En español | Q: As a former teacher, I receive a pension from a school system that did not withhold Social Security taxes from my pay. In later years, I worked at a company where I paid Social Security taxes. Now, I plan to apply for my Social Security retirement benefits. But I've heard that the teacher's pension may cause me to lose some of my Social Security. Is that true?
A: Yes, it's true. It's likely that your Social Security benefit will be reduced under the terms of a government rule called the Windfall Elimination Provision (WEP).
See also: AARP Social Security Calculator
The WEP affects people who receive pensions from jobs in which they were not required to pay Social Security taxes — for instance, police officers, firefighters, teachers and state and local government workers whose employers were not part of the national Social Security system. Workers at nonprofits may be outside the system. However, many of these people — like you — are eligible for Social Security retirement or disability benefits based on other work they did over the course of their careers for which Social Security taxes were paid.
Because of your teacher's pension, Social Security will use a special formula to calculate your retirement benefits, reducing them compared to what you'd otherwise get.
By how much? That depends on your work history. But one rule that generally applies is that the reduction in your Social Security benefit cannot exceed one half of your pension.
Q: Are there some situations where WEP does not apply?
A: Yes, WEP does not apply if:
- You're a federal employee who was hired for the first time after Dec. 31, 1983
- You have 30 or more years of substantial earnings at jobs where you paid Social Security taxes
- As of Dec. 31, 1983, you worked for a nonprofit organization that did not initially withhold Social Security taxes from your paycheck but later began to do so
- Your only pension is based on work for a railroad company
Q: Does WEP apply to benefits paid to widows, widowers and other survivors such as children?
A: No, WEP applies only to a worker's benefits. However, benefits for widows, widowers and other survivors may be reduced because of another rule called the Government Pension Offset (GPO). Under the GPO, those benefits will be cut by two-thirds of a pension you receive from a federal, state or local government job in which you were not required to pay Social Security taxes.
Example: If you get a $600 pension, two thirds or $400 must be deducted from your Social Security payment. Thus if you're eligible for a $500 spouse's, widow's, or widower's benefit, you will receive only $100 a month from Social Security ($500 - $400 = $100).
Q: Are there exceptions to the GPO?
A: Yes, there's a lengthy list of situations in which GPO will not reduce your benefits. Here's a sample of three:
- You're a federal employee who switched from the Civil Service Retirement System (CSRS) to the Federal Employees Retirement System (FERS) after Dec. 31, 1987
- You filed for and were entitled to a spouse's, widow's or widower's benefit before April 1, 2004
- You paid Social Security taxes on your earnings for 60 months or more during the period beginning January 1988 and ending with the first month of entitlement to benefits
Q: What was the thinking in Congress when it created the WEP and the GPO?
A: There's a long history here, but basically it came down to feeling that people who got both a pension from non-Social Security work and benefits from Social Security-covered work were enjoying an unfair "windfall" due to technicalities of how benefit amounts are calculated.
According to the Social Security Administration, Congress adopted these rules in order to ensure that government employees who don't pay Social Security taxes would end up with roughly the same income as people who work in the private sector and do pay them. The GPO was adopted in 1977, the WEP in 1983. Both rules have been controversial.
Stan Hinden, a former columnist for The Washington Post, wrote How to Retire Happy: The 12 Most Important Decisions You Must Make Before You Retire. Have a question? Check out the Social Security Mailbox archive. If you don't find your answer there, send an email to the Social Security Mailbox.
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