The Windfall Elimination Provision (WEP) only impacts individuals who earned a pension in any job and did not pay Social Security taxes, but worked long enough in other jobs to be eligible for Social Security Retirement or benefits due to disability. The Windfall Elimination Provision impacts Social Security benefits when any of an employee’s federal service after 1956 was covered under the old Civil Service Retirement Systems (CSRS). Social Security was not withheld from these employees’ checks because the Social Security System had not yet been formed.
The Windfall Elimination Provision (WEP) applies to federal workers if they reached age 62 after 1985 or became disabled after 1985. It also applies if you became eligible for the first time for a monthly pension based on work you performed where you did not pay Social Security taxes after 1985. The provision still applies even if you are still working.
Lower wage earners receive a higher return on their Social Security benefits than higher paid earners. While lower paid earners may receive as much as 55% of their income before retirement, high salary earners may only receive approximately 25% of their pre-retirement income. Social Security benefits were never designed to replace all of a worker’s pre-retirement earnings but only a percentage.
Prior to 1983 before Congress passed the Windfall Elimination Provision workers who had jobs not covered by Social Security, benefits were calculated as if they were low-wage workers. This allowed them to have the advantage of receiving a higher percentage of their pre-retirement earnings in addition to receiving a pension from employment where they paid no Social Security taxes.
To see the maximum amount your benefit could be reduced visit www.socialsecurity.gov/retire2/wep-chart.htm.
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You may also want to read Government Pension Offset (GPO)