Mystery of SS Windfall Elimination Provision

[H2ODude]

Appreciate any guidance here. I could contact SS but it seems so ambiguous in my case I'm not sure I want to raise a flag. OTOH I don't want to have to retro pay.

I'm not likely to claim SS until 70 (now 62). Obviously I'm curious as to what the payout would really be. I can see the estimated benefit on their site just fine, but then I run into the WEP alert. Basically it applies "if you earned a pension in any job where you did not pay SS taxes and also worked long enough to qualify for a SS retirement or disability benefit." I cannot figure out if that applies to me.

I have 25 years of qualifying payments into the system. I worked 14 years in a local government where no SS was paid. Moved around, and spent 15 years in local government that uses State pension system (NC). 5-10 years ago I discovered that NC allows you to purchase at full actuarial value up to 10 years of service provided you have at least that many years in a recognized government for which you now are no longer able to receive a benefit. As I took my money out of the previous locality's system for several reasons, I could therefore buy 10 years. I did. Allowed me to leave with no penalty at 60.

So the crux of the matter is, for the purpose of WEP, did I "earn" any of this pension in a job "where I did not pay SS taxes?" I paid the buy in with after tax dollars, it's not a pension of the previous employer but a pension of the last where I paid SS, and the 10 year buy was permitted (my term) because of the prior employment, but not provided by it.

When I first discovered this a year ago I was pretty sure I was toast. Reading it more carefully now I'm not sure that it would apply to me. And the way I got those 10 years is pretty obscure to the computers I'd think, so not sure it would be picked up unless I held my hand up. And I would if I was sure it applied.

Anyone have any experience with anything like this? Thanks in advance!

 

[akck]

As far as I know, WEP doesn't care how many years you worked, not paying SS. The fact that you worked 14 year is enough to trigger it. Since you have 25 years of hopefully substantial SS paid earnings, the maximum your benefit could be reduced is $197.80, according to this chart:

Retirement Planner: How the Windfall Elimination Provision Can Affect Your Social Security Benefit

 

[rothlev]

The pension you are collecting is from government work wherein you did not pay into social security? Correct?
Then you are subject to the WEP which decreases depending on how many years you paid in SS system. As akck says. When you hit 30 years the WEP disappears.

 

[H2ODude]

The pension you are collecting is from government work wherein you did not pay into social security? Correct?
Then you are subject to the WEP which decreases depending on how many years you paid in SS system. As akck says. When you hit 30 years the WEP disappears.

No, the pension I am collecting is from 15 years of work during which I paid SS. However, they are paying me pension as though I worked for them for 25 years (I bought 10) in light of the fact that I also worked ~14 for a government for which I get no pension. It's confusing I know. Or I can't explain it well!

 

[H2ODude]

As far as I know, WEP doesn't care how many years you worked, not paying SS. The fact that you worked 14 year is enough to trigger it. Since you have 25 years of hopefully substantial SS paid earnings, the maximum your benefit could be reduced is $197.80, according to this chart:

Retirement Planner: How the Windfall Elimination Provision Can Affect Your Social Security Benefit

Hmm, that's one chart I had not found. Thanks, if it's limited to $197.80 a month I'm not going to worry about it in the grand scheme. I'm assuming when they give you the projection for your personal case any such reduction is not included. Thanks all....

 

[obgyn65]

30 years with significant earnings to be precise.

When you hit 30 years the WEP disappears.

 

[akck]

Hmm, that's one chart I had not found. Thanks, if it's limited to $197.80 a month I'm not going to worry about it in the grand scheme. I'm assuming when they give you the projection for your personal case any such reduction is not included. Thanks all....

If it's your annual statement, no it doesn't include WEP. You can go online and use the WEP calculator or download the detailed calculator to get an estimate:

Calculators: Online Calculator (WEP Version)

Social Security Detailed Calculator

 

[ducky911]

I am confused ...it seems you are not getting a pension for the years you worked when you were not paying ss. So I would say foul if they deducted anything.. my guess is your ok

Bob

 

[martyb]

I'm a federal employee, about to retire. I have just enough credits to qualify for SS, but the majority of my years don't count. Also, while I did pay into SS through my service in the AF Reserves, apparently none of the years was enough income to meet the "substantial earnings" requirement, thus will not count. I'm expecting to only receive around $250 in SS when I reach age 62 (7 yrs from now).

 

[H2ODude]

I am confused ...it seems you are not getting a pension for the years you worked when you were not paying ss. So I would say foul if they deducted anything.. my guess is your ok

Bob

It is confusing. You're correct; I am not "getting a pension for the years I worked when I was not paying SS." What's confusing is that since I didn't, and it was government service, my later employer (government) allowed me to buy years in light of those unpensioned years. My guess is that if it is to ever be considered as windfall by SS, I'd have to inquire as to how the pension system I bought the time reports back to SS. My guess is that if I do, I'll get a "Huh?" from them. OTOH, there are systems in place that treat my purchased time differently. My 1099 is broken down to show about 15% of my income as non-taxable, reflective of the "time" I purchased with taxable dollars.

 

[nun]

It is confusing. You're correct; I am not "getting a pension for the years I worked when I was not paying SS." What's confusing is that since I didn't, and it was government service, my later employer (government) allowed me to buy years in light of those unpensioned years. My guess is that if it is to ever be considered as windfall by SS, I'd have to inquire as to how the pension system I bought the time reports back to SS. My guess is that if I do, I'll get a "Huh?" from them. OTOH, there are systems in place that treat my purchased time differently. My 1099 is broken down to show about 15% of my income as non-taxable, reflective of the "time" I purchased with taxable dollars.

If you purchased extra years in your previous pension with non-SS dollars then WEP will apply on the fraction of the pension attributable to non-SS wages.

Did you save into 403b, 457 etc accounts while working in the non-SS job. If so the balance of those accounts will be used to calculate an income that will also add to your WEP calculation.

 

[H2ODude]

If you purchased extra years in your previous pension with non-SS dollars then WEP will apply on the fraction of the pension attributable to non-SS wages.

Did you save into 403b, 457 etc accounts while working in the non-SS job. If so the balance of those accounts will be used to calculate an income that will also add to your WEP calculation.

I think I understand the first paragraph (but what would be non SS dollars used to purchase time? Came from an account funded by savings. I understand taxed and non taxed dollars, but SS'd and non SS'd dollars?), not sure the second. While working the first job (got no pension from it as I took my money out) I fully loaded the 457 (as I did in the second). Are you saying I'll pay a penalty for that now through WEP? The last 16 years of employment I was over the max on SS each year. Is there a reference somewhere as to how all this gets calculated? Although I'm so confused at this point I'm about ready to just cross my fingers see what happens! Which is OK (well, not really) because I never assumed SS would be there for what I needed. Hence the maxing of 457, 401ks, and other strategies. Thanks for the help!

 

[Rich]

Indeed the WEP is very confusing. I am now retired and taking SS (started it at age 66). I had 26 years of substantial earnings. However, my last twenty years were with a governmental entity that did not take out SS (I retired from two different PDs from two different states). The hit on my SS wasn’t as bad as I thought it would be and I get around $22K a year. As others have posted, the closer you are to having 30 years of substantial earnings (a defined amount in which you paid SS each year) the less the penalty.


Might be worth your while to go into a SS office and sit down and talk with one of their representatives.


If you have military time you might have more substantial earnings than you think.