WEP questions

[chercat]

I worked for a state agency for 16 years , leaving there in 1986 and taking out my contributions in 1987 . Therefore , technically , I never will get a pension . I recently applied for SS to begin at age 62 and a few months and was told by the SS rep that I may be subject to the WEP which shocked me . She said they will check to see if the contributions were all my own or if I was vested - I told her I took out my own money and paid a penalty so how is that a pension ? Then she seemed confused - she made some comments in the Comments section and said that SS will check with the State agency . I called them and they did not have much knowledge of the WEP - they just said I took my money out in 1987 , approx. $14000 and I had a zero balance . It was all my own money PLUS interest which I guess could make it a pension since I did not pay into SS there .

Does anyone have any knowledge of this ? SS sent me a letter with the amt I will get assuming that I do not get a state pension . I don't want any big surprises so may have to delay my retirement . : (
I see there is a lump sum pension calculator on the SS website - because I was only 34 when I took the money out in 1987 , using their calculator , I believe I would only lose $84 a month . Here is a link to the calculator :


https://secure.ssa.gov/poms.nsf/lnx/0300605364 ALso , I know there is a low pension guarantee that they cannot take more than half of a non covered pension away . Am I figuring this correctly ? TThey told me that without the WEP , my SS at 63 would be $950 - thanks for anyone who is more knowledgeable about this than I am. It seems so unfair to be penalized several times over for a lousy $14000 I took 28 years ago and never was notified about since the law just passed .

It seems that some people are getting hit really hard so I am asking is the WEP based on the PIA at 66 or do they recomputed then take the small pension into acct ? Thanks for any info -

 

[braumeister]

Since you're apparently not receiving a pension from them, I don't see how the SS WEP could possibly apply.

FWIW, I did a few years part time teaching a while back. Part of my pay was withheld for the state teachers' pension program, and when I quit I withdrew it all (and paid taxes on it). When I filed for SS, nothing was ever said about WEP, so I would imagine you're the same.

Just be sure when talking to SS reps that you ask lots of questions and document the conversation carefully.

 

[Tadpole]

According to the NEA faqs, it depends on your vesting/eligibility:

What happens if I withdraw my government pension from non-SS-covered employment in a lump sum (that is, I take my employer contributions, my contributions, and interest as a single payment)?

It is treated as a government pension for WEP purposes. The pension-paying agency will usually prorate the lump sum to determine a monthly amount for WEP purposes. If it does not, the SSA has a method for determining the amount.

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.

NEA - FAQs About the Windfall Elimination Provision

 

[chercat]

thanks

Thanks for replying , Tadpole .
Yes, I am afraid that will be the case .
But to me ,I did forfeit the pension because I withdrew the money in a lump sum which was only $14000 and I would have had to wait 21 years to get the pension as I was only 34 at the time .
AND all the contributions were my own - did you take a look at the link I posted or are you familiar with the SSA lump sum pension calculator ? I just want to make sure I am figuring my loss correctly should they deem that I am subject to the WEP .
ALso , they gave me a figure of $949 without the WEP as the amt I should receive . If I am interpreting the calculator correctly , do you come up with the same figure I do - $84 or $42 ( low pension guarantee that they cannot take more than half a small pension ) off that figure or is there more to it than that ? Will they recomputed the WEP amt since I am not getting a monthly pension ever ?
This is very confusing to me - it seems odd because if I left in 1985 I would not be subject to any WEP -seems like bad timing and a bit unfair .

 

[Tadpole]

Calculators: Online Calculator (WEP Version)

The amount you gave appears to be the monthly pension value of your payout. If so, get your actual SS statement and plug the required numbers in the calculator above.

 

[harley]

Man, I was all excited. Finally, a topic I have some expertise in. I was going to explain about 802.11b WLAN security, encryption, and the problems with it not providing end to end security. Dammit.


I know absolutely nothing about SS.

 

[Tadpole]

"The worker must have been eligible to receive a retirement or disability pension payment (either monthly or lump sum) from the pension plan before 1986 for the WEP exemption to apply."

chercat, The above statement is from your link. My interpretation is you are not exempt? You read it differently? Do you know what "eligible" means in this context?

How many years will you have with substantial SS earnings. At some point WEP becomes small. See the table:
http://www.socialsecurity.gov/retire2/wep-chart.htm

 

[chercat]

lump sum

I was looking at it like this - if I took a lump sum retirement at age 34 but was eligible to take it after 10 years then that would have been 1980 , well before 1986 . But it looks like you are saying that I would have had to be at least 55 to be " eligible " to take that lump sum prior to 1986 ? I wish it said that a bit more clearly - it could be interpreted that this was not a monthly sum retirement then, because I definitely would have been able to take it out years earlier .
It also seems odd to me that a person who takes out their own $ within 9 years and is age 54 is exempt yet a person who takes it out after 10 years at a young age is penalized when they hit retirement age.
I understand the " theory " of equity and the so-called double dipping , but Reagan definitely did not think this through .

 

[youbet]

chercar..... Are you looking for an answer as to how WEP will impact your SS? Or are you looking for a politically charged discussion as to whether the current WEP rules are "fair," make sense, pass your common sense test and that sort of thing?

 

[chercat]

both ?

Sorry about that - I guess a little of both

Just seems illogical to me that if it is a lump sum retirement and I guess it appears that it is , then if I could have taken it prior to 1986 with 10 years then I would be exempt . If they meant to clarify by adding " must be at least 55 and eligible to take a lump sum retirement prior to 1986 " then there would have been no question in my mind .

 

[Tadpole]

chercat: I see you aired this same question at Bogleheads earlier this month with a similar discussion and unofficial interpretations of eligibility. Dollar-wise I don't think it affects your benefits at all if you spent most of your career paying into SS.

 

[Tadpole]

And I wouldn't waste time obsessing on the fairness of grandfather type clauses, especially 30 year old political ones.

 

[martyb]

Agree...no point stressing, WEP has been around a long time & is likely here to stay. I also agree it doesn't sound like it's going to affect you too much, if at all. Personally, WEP will reduce my SS to around $250 per month when I reach age 62
I am about a month away from my 57th birthday now.

Sent from my SAMSUNG-SM-G900A using Early Retirement Forum mobile app

 

[nun]

WEP is going to apply as long as you have a benefit from non-SS wages. When you left your state employment the SSA will have been advised of any DB pension or 401a ( DC plan) balance and they will use that to do an annuity calculation to calculate your WEP. The fact that you took out a lump sum does not change the application of WEP.