Estimating the Social Security Windfall Elimination Provision's Impact on Clients

Mason, Richard; Mills, John R.; Ferrell, Brian
December 2005
Journal of Financial Planning;Dec2005, Vol. 18 Issue 12, p52
Academic Journal
• Social Security's windfall elimination provision (WEP) reduces Social Security retirement benefits for those workers, typically employed in the public sector, covered by a non-Social Security retirement plan and who became first eligible for that non Social Security plan after 1985. • It is estimated that up to 9 percent of future retirees may be affected by the provision. As a rule of thumb, essentially all workers who have paid into the Social Security system for less than 30 working years at "substantial earnings" and have worked in the public sector in non-Social Security positions are likely to have their Social Security retirement benefits reduced by the WEP. • Current annual Social Security benefit statements overstate the worker's estimated benefits by not reflecting any potential WEP reduction. Accordingly, financial planners should be aware of the potential reduction and how it works to reduce the monthly benefits that clients may receive. • It is particularly important to factor in the WEP for those clients who have 20 or fewer years of substantial earnings, as the WEP reduction for these individuals is far more pronounced. • This article describes the WEP and its workings through a detailed example. It shows how to estimate Social Security retirement benefits, upon which any potential WEP impact must be based, with a quick yet accurate back-of-the-envelope calculation. • The article also discusses the fact that workers who leave the private sector for a non-Social Security covered position may well lose their Social Security disability coverage that requires current Social Security work credits to remain in force.


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