Windfall Elimination Provision

 

Windfall Elimination Provision

Your Social Security retirement or disability benefits may be reduced

The Windfall Elimination Provision (WEP) can affect how Social Security calculates your retirement or disability benefit. If you work for an employer who doesnt 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 didnt 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 didnt pay Social Security taxes after 1985. This rule applies even if youre still working.

This provision also affects Social Security benefits for people who performed federal work under the Civil Service Retirement System (CSRS) after 1956. We wont 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 workers pre-retirement earnings.

We base your Social Security benefit on your average monthly earnings adjusted for average wage growth. We 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 we apply 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, well reduce their monthly benefit.

Why we use a different formula

Before 1983, people whose primary job wasnt 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 didnt pay Social Security taxes. Congress passed the WEP to remove that advantage.

Under the provision, we reduce the 90% factor in our formula and phase it in for workers who reached age 62 or developed a disability between 1986 and 1989. For people who reach 62 or developed a disability in 1990 or later, we reduce the 90% factor to as little as 40%.

Some exceptions

The WEP doesnt apply if:

Youre a federal worker first hired after December 31, 1983.

Youre 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 didnt pay Social Security taxes was before 1957.

You have 30 or more years of substantial earnings under Social Security.

 

SSA.gov Windfall Elimination Provision