Generally, income from a pension will not reduce your monthly Social Security benefits. According to the Social Security Administration, pension payments are not considered income for Social Security purposes. Under a provision passed by Congress, however, there are certain individuals whose pension income may reduce their Social Security benefits. A social security lawyer can fully explain what this provision means to you and your family, but here is a brief overview.
Windfall Elimination Provision (WEP)
In 1983, Congress passed the Windfall Elimination Provision (WEP). Under this provision, workers who worked for employers who did not pay Social Security taxes will not be able to receive Social Security benefits at a higher percentage of their earnings, while also receiving their pension. This provision specifically applies to workers whose employers did not pay Social Security taxes and qualified for Social Security retirement or disability benefits from work done for other employers who did pay Social Security taxes. More specifically, the provision affects workers who:
- Attained age 62 after 1985
- Became disabled after 1985
- Become eligible for a pension based on work performed for an employer who did not pay Social Security taxes, even if they are still working
- Have performed federal service under the Civil Service Retirement System (CSRS) after 1956.
Workers who performed federal service under the Federal Employees’ Retirement System (FERS) are not affected by the provision, because Social Security taxes are withheld for such workers.
How the Provision Affects Social Security Income
Your Social Security benefit is calculated by dividing your average earnings into three parts and multiplying each amount by a certain percentage, as shown below:
- The first $856 multiplied by 90 percent;
- Earnings between $856 and $5,517 multiplied by 32 percent;
- The balance multiplied by 15 percent.
Under the WEP, the 90 percent is reduced by 45 to 85 percent, depending on the number of years of substantial earnings a worker has. The more years of substantial earnings a worker has under his belt, the less his Social Security benefits will be reduced. You can go to www.ssa.gov to learn how to calculate your monthly benefit under WEP. A social security lawyer can also provide information on how Social Security benefits are calculated and determined and the impact WEP can have on your benefits.
Workers whose Social Security benefits are not affected by the WEP are:
- Federal workers hired after December 31, 1983;
- Workers whose only pension is for railroad work;
- Workers with 30 or more years’ substantial earnings under Social Security
- Workers who performed work before 1957, for which no Social Security taxes were paid
- Individuals receiving survivors’ benefits.
In addition, if you receive a low pension, by law your Social Security benefits cannot be reduced by more than half of your pension for any income earned after 1956 on which no Social Security taxes were paid.
Concerned About Your Social Security Benefits?
We’ve been helping disabled individuals in the Greater Los Angeles area, the Inland Empire, and Orange County get the disability benefits they need for years. Call Dr. Bill LaTour and his team today at 800-803-5090 or fill out our online form to schedule a free consultation.