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Windfall Elimination Provision (WEP) - Modified Benefit Formula to Determine the PIA for Workers with Pensions from Non-covered Employment

Excerpted from "Social Security Handbook". See the up-to-date, official Social Security Handbook at ssa.gov.

718. Windfall Elimination Provision (WEP) - Modified Benefit Formula to Determine the PIA for Workers with Pensions from Non-covered Employment

718.1 What is the WEP PIA formula that is used for workers who are eligible for a pension from noncovered employment based on their own work?

The WEP benefit formula is used to determine the PIA for workers who are eligible for a pension from noncovered employment based on their own work and a Social Security retirement or disability benefit.

718.2 How does the WEP PIA formula affect workers who are eligible for a pension from noncovered employment?

The Social Security benefit formula provides a higher percentage of pre-retirement income for lifetime low-wage workers. The WEP benefit formula eliminates the "windfall" in Social Security benefits received by workers who have only minimal Social Security coverage and who receive a pension based on years of work in noncovered employment. A worker's PIA will never be reduced by more than one-half of the pension amount from noncovered employment. (See §706)

718.3 How is the revised formula used?

The revised formula substitutes 40 percent for the 90 percent factor in the first band of the Social Security benefit formula. The reduction is phased in as follows:


Revised PIA Formula

If you are initially eligible for retirement or disability benefits in...

Then the first percentage factor used in the Social Security benefit formula is...

1986

80 percent

1987

70

1988

60

1989

50

1990 or after

40

A worker may get a full or partial exemption based on earning "years of coverage." The worker receives the percentage that yields the higher benefit amount.


Revised PIA Formula

If your total years of coverage equal...

Then the first percentage factor in the formula is...

29

85

28

80

27

75

26

70

25

65

24

60

23

55

22

50

21

45

20 or fewer

40

A "year of coverage" is calculated as is the special minimum PIA. (See §717). For years 1991 and later, the amount needed for a year of coverage is 25% of the maximum earnings base.

718.4 Are any other methods considered?

In addition to the modified formula, we also consider the simplified old-start formula (see §707) and the special minimum PIA (see §717). We use the computation yielding the highest PIA to determine the amount of benefits payable.

718.5 When does the WEP benefit formula not apply?

The WEP provision does not apply under the following situations:

  1. When the noncovered pension benefits are paid under the Railroad Retirement Act;

  2. To Federal employees who are mandatorily covered for Social Security purposes beginning January 1, 1984;

  3. To most employees of nonprofit organizations who were exempt from coverage before 1984; and

  4. To benefits for survivors.

Last Revised: Jan. 20, 2006


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There are 2 Comments

I worked under Social Security untill I was employed by they V.A. starting in 1982 untill I retired in 1999. I am penialized and only able to receive 40% of my Social Security earnings. I think the systems stinks. After Medicare is taken out, i receive only $310.00 a month. My previous husband was getting about $500.00 and didn't have as much paid into the systems as I did. I was told that I couldn"t collect any of his. Now I'm married to a new husband that gets abt. $1,388.00 a month and I'm told that I can't collect any of that. So I'm being penialized for having to work to most of my life. If my new husband dies before me, I will have the responsibility of providing for his 50 yr. old daughter that is mentally like a teenager and can't hold a job and has never married. The daughter doesn't meet the S.S. guard-lines for dependency, yet she is. I strongly feel that the guard-lines are very unfair especially when I see people that have never paid into the system being rewarded.

If you are divorced, but your marriage lasted 10 years or longer, you can receive benefits on your ex-spouse's record (even if he or she has remarried) if:

  • You are unmarried;
  • You are age 62 or older;
  • The benefit you are entitled to receive based on your own work is less than the benefit you would receive based on your ex-spouse's work; and
  • Your ex-spouse is entitled to Social Security retirement or disability benefits.

If you remarry, you generally cannot collect benefits on your former spouse's record unless your later marriage ends (whether by death, divorce or annulment).

See here for details : http://www.ssa.gov/retire2/divspouse.htm

Social Security decisions can be appealed if you make your request in writing within 60 days from the date you receive their letter. Call your local Social Security office if you need help with your appeal.

See here for details on appeals :

http://www.ssa.gov/pubs/10041.html

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