Be aware of WEP’s impact if you receive a foreign pension

 

Windfall Elimination Provision (WEP) is the one that will reduce your social security (“SS”) payments. When you apply for SS, you will be asked if you are currently receiving a pension from foreign country. If you truthfully say yes, you will be asked by an official to provide the proof of such payments. Based on the proof, your payments under the SS system will be reduced.

Please note that the WEP covers other types of workers. It is a broad provision and I am only discussing the part that affects readers like you.

This is how.

Social Security benefits are based on the monthly average of lifetime earnings. In the basic formula for figuring benefits, the first part of the average earnings is multiplied by 90 percent; the second part is multiplied by 32 percent; and any part of the average monthly wage remaining is multiplied by 15 percent. However, under WEP, the 90 percent factor is replaced by a factor ranging from 45 to 80 percent. See the link below.  https://www.ssa.gov/pubs/EN-05-10045.pdf

Background of this Provision

If you are from a foreign country, which may be your home country, you may have worked in your country and paid in premiums based on your earnings. This earning is not captured when you are considered for the SS payment. The SS system is to take care of lower income earners. You, however, had earnings from overseas. Therefore, you are not really in the category of lower wage earners. Therefore, the formula is modified to reflect your uncovered earnings.

How much your SS payments can be reduced?

The reduction cannot be over 50% of your foreign pension. This is called WEP Guarantee Provision. You can find out how much your SS payment will be by using the SS office’s calculator. See the link https://www.ssa.gov/planners/retire/anyPiaWepjs04.html

Spousal Benefits and Survivor Benefits

Spousal benefits are affected by WEP. Survivor benefits are not affected by WEP.

Can you be silent about your foreign pension?

No, when you apply for SS, you must be truthful about your receipt of your foreign pension. Even if you start receiving foreign pension after you apply for SS, you still need to inform the SS office to reflect your foreign pension receipt.

Several Countries are treated differently

I believe that there are seven countries that have part of their pensions exempt from the WEP provision. Most of these countries are from northern Europe.

If you wonder if your country is listed, check this link.  https://secure.ssa.gov/apps10/poms.nsf/lnx/0201701320

Also, the key document that you should review for further details is Section GN 00307.290.

If you have questions about this article, please contact Koh Fujimoto. [email protected] Or call his cell phone at 630 253 0215.