Additionally, I have to buy a life insurance policy to cover my wife when I die. He doesn't. Forget the work history of our respective wives, my neighbor and I paid the same. We should get treated the same.

Are you suggesting that spouses who do not work should get no benefit? (I don't think you are.)


Or, are you suggesting that because my wife and I each have our own SS benefit we should each also get the spousal benefit as well?


To me, those seem to be the 2 possible logical conclusions to your argument. I don't see why a spouse with a non-social security pension should get more than a spouse with their own social security pension.

[Gumby]

Quote:

Originally Posted by Kwirk Are you suggesting that spouses who do not work should get no benefit? (I don't think you are.) Or, are you suggesting that because my wife and I each have our own SS benefit we should each also get the spousal benefit as well? To me, those seem to be the 2 possible logical conclusions to your argument. I don't see why a spouse with a non-social security pension should get more than a spouse with their own social security pension.

I am suggesting neither of your two alternatives, and I don't think the second of those is a logical conclusion in any event.

My bold - they wouldn't. As I understand the law, you get the greater of your own social security or spousal social security, which is half of your spouse's. If you never contributed to social security - either because you never worked or you worked in a non-social security job - then your own is zero. So, you would get the spousal benefit. That is the law now. All I am asking is that spouses who didn't contribute to social security get treated the same, regardless of why they never paid into the system. They get the greater of their own or 1/2 their spouse's, and they get a survivor benefit.

[rothlev]

some examples -- of the effect of the law

NEA - Stories from real people hurt by GPO, WEP

[Alan]

Quote:

Originally Posted by samm + 1 Because of the way WEP was written, though possibly unintended, WEP also applies to immigrants that have earned pension benefits in home country BEFORE moving to US, BEFORE becoming citizens.

I know exactly what you mean, I already had 16 years working in the UK before we moved to the USA.

With the UK SS you have the option to make voluntary contributions for the years you are not working and paying into the system (such as working overseas). The contributions are great value (<$250/year) and my wife and I will be due UK SS next year with more than half the years contributions where we have paid into it is from our US earnings but SSA don't see it like that.

[Chuckanut]

Quote:

Originally Posted by rothlev some examples -- of the effect of the law NEA - Stories from real people hurt by GPO, WEP

I saw nothing in there that disputes Mr. Margenau's facts about why WEP and GPO are needed to prevent non SS payers from getting a better deal than those who paid into SS.

From what I can see many of the people who have complaints are not being hurt. They simply don't understand how SS benefits are made up. They just see that are getting less money than they think they should get or somebody else gets, so it's not 'fair'.

I am not going to deny that some people are not treated fairly by things like WEP, but overall, the system is far more fair than if WEP and GPO did not exist.

[Teacher Terry]

They need to come up with a formula that’s fair to people that split their careers between SS eligible and non SS jobs. For people with 30 years in non SS jobs it is now fair.

[zippy2020]

A couple of interesting facts about WEP:

- it does NOT affect railroad workers. The RR workers union lobbied heavily against it, so they are specifically EXCLUDED from the effects of the WEP.

- Sen. Dianne Feinstein has introduced a bill every year to end or amend WEP. It has never garnered enough support to come up on the floor.

[Kwirk]

If I am employed as a teacher (or whatever) and I do not pay into SS then that is because my teacher (or whatever) pension is intended to be a complete replacement for SS. That is the bargain that was made when these pensions were allowed to exist without paying into SS as well. So, it should be no surprise that these pensions are treated as if they are SS. There is no reasonable basis for expecting to get unadjusted spousal or other benefits that a SS recipient could not get.

I suggest changing the law to do away with having any pensions that have no accompanying contribution to SS. Until then I feel that those pensions should trigger an adjustment to SS payments.

(By the way, I have a CSRS pension that makes me ineligible for spousal SS so I am affected by these rules. I'm sure there are many CSRS retirees who would love to have spousal SS.)