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<li><a href="/policy/docs/program-explainers/poverty-decline.html">Why Will Poverty Decline for Beneficiaries?</a></li>
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<li><a href="/policy/docs/program-explainers/windfall-elimination-provision.html">Windfall Elimination Provision</a></li>
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<li><a href="/policy/docs/projections/populations/divorced-spousal-2050.html">By beneficiary type</a></li>
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<li><a href="/policy/docs/projections/policy-options/index.html">Policy options/proposals</a></li>
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<h3>Program Explainers</h3>
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<ol class="tabsORP greentab ninetypercent">
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<li><a href="benefit-claiming-age.html"><span>Benefit<br>Claiming Age</span></a></li>
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<li><a href="government-pension-offset.html"><span>Government<br>Pension Offset</span></a></li>
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<li><a href="retirement-earnings-test.html"><span>Retirement<br>Earnings Test</span></a></li>
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<li><a href="scheduled-payable.html"><span>Scheduled <abbr title="versus">vs.</abbr><br> Payable Benefits</span></a></li>
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<li><a href="special-minimum.html"><span>Special<br>Minimum Benefit</span></a></li>
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<li><a href="poverty-decline.html"><span>Why Will Poverty Decline<br>for Beneficiaries?</span></a></li>
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<li class="currentTab"><a href="windfall-elimination-provision.html"><span>Windfall Elimination<br>Provision</span></a></li>
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</ol>
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<div class="factsheet ORPgreen">
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<h4>Windfall Elimination Provision</h4>
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<span class="dateORP"><br>Released: May 2024</span>
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<div class="container-yellow"><p>The Social Security Fairness Act, <abbr class="spell">HR</abbr> 82, concerning the Windfall Elimination Program and Government Pension Offset, was signed into law on January 5, 2025. Upon implementation, the Social Security Fairness Act eliminates the reduction of Social Security benefits while entitled to public pensions from work not covered by Social Security. The Social Security Administration is evaluating how to implement the Act. Ongoing agency updates will be released at <a href="/benefits/retirement/social-security-fairness-act.html">https://www.ssa.gov/benefits/retirement/social-security-fairness-act.html</a>.</p><p>The fact sheet below is from the <b>historical</b> policy.</p></div>
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<p><b>BACKGROUND:</b> The <a href="/pubs/EN-05-10045.pdf">Windfall Elimination Provision (<abbr>WEP</abbr>)</a> is a formula used to adjust Social Security worker benefits for people who receive “non-covered pensions” and qualify for Social Security benefits based on other Social Security–covered earnings. <sup><a href="#mna" id="mta">a</a></sup> A <b>non-covered pension</b> is a pension paid by an employer that does not withhold Social Security taxes from your salary, typically, state and local governments or non-<abbr>U.S.</abbr> employers.</p>
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<p>Congress passed the <abbr>WEP</abbr> to prevent workers who receive non-covered pensions from receiving higher Social Security benefits as if they were <span class="nobr">long-time,</span> low-wage earners. <sup><a href="#mnb" id="mtb">b</a></sup> In 2022, the <abbr>WEP</abbr> applied to 3.1 percent of all beneficiaries (2.01 million beneficiaries out of <a href="/policy/docs/statcomps/supplement/2023/5a.html#table5.a1">65.99 million total beneficiaries</a>).</p>
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<p><b>HOW THE <abbr>WEP</abbr> WORKS</b>: Social Security benefits are calculated by applying three different percentages to a person's lifetime <a href="/OACT/COLA/Benefits.html">average indexed monthly earnings (<abbr>AIME</abbr>)</a> and adding them up to obtain the worker's monthly benefit (<a href="/OACT/COLA/piaformula.html">primary insurance amount (<abbr class="spell">PIA</abbr>)</a>) at full retirement age. For most beneficiaries in 2024, the <abbr class="spell">PIA</abbr> equals the sum of:</p>
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<ul>
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<li>90 percent of the first $1,174 of <abbr>AIME</abbr>, plus </li>
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<li>32 percent of <abbr>AIME</abbr> over $1,174 and through $7,078, plus </li>
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<li>15 percent of <abbr>AIME</abbr> over $7,078. </li>
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</ul>
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<p>The <abbr>WEP</abbr> <abbr class="spell">PIA</abbr> replicates the regular <abbr class="spell">PIA</abbr> but scales down the first percentage from 90 percent to 40 percent in increments of five percentage points for workers with less than 30 <a href="/OACT/COLA/yoc.html">years of coverage (<abbr class="spell">YOC</abbr>s)</a>. Thus, workers with 30 or more <abbr class="spell">YOC</abbr>s have a first <abbr class="spell">PIA</abbr> factor of 90 percent, workers with <span class="nobr">21–29</span> <abbr class="spell">YOC</abbr>s have a first <abbr class="spell">PIA</abbr> factor between <span class="nobr">45–85</span> percent, and workers with 20 <abbr class="spell">YOC</abbr>s have a first <abbr class="spell">PIA</abbr> factor of 40 percent.</p>
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<p>However, the difference between the regular <abbr class="spell">PIA</abbr> and the <abbr>WEP</abbr> <abbr class="spell">PIA</abbr> cannot exceed <span class="nobr">one-half</span> of the monthly non-covered pension. This provision is known as the <abbr>WEP</abbr> guarantee and results in a smaller <abbr>WEP</abbr> reduction to the Social Security benefit than otherwise would have applied.</p>
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<div class="row-12">
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<div class="column-6">
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<div class="svgChart" id="chart1"><img src="windfall-elimination-provision.svg" alt="Stacked bar chart. Title: WEP P I A Examples for Different Y O Cs (Years of Coverage): For a hypothetical worker with an $8,000 AIME. Three bars, one each for 20 Y O Cs, 25 Y O Cs, and 29 Y O Cs. Each bar has three segments. All three bars start with the same-sized bottom segment: $138 (or 15% of $922). All bars have the same-sized middle segment: $1,889 (or 32% of $5,904). For 20 Y O Cs, the top segment is $470 (or 40% of $1,174) and the total WEP P I A equals $2,497. For 25 Y O Cs, the top segment is $763 (or 65% of $1,174) and the total WEP P I A equals $2,790. For 29 Y O Cs, the top segment is $998 (or 85% of $1,174) and the total WEP P I A equals $3,025." width="323" role="img" /> </div>
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</div>
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<div class="column-6" style="font-size:90%">
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<div class="table" style="margin-top:1.3em">
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<table style="background-color:#fff">
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<caption style="background-color:#478e6d;border:none;color:#fff;line-height:1.2;padding:2px 0 5px 7px"><span class="tableNumber" style="font-weight:600;font-size:.9rem"><abbr>WEP</abbr> Guarantee Examples </span><span class="nonbold"><i>For three hypothetical workers</i></span></caption>
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<thead>
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<tr>
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<th class="stubHeading" scope="col" style="border:none !important"> </th>
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<th scope="col" style="border:none !important">
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<div style="border-bottom:1px solid #ccc;padding-bottom:.2em;padding-top:.5em">Worker A<br><i>(<abbr>WEP</abbr> reduction capped by <abbr>WEP</abbr> guarantee)</i></div>
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</th>
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<th scope="col" style="border:none !important;padding-left:1em">
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<div style="border-bottom:1px solid #ccc;padding-bottom:.2em">Worker B<br><i>(<abbr>WEP</abbr> reduction)</i></div>
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</th>
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<th scope="col" style="border:none !important;padding-left:1em">
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<div style="border-bottom:1px solid #ccc;padding-bottom:.2em">Worker C<br><i>(not affected by <abbr>WEP</abbr>)</i></div>
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</th>
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</tr>
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</thead>
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<tbody>
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<tr>
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<th class="stub0" scope="row"><abbr class="spell">YOC</abbr>s</th>
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<td>20</td>
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<td>25</td>
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<td>30</td>
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</tr>
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<tr>
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<th class="stub0" scope="row">First <abbr class="spell">PIA</abbr> factor</th>
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<td>40%</td>
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<td>65%</td>
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<td>90%</td>
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</tr>
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<tr>
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<th class="stub0" scope="row">Regular <abbr class="spell">PIA</abbr></th>
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<td>$1,321</td>
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<td>$1,449</td>
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<td>$1,609</td>
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</tr>
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<tr>
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<th class="stub0" scope="row"><abbr>WEP</abbr> <abbr class="spell">PIA</abbr></th>
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<td>$734</td>
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<td>$1,155</td>
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<td>$1,609</td>
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</tr>
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<tr>
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<th class="stub0" scope="row">Regular <abbr class="spell">PIA</abbr> minus <br> <abbr>WEP</abbr> <abbr class="spell">PIA</abbr></th>
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<td>$587</td>
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<td><b>$294</b></td>
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<td>$0</td>
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</tr>
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<tr>
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<th class="stub0" scope="row" style="padding-right:0;padding-top:2em">Monthly non-covered <br> pension</th>
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<td style="padding-top:2em">$800</td>
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<td style="padding-top:2em">$600</td>
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<td style="padding-top:2em">$400</td>
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</tr>
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<tr>
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<th class="stub0" scope="row"><abbr>WEP</abbr> guarantee<br> <span class="nobr"><i> (½ non-covered <br> pension)</i></span></th>
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<td><b>$400</b></td>
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|
<td>$300</td>
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<td>$200</td>
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</tr>
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<tr>
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|
<th class="stub0" scope="row" style="padding-top:2em"><abbr>WEP</abbr> reduction</th>
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<td style="padding-top:2em"><b>$400</b></td>
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<td style="padding-top:2em"><b>$294</b></td>
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<td style="padding-top:2em">$0</td>
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</tr>
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<tr>
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|
<th class="stub0" scope="row" style="padding-right:0">Social Security benefit</th>
|
|
<td>$921</td>
|
|
<td>$1,155</td>
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|
<td>$1,609</td>
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</tr>
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</tbody>
|
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</table>
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</div>
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</div>
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</div>
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<div class="note">
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|
<p><a href="#mta" id="mna">a.</a> Worker benefits are paid to an insured worker based on the worker's own earnings history. Beneficiaries eligible for spouse or survivor benefits who also receive a non-covered pension are affected by another provision, the <a href="/policy/docs/program-explainers/government-pension-offset.html">Government Pension Offset (<abbr class="spell">GPO</abbr>)</a>.</p>
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|
<p><a href="#mtb" id="mnb">b.</a> Brown, Jeffrey R., and Scott Weisbenner. 2012. “The Distributional Effects of the Social Security Windfall Elimination Provision.” National Bureau of Economic Research Working Paper #18342.</p>
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