What is the Windfall Elimination Provision?

Bottom Line Up Front

• The Windfall Elimination Provision, also known as WEP, is a rule that reduces any earned Social Security benefits paid to retirees who also receive a pension from a job that didn’t pay into Social Security taxes. 
• The Social Security Fairness Act (“SSFA”), a bipartisan bill designed to eliminate both WEP and Government Pension Offset, was reintroduced earlier this year. 

The Windfall Elimination Provision (“WEP”) may reduce the Social Security benefits paid to you if you also receive a pension from a job in which you didn’t pay Social Security taxes (i.e., “non-covered” employment).

This “non-covered” employment is generally related to a government job that was not covered by Social Security. The reduction via WEP may be up to 50% of the amount of your pension so it might not offset the entire benefit (there are maximum offset limits set by Social Security). 

What is the Windfall Elimination Provision?

Enacted by Congress in 1983, the Windfall Elimination Provision, also known as “WEP”, was created as part of a Social Security rescue/reform package. The intent underlying this provision was to avoid allowing government workers who collect non-covered pensions but also had spent time working for a “covered” job that paid into Social Security from receiving a higher total of benefits than those who did not. 

The WEP only affects about 1.9 million people or 3% of all Social Security beneficiaries according to a recent report from the Congressional Research Service. However, this has been subject to some debate regarding its “fairness”. The provision is limited to the 1st wage band or bracket of the Social Security benefit formula so it has proven to disproportionately impact lower-wage workers. 

What’s the Status of the WEP Repeal Legislation?

There has been an ongoing effort to repeal both the Governmental Pension Offset (“GPO”) and Windfall Elimination Provision. The bipartisan H.R. 82 Social Security Fairness Act (“SSFA”) is designed to eliminate both. As of the date of this article, the bill introduced by Rodney Davis (R-IL) and Abigail Spanberger (D-VA) has 184 co-sponsors in the House (it previously had 264 co-sponsors last session). While we can’t forecast the outcome, it has gained more followers each cycle which makes it worth keeping an eye on. 

We recognize that these provisions and their impact are quite complex. If you have any questions or would like to learn more, please reach out to one of our Odyssey consultants.