Teacher Pension and WEP

[Sunset]

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]

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]

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]

+ 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]

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]

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]

+ 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]

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.)

 

[youbet]

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.

I don't understand how you can treat WEP and GPO as though they have similar consequences. They don't. WEP is a reduction in SS benefits for the person that earned them due to having had employment not covered by SS. GPO, OTOH, reduces the SS spousal or survivor benefit a private sector employee can provide for his/her spouse.

I worked for about 40 years under SS. My DW was a school teacher in a non-SS system. I am denied from providing her spousal SS benefits nor survivor's benefits from my SS if I predecease her. If she had been a SAHM she would receive these. I'm the one being short changed as I paid in the same as my peers but still had to carry life insurance in amounts appropriate to cover the shortfall.

It does seem inequitable. I put a lot of money into SS while employed by MegaCorp, like all the other employees, but am denied the benefit of being able to provide for my spouse in the same way as others because of something she did: worked.

I do appreciate you conceding that some people are treated unfairly by these SS provisions. Like Gumby, I tend to be in the anti-GPO camp because it negatively impacts me and I never worked in a public sector job and have no public sector pension. It's easier to understand the reasoning behind WEP. But, as another poster mentioned upstream from here, with today's computer power and data tracking ability, it should be possible to improve the system.

 

[rothlev]

WEP is not always fair either as many are very hurt when they work partial careers in both systems, and thus do not receive a full benefit from either, social being knocked out by WEP , and pension being small due to the number of years put in.

 

[Kwirk]

I don't see how you are more cheated than somebody whose wife worked and paid into SS.

My wife worked and is eligible for her own SS, but she cannot have both her own SS and take advantage of spousal SS from my account. We would both love it if she could, but she can ultimately only take whichever is greater.

Now, if your wife wants to completely forgo her non-SS pension (that was meant to replace SS) and take just your spousal benefit then that would be fair (but that's what the adjustments are for).

This is why I say your argument leads to a conclusion that we do away with any spousal benefit or that everybody is eligible for a spousal benefit (even if they get their own SS).

 

[youbet]

I don't see how you are more cheated than somebody whose wife worked and paid into SS.

My comparison, clearly stated, is to someone with a DW who did not work at all. Or worked so little that their SS is zero or very small.

 

[Rustic23]

Kwirk, you are wrong. If you wife's SS does not equal to one half yours, she get the difference made up by SS. If you should die before you, she sets a sum equal to your SS. Both SS benefits she is entitled to. However, The Stay at Home Wife with no payments into SS gets both of these same benefits. However if she is a Retired Texas School teacher she gets ZERO from SS. Neither the SAHM nor the teacher paid into SS. Yet one is entitled to SS benefits and the other is not.

In a previous post you stated that "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."
Refference: https://fas.org/sgp/crs/misc/RL32453.pdf

Social Security spousal benefits were established in the 1930s to help support wives who are
financially dependent on their husbands.

As more and more SHM became working mom's, and in some cases the government was paying our SS and Gov. retirement to these women, the law was changed. It covered all government workers. I am no expert on all teacher and other government pension systems, however I don't believe Texas pays the myriad of benefits, ie death, child till 18 and others, and are not a complete replacement for SS.

 

[Chuckanut]

First, I personally agree with those who think we ALL should pay into SS. It would eliminate misunderstandings and clearly be fair, with fewer confusing rules to complicate our understanding of how SS payments work.

https://www.creators.com/read/your-social-security/11/18/public-employee-offsets

The GPO explanation starts about half way down.

“What these people don't realize is that the government pension offset law simply treats them in the same way that all other working people have always been treated. For example, if a woman who worked at a job that was covered by Social Security gets a Social Security retirement pension, that pension has always offset any spousal benefits she might have been due. Before the GPO law went into effect, people getting a non-Social Security pension were the only working people in this country who could get their own retirement pension AND a full dependent's benefit from Social Security.”

And this......

“And the GPO law actually gives these people a bit of a break. Social Security retirement pensions offset spousal benefits dollar for dollar. But a non-Social Security retirement pension causes only a three-for-two offset. In other words, for each $3 you get in a teacher's or other non-covered pension, you lose only $2 from Social Security spousal benefits.”

Here's some math that shows that even GPO, the non SS paying surviving spouse ends up better off than the SS paying surviving spouse.

https://www.creators.com/read/your-...-the-government-pension-offset-dont-repeal-it

Fred and Wilma both worked at jobs covered by Social Security. Fred gets $2,000 per month in Social Security retirement. Wilma gets $2,100 per month in her own Social Security retirement. Fred dies at age 73. Wilma, who is 71, will not get a nickel of Social Security widow's benefits, because her own Social Security benefit offsets her widow's rate dollar for dollar. (One Social Security benefit has always offset another Social Security benefit.)


Their neighbor, Barney, worked at a job covered by Social Security and he gets $2,000 per month in Social Security retirement benefits. His wife, Betty, was a teacher in a state where teachers do not pay into Social Security. She gets $2,100 per month in a teacher's retirement pension. Like Fred, Barney dies at age 73. Before the GPO law was in place, 71 year old Betty would have received Barney's full Social Security pension, or $2,000, in widow's benefits in addition to her own full teacher's pension. Why should Betty (the teacher) get a widow's benefit when Wilma (the non-teacher) doesn't get widow's benefits? The GPO law simply eliminated that loophole. So again I must ask: Why should the GPO be repealed?


In fact, even with the GPO law, Betty the teacher comes out ahead of Wilma the non-teacher. All of Wilma's Social Security retirement benefit offsets her possible widow's benefit, meaning Wilma (the non-teacher) gets nothing. But only two thirds of Betty's teacher's pension offsets her widow's benefits. Two thirds of her $2,100 teacher's pension is $1,386. So you deduct that from Barney's Social Security, and that leaves $614.


In other words, Betty, the teacher, still gets $614 in widow's benefits, even with the GPO, while Wilma, the non-teacher, gets nothing.

As I said, eliminating GPO and WEP would be highly unfair to those of us who have paid into SS for most or all of our working lives.

Many of our laws have parts that seem unfair and may really be unfair. I certianly won't argue against fixing issues that are truly unfair. Hmmm.... maybe we should require a dollar for dollar offset for Betty. That could help reduce the future SS funding problem. Once they start tinkering with GPO, they might really fix it. Be careful what you ask for.

Note: I left out the Nell and Dudley example that deals with one spouse getting a SS type pension from a foreign government. It's towards the end of the second article.

 

[Kwirk]

Rustic23, I believe your reference supports my point. From your link:


"The Government Pension Offset (GPO) is analogous in purpose to the dual entitlement provision and applies to individuals who qualify for both a pension based on their own non-Social Security-covered government work and a Social Security spousal benefit based on a spouse’s work in Social Security-covered employment.1 The dual entitlement rule and the GPO share the same intent—to reduce the Social Security spousal benefits of individuals who are not financially dependent on their spouses because they receive their own retired-worker or disabled-worker Social Security benefits, or their own non-Social Security pension benefits."


I'm trying to point out that it would be grossly unfair to pay spousal benefits to a spouse with a non-SS pension who did not pay into the system but not to a spouse with SS benefits of the same amount who did pay into the system. The spousal benefit is intended primarily for spouses who did not work or worked very little, and I support that. I can't see how a spouse who worked and has a pension is somehow more entitled just because he/she did not pay social security taxes. Either the spousal benefits go just to spouses with (little or) no pension or they go to every spouse regardless of the pension source, including SS.



I'm aware of the adjustments that are made to benefits when there are differences between the amounts each spouse might receive. In my own case I could never receive a spousal benefit because my CSRS pension is too large. I do receive a SS pension based on many years of, mostly, self-employment but it is substantially less than my wife's so she will not benefit from my SS when she begins collecting hers at 70.


I'll read future comments but I think I've said all that I can say.

 

[meierlde]

I agree as to the unfairness of the law. I can actually see limiting a spousal benefit, if you’re collecting a teacher pension. But, in the case where you’ve earned a benefit both in SS and the teacher pension plan, how does it make sense to limit the SS portion? You can’t be accruing benefits in both plans at the same time. You’re just receiving partial benefits from two separate plans.

The answer to this question is to take a look at the Social Security benefit formula, since there is an element of welfare in it i.e those with lower lifetime average earnings get a greater portion of their income replaced than those with higher earnings (90,33,15% in various brackets) Since in the cases inovled there was not 120 quarters of paying to SS the formula without wep would pay a greater percentage of income than was thought justified.

 

[Mulligan]

The theory of WEP and GPO is understandable, but in reality it doesnt work in an equitable manner for many. It effects me but only minimally and as intended.
I was in a pension system with 14.5% withdrawal and 14.5% match to pension system and no SS.
Historically back in 1940s the teachers of the state had a one time vote to either join or not join SS. They chose not to overwhelmingly and was never revisited again.
I have almost 20 years of SS, but it is of the “Mickey Mouse” variety and thus why the WEP zaps it hard. GPO is largely immaterial because I am not married and if I was it wouldnt do a spouse much good even if WEP were not in existence.
I suspect many who face this problem might find their predecessors from decades ago like mine may have also voted to not participate. See historically speaking there were many states who already had pension systems in place. And they probably trusted it more than a fledgling new system.

 

[Dreamer]

She will be starting her teacher pension later this year when she turns 65. Not sure exactly what is required with respect to notifying SSA. Is she required to notify them? Or is that something the school district will do once they start her pension. If anyone has any experience with this, I’d appreciate you insight.

She is required to notify SSA herself. This is one of the reporting responsibilities that she was told about when she filed for social security.

I am also affected by WEP and GPO. My social security check is not high enough for my Medicare premium, so I get my social security check withheld for the year and receive a yearly bill. I will not receive any social security widow's benefits from my DH if I outlive him. However, he will receive his social security check, a civil service pension from my working for the goverment and 2 small pensions he earned from private companies, if he outlives me. His income as a widower would be much higher than my income as a widow.