The Windfall Elimination Provision

If you work for an employer who doesn’t withhold Social Security taxes from your salary, any pension you get from that work can reduce your Social Security benefit.

The Windfall Elimination Provision or WEP applies to a benefit you earned because of private sector employment. In essence, people who receive “non-covered pensions” and qualify for Social Security benefits based on other Social Security–covered earnings may receive a lower Social Security benefit. A non-covered pension is a pension paid by an employer that does not withhold Social Security taxes from your salary, typically, state and local governments or non-U.S. employers.

Under WEP, a modified benefit formula is 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.

The WEP results in a lower Social Security benefit. Its purpose is to remove an unintended advantage or “windfall” that you might otherwise receive as a result of the interaction between the regular Social Security benefit formula and a relatively short career in Social Security-covered employment.

Many people don't know this, but your Social Security statement does not reflect any reduction in benefits due to WEP. The Social Security Administration will wait until you file to tell you how your benefit will be reduced. Until then the best way to project your benefit is navigating over to SSA.Gov and using the WEP calculator or calling the Social Security Administration.

Once you know your benefit, we recommend that you disable our Social Security calculations and model your benefits as a pension in My Plan > Income > Pensions.

Follow these steps:

STEP 1: Head on over to My Plan > Income > Pensions

STEP 2: Press Add a Pension +

STEP 3: Enter a descriptive name, Social Security Subject to WEP for example

STEP 4: Enter your monthly benefit

STEP 5: Enter the start and stop ages

STEP 6: Adjust the optimistic and pessimistic growth rates to match your Social Security COLA assumptions

STEP 7: Select the appropriate tax treatment

STEP 8: Save