Social Security Choices

Windfall Elimination Provision

If you receive a pension from an employer (usually a government employer) who did not withhold Social Security taxes from your salary, your Social Security retirement (or disability) benefits may be reduced—but never eliminated—by the Windfall Elimination Provision (WEP). (Note that IRAs and pensions from employment where you paid SS taxes do not fall under WEP.)

If you have this type of pension, the only way to avoid WEP is by accruing at least 30 years of "substantial earnings" that were taxed by Social Security. The maximum WEP effect falls on those with 20 or fewer years of substantial Social Security earnings. Between 20 and 30 years of substantial earnings, the impact of WEP declines with each additional year of earnings taxed by Social Security.

In addition to reducing a person's retirement (or disability) benefit, WEP can indirectly reduce any spousal benefits based on that person's Social Security earnings record.

Notably, the indirect WEP reduction does not carry over to widow(er)'s benefits. So, while a spouse may experience reduced spousal benefits due to WEP, his or her survivor's benefits are unaffected. However, married, widowed, or divorced individuals with pensions from uncovered employment may be affected by the Government Pension Offset (GPO), which impacts spousal, ex-spousal, and survivor's benefits.

Currently, our custom analyses incorporate the impact of WEP on the Social Security claiming strategies for married couples and for singles. WEP effects will soon be incorporated into the analyses for divorced persons and for widow(er)s.