March 09, 2024
By SSA
Washington, DC – (highpoint Digest) – As time draws near when it comes to asking yourself that important life-changing question “To retire or not to retire”. It can become a daunting task of pouring through tons of information trying to make sense of it all. Not to mention, the paperwork involved, as well as enduring the watt toward getting that first retirement check deposited into your bank account.
Another concerning factor is how can you make up the difference in your monthly income if your pension falls short of what you’re used to bringing in weekly or biweekly. It is also important to take notice of whether or not your pension falls under the provision set forth by the Social Security Administration will offset your Social Security retirement benefits once you start applying for it.
The Windfall Elimination Provision (WEP) can affect how
the Social Security Administration calculates your retirement or disability
benefit. If you work for an employer who didn’t withhold
Social Security taxes from your salary, any retirement
or disability pension you get from that work can reduce
your Social Security benefits. Such an employer may be
a government agency or an employer in another country.
When your benefits can be affected
The following provisions can affect you if both are true:
- You earn a retirement or disability pension from an
employer who didn’t withhold Social Security taxes. - You may be eligible for Social Security retirement or
disability benefits from work in other jobs for which
you did pay taxes.
The WEP can apply if one of the following is true:
- You reached age 62 after 1985.
- You developed a qualifying disability after 1985.
If the latter applies, you must first have become eligible
for a monthly pension based on work where you didn’t
pay Social Security taxes after 1985. This rule applies
even if you’re still working.
This provision also affects Social Security benefits for
people who performed federal work under the Civil
Service Retirement System (CSRS) after 1956. The Social Security Administration
won’t reduce your Social Security benefit amount if you
only performed federal work under a system such as the
Federal Employees’ Retirement System (FERS). Social
Security taxes are withheld for workers under FERS.
How it works
Social Security benefits are intended to replace only
some of a worker’s pre-retirement earnings.
The Social Security Administration bases your Social Security benefit on your average
monthly earnings adjusted for average wage growth.
The Social Security Administration will then separate your average earnings into 3 amounts and
multiply the amounts using 3 factors to compute your
full Primary Insurance Amount (PIA ). For example, for a
worker who turns 62 in 2024: the first $1,174 of average
monthly earnings is multiplied by 90%; earnings between
$1,174 and $7,078 are multiplied by 32%; and the
balance is multiplied by 15%. The sum of the 3 amounts
equals the PIA, which is then decreased or increased
depending on whether the worker starts benefits before
or after full retirement age (FRA). This formula produces
the monthly payment amount.
When the Social Security Administration applies this formula, the percentage of career
average earnings paid to lower-paid workers is greater
than higher-paid workers. For example, consider workers
age 62 in 2024, with average earnings of $3,000 per
month. They could receive a benefit at FRA of $1,640
(approximately 55%) of their pre-retirement earnings
increased by applicable cost of living adjustments
(COLAs). For a worker with average earnings of $8,000
per month, the benefit starting at FRA could be $3,084
(approximately 39%) plus COLAs. However, if either of
these workers starts benefits earlier than their FRA, the Social Security Administration will
reduce their monthly benefit.
Why does the Social Security Adminstration use a different formula
Before 1983, people whose primary job wasn’t covered
by Social Security had their Social Security benefits
calculated as if they were long-term, low-wage workers.
They had the advantage of receiving a Social Security
benefit that represented a higher percentage of their
earnings. They also had a pension from a job for which
they didn’t pay Social Security taxes. Congress passed
the WEP to remove that advantage.
Under the provision, the Social Security Administration reduces the 90% factor in the
formula and phase it in for workers who reached age 62
or developed a disability between 1986 and 1989. For
people who reached 62 or developed a disability in 1990 or
later, Social Security reduced the 90% factor to as little as 40%.
Some exceptions
The WEP doesn’t apply if:
- You’re a federal worker first hired after
December 31, 1983. - You’re an employee of a non-profit organization
which was exempt from Social Security coverage
on December 31,1983. This does not apply if the
non-profit organization waived exemption and did
pay Social Security taxes, but then the waiver was
terminated prior to December 31, 1983. - Your only pension is for railroad employment.
- The only work you performed for which you didn’t pay
Social Security taxes was before 1957. - You have 30 or more years of substantial earnings
under Social Security.
The WEP doesn’t apply to survivors benefits. The Social Security Administration may
reduce spouses or surviving spouses benefits because
of another law. For more information, read Government
Pension Offset (Publication No. 05-10007).
Social Security years of substantial earnings
If you have 30 or more years of substantial earnings,
The Social Security Administration doesn’t reduce the standard 90% factor in their formula.
See Tables 1-3 which list the substantial earnings for
each year.
Table 1
| Year | Substantial earnings |
| 1937–1954 | $900 |
| 1955–1958 | $1,050 |
| 1959–1965 | $1,200 |
| 1966-1967 | $1,650 |
| 1968-1971 | $1,950 |
| 1972 | $2.250 |
| 1973 | $2,700 |
| 1974 | $3,300 |
| 1975 | $3,525 |
| 1976 | $3,825 |
| 1977 | $4,125 |
| 1978 | $4,425 |
| 1979 | $4,725 |
| 1980 | $5,100 |
| 1981 | $5, 550 |
| 1982 | $6,075 |
| 1983 | $6,675 |
| 1984 | $7,050 |
| 1985 | $7,425 |
| 1986 | $7.875 |
| 1987 | $8,175 |
| 1988 | $8,400 |
| 1989 | $8,925 |
Table 2
| Year | Substantial earnings |
| 1990 | $9,525 |
| 1991 | $9,900 |
| 1992 | $10,350 |
| 1993 | $10,725 |
| 1994 | $11,250 |
| 1995 | $11,325 |
| 1996 | $11,625 |
| 1997 | $12,150 |
| 1998 | $12,675 |
| 1999 | $13,425 |
| 2000 | $14,175 |
| 2001 | $14,925 |
| 2002 | $15,750 |
| 2003 | $16,125 |
| 2004 | $16,275 |
| 2005 | $16,725 |
| 2006 | $17,475 |
| 2007 | $18,150 |
| 2008 | $18,975 |
| 2009 – 2011 | $19,800 |
| 2012 | $20,475 |
| 2013 | $21,075 |
| 2014 | $21,075 |
Table 3
| Year | Substantial earnings |
| 2015–2016 | $22,050 |
| 2017 | $22,050 |
| 2018 | $23,850 |
| 2019 | $24,675 |
| 2020 | $25,575 |
| 2021 | $26,550 |
| 2022 | $27,300 |
| 2023 | $29,700 |
| 2024 | $31,275 |
The fourth table shows the percentage used to
reduce the 90% factor depending on the number
of years of substantial earnings. If you have 21 to
29 years of substantial earnings, the Social Security Administration will reduce the
90% factor to between 45% and 85%. To see the
maximum amount we could reduce your benefit, visit
www.ssa.gov/benefits/retirement/planner/wep.html.
Table 4
| Years of substantial earnings | Percentage |
| 30 or more | 90 % |
| 29 | 85% |
| 28 | 80% |
| 27 | 75% |
| 26 | 70% |
| 25 | 65% |
| 24 | 60% |
| 23 | 55% |
| 22 | 50% |
| 21 | 45% |
| 20 or less | 40% |
A Guarantee
If you receive a relatively low pension and that pension
is fully or partially based on earnings after 1956 where
you did not pay Social Security taxes, there’s a law that
might help you. In most cases, the Social Security Administration won’t reduce your
Social Security full retirement age benefit by more than
half of your pension amount.
For a more detailed estimate of how the WEP Guarantee
may affect your Social Security benefit, please visit
www.ssa.gov/benefits/retirement/planner/wep.html
to access the WEP Online Calculator
Contacting The Social Security Administration
The most convenient way to do business with the Social Security Administration is to
visit www.ssa.gov to get information and use their online
services. There are several things you can do online:
apply for benefits; start or complete your request for
an original or replacement Social Security card; get
useful information; find publications; and get answers to
frequently asked questions
Or, you can call the Social Security Administration toll-free at 1-800-772-1213 or
at 1-800-325-0778 (TTY) if you’re deaf or hard of
hearing. The Social Security Administration can answer your call from 8 a.m. to 7 p.m.,
weekdays. The Social Security Administration also provides free interpreter services upon
request. For quicker access to a representative, try
calling early in the day (between 8 a.m. and 10 a.m.
local time) or later in the day. We are less busy later
in the week (Wednesday to Friday) and later in the
month. You can also use their automated services via
telephone, 24 hours a day, so you do not need to speak
with a representative.
Source: Social Security Administration
Image courtesy of Social Security Adminstration
