Social Security Windfall Elimination Provision

Social Security windfall elimination provision coordinates and reduces your retirement income

The Social Security windfall elimination provision can cut your benefits by 60%

Most individuals enter retirement knowing they’ve got some form of Social Security benefit coming. What you may not know is if you’re subject to the windfall elimination provision, and how much your Social Security benefits may be cut.

Some people are eligible for multiple retirement income streams. This occurs when you pay into more than one retirement system. The windfall elimination provision is designed to make sure you don’t get “too much” retirement income.

 

How the windfall elimination provision works

Many federal, state, and local government agency employees are eligible for a pension benefit. This benefit is completely separate from Social Security, and generally a lot richer than Social Security.

Earnings from your federal, state, or other government agency were excluded from Social Security taxes. Since earnings from these entities are’t subject to Social Security taxes, you don’t accrue Social Security benefits.

Most people have had many jobs and did pay something into Social Security. In this case federal, state, and local government employees may still be eligible for Social Security benefits. If you have enough history paying into both systems you may be eligible for both retirement benefits.

 

How do I know if the windfall elimination provision applies?

If you’re eligible for multiple government based retirement benefits, your Social Security may be reduced due to the windfall elimination provision (WEP). The WEP may apply if:

  • You reached 62 after 1985; or
  • You became disabled after 1985; and
  • You first became eligible for a monthly pension based on work where you did not pay Social Security taxes after 1985, even if you are still working.

The WEP may not apply if:

  • You are a federal worker first hired after December 31, 1983;
  • You were employed on December 31, 1983, by a nonprofit organization that did not withhold Social Security taxes from your pay at first, but then began withholding Social Security taxes from your pay;
  • Your only pension is for railroad employment;
  • The only work you performed for which you did not pay Social Security taxes was before 1957; or
  • You have 30 or more years of substantial earnings under Social Security.

 

How much is the windfall elimination provision penalty?

In cases where the WEP applies your monthly benefits are reduced using the following chart. Find the intersection between the eligibility year (year you attained age 62 or were disabled) and the number of years you paid into social security. Keep in mind the WEP reduction limit is half of your pension from non-covered employment.

Years of Substantial Earnings

Year

≤ 20

21

22

23

24

25

26

27

28

29

30

1990

$178.0

$160.2

$142.4

$124.6

$106.8

$89.0

$71.2

$53.4

$35.6

$17.8

$0.0

1991

$185.0

$166.5

$148.0

$129.5

$111.0

$92.5

$74.0

$55.5

$37.0

$18.5

$0.0

1992

$193.5

$174.2

$154.8

$135.5

$116.1

$96.8

$77.4

$58.1

$38.7

$19.4

$0.0

1993

$200.5

$180.5

$160.4

$140.4

$120.3

$100.3

$80.2

$60.2

$40.1

$20.1

$0.0

1994

$211.0

$189.9

$168.8

$147.7

$126.6

$105.5

$84.4

$63.3

$42.2

$21.1

$0.0

1995

$213.0

$191.7

$170.4

$149.1

$127.8

$106.5

$85.2

$63.9

$42.6

$21.3

$0.0

1996

$218.5

$196.7

$174.8

$153.0

$131.1

$109.3

$87.4

$65.6

$43.7

$21.9

$0.0

1997

$227.5

$204.8

$182.0

$159.3

$136.5

$113.8

$91.0

$68.3

$45.5

$22.8

$0.0

1998

$238.5

$214.7

$190.8

$167.0

$143.1

$119.3

$95.4

$71.6

$47.7

$23.9

$0.0

1999

$252.5

$227.3

$202.0

$176.8

$151.5

$126.3

$101.0

$75.8

$50.5

$25.3

$0.0

2000

$265.5

$239.0

$212.4

$185.9

$159.3

$132.8

$106.2

$79.7

$53.1

$26.6

$0.0

2001

$280.5

$252.5

$224.4

$196.4

$168.3

$140.3

$112.2

$84.2

$56.1

$28.1

$0.0

2002

$296.0

$266.4

$236.8

$207.2

$177.6

$148.0

$118.4

$88.8

$59.2

$29.6

$0.0

2003

$303.0

$272.7

$242.4

$212.2

$181.8

$151.5

$121.2

$90.9

$60.6

$30.3

$0.0

2004

$306.0

$275.4

$244.8

$214.2

$183.6

$153.0

$122.4

$91.8

$61.2

$30.6

$0.0

2005

$313.5

$282.2

$250.8

$219.5

$188.1

$156.8

$125.4

$94.1

$62.7

$31.4

$0.0

2006

$328.0

$295.2

$262.4

$229.6

$196.8

$164.0

$131.2

$98.4

$65.6

$32.8

$0.0

2007

$340.0

$306.0

$272.0

$238.0

$204.0

$170.0

$136.0

$102.0

$68.0

$34.0

$0.0

2008

$355.5

$320.0

$284.4

$248.9

$213.3

$177.8

$142.2

$106.7

$71.1

$35.6

$0.0

2009

$372.0

$334.8

$297.6

$260.4

$223.2

$186.0

$148.8

$111.6

$74.4

$37.2

$0.0

2010

$380.5

$342.5

$304.4

$266.4

$228.3

$190.3

$152.2

$114.2

$76.1

$38.1

$0.0

2011

$374.5

$337.1

$299.6

$262.2

$224.7

$187.3

$149.8

$112.4

$74.9

$37.5

$0.0

2012

$383.5

$345.2

$306.8

$268.5

$230.1

$191.8

$153.4

$115.1

$76.7

$38.4

$0.0

2013

$395.5

$356.0

$316.4

$276.9

$237.3

$197.8

$158.2

$118.7

$79.1

$39.6

$0.0

2014

$408.0

$367.2

$326.4

$285.6

$244.8

$204.0

$163.2

$122.4

$81.6

$40.8

$0.0

2015

$413.0

$371.7

$330.4

$289.1

$247.8

$206.5

$165.2

$123.9

$82.6

$41.3

$0.0

 

The windfall elimination provision in summary

The WEP can substantially reduce your Social Security benefits. It was ultimately designed to make sure you don’t double-dip your retirement to an extreme amount. If you’re a government worker and pay into your employer plan you need to be aware of how it affects your individual situation.

Understanding and planning for Social Security and other pension benefits is critical to a successful retirement. If you need help planning for retirement feel free to drop us a note here.