Windfall Elimination Provision (WEP)
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Call To Action!
We urge you to contact your Representative and Senators today!
House bill H.R.82 has over 300 co-sponsors - enough to assure its passage. Its Senate companion bill, S.597 has 50 co-sponsors, so to assure its passage we need a few more.
Step 1. Contact Your Representative!
Step 2. Contact Your Senators!
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FAQs
What is the Windfall Elimination Provision (WEP)?
The Windfall Elimination Provision is a formula ( under Title II of the Social Security Act [i] ) that reduces the amount of your Social Security (SS) retirement or disability benefit for workers who receive a pension from a job in which they did not pay FICA - Social Security taxes . The provision affects about 2 million Social Security beneficiaries, most of them veterans of federal, state or local government. [ii]
When was WEP established?
On April 20, 1983, President Reagan signed into law HR.1900 (Public Law 98-21), entitled the Social Security Amendments of 1983.
Why was WEP established?
Its purpose was two-fold — to remove an unintended advantage or “windfall”, that was paid to workers who received a pension from employers but did not pay into the SS system .
Its second purpose was to ensure a minimum income for workers who had spent their careers in low paying jobs.
The problem with WEP
The problem is that the WEP formula wasn’t designed to differentiate between workers in low-paid jobs, versus workers whose jobs were not covered by SS and received a pension.
WEP is a formula that was originally designed to remove the unintended advantage, or “windfall,” of the regular benefit formula for certain retired or disabled workers who spent less than full careers in covered employment and who are also entitled to pension benefits based on earnings from jobs not covered by SS.
The reduction in initial benefits caused by the WEP is designed to place affected workers in approximately the same position they would have been in had all their earnings been covered by SS. [iv]
The WEP works by tweaking the formula Social Security uses to calculate your retirement benefit. Social Security benefits are based on subsiding the primary insurance amounts (PIA) for beneficiaries with lower incomes throughout life.
The amount of tweaking is determined by how many years you had “substantial earnings” from work in which you did pay Social Security taxes, perhaps from a part-time or second-career job in the private sector. (You can find out what Social Security considers substantial earnings in its WEP factsheet .)
This amount is adjusted annually by COLA (cost of living adjustment). The WEP affects retired or disabled worker beneficiaries and their eligible dependents. However, it does not affect survivor beneficiaries.
What are the advantages of WEP?
- Social Security is financed.
- WEP places affected workers in approximately the same position they would have been in had all their earnings been covered by SS.
- WEP promises that workers will get their fair share of benefits when they retire. [v]
What are the disadvantages of WEP?
Regardless of President Reagan’s claim that this bill is a “ monument to the spirit of compassion and commitment that unites us as people”, there are disadvantages:
- The problem WEP was meant to resolve didn't consider in a fair and equitable way the impact on overseas retirees.
- Beneficiaries who have paid into SS do not receive the full benefits, but reduced benefits. These do not represent their full SS contributions over the years.
- Beneficiaries do not get their fair share of benefits when they retire — eg, the penalty imposed on the overseas retiree is disproportionately burdensome because of the lower cap. This has not been explained above.
- Some beneficiaries only learn of WEP after they have retired, and the reduced benefits affect substantially their financial standing in later years.
How many Americans Abroad are affected by WEP?
According to the Congressional Research Service, there are 109,911 [vi] individuals who live outside of the US and in foreign countries who are affected by WEP in 2022.
Legislative Remedies
HR.82/S.597 Social Security Fairness Act of 2023 and S.2280 Social Security 2100 Act together are the “gold standard for repeal” of WEP. The DA Seniors Caucus supports both. S.2280 expands benefits across the board - it has a caregiver credit, better benefits for widowers, as well as repealing WEP/GPO.
[i] Title II “establishes the Federal Reserve account used to pay for Social Security benefits and gives the Secretary of the Treasury the authority to invest excess reserves from the account.”
[ii] AARP
[iv] See: Windfall Elimination Provision (ssa.gov) and Congressional Research Service (2022) Social Security: The Windfall Elimination Provision (WEP) March 7, 2022, Washington DC: CRS.
[v] See: Remarks on Signing the Social Security Amendments of 1983 | Ronald Reagan (reaganlibrary.gov)
[vi] This includes 86,628 retired workers, 389 disabled workers and 22,894 spouses and children.
Disclaimer
Please note that Democrats Abroad does not offer financial advice to individuals. The information below is listed for reference purposes only. Please contact your personal financial advisor if you have questions.
If you notice any broken links, believe this contains inaccurate or outdated information, or you have a general question, please email [email protected] .