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How Social Security’s WEP Affects Some Federal Retirees


Most working individuals in the U.S. are covered by Social Security and pay into the Social Security system by having the Federal Insurance Contribution Act (FICA) tax deducted from their paychecks.

Currently, the FICA tax is equal to 6.2 percent and is imposed on an individual’s gross wages. The individual’s employer also matches the 6.2 percent contribution by the employee. During 2020, the FICA payroll tax is imposed on the first $137,700 of an employee’s wages.

By paying the FICA tax, employees are earning Social Security credits. During 2020, one credit of Social Security is earned when an employee earns $1,410. In order to earn the maximum four Social Security credits during 2020, an employee would have to earn $5,640 in Social Security-covered employment.

Once an employee has earned a minimum of 40 credits during his or her working lifetime, the employee is considered “fully insured” and is entitled to a Social Security retirement benefit starting as early as age 62. A Social Security retirement benefit check continues for the rest of his or her life.

It is important to understand that the 40 credits are just the minimum an individual has to earn during his or her lifetime in order to be guaranteed a lifetime Social Security retirement benefit. But the more an individual earns in Social Security-covered employment together with more years of Social Security-covered employment, the larger will be the individual’s Social Security retirement benefit.

Some are not covered

There are some working individuals who are not covered by Social Security and therefore do not pay the FICA payroll tax. These individuals include federal employees covered by the Civil Service Retirement Systems (CSRS)

In some states and cities in the US, state and local government employees are covered by a state or local-sponsored guaranteed pension (a defined benefit plan). CSRS annuitants receive a CSRS annuity, which is classified as a defined benefit plan.

This means that a CSRS employee upon retiring from federal service will receive a guaranteed pension for life with some inflation protection. But CSRS-covered employees do not pay into Social Security while they work in federal service.

Many of the aforementioned individuals, even though they worked most of their lives for the federal government under CSRS or for a state and/or local government and earned a guaranteed pension while not paying into Social Security, were able to earn and accumulate the minimum 40 credits of Social Security and therefore are “fully insured.”

For example, they worked very part-time or temporary jobs while in high school or college. They served in the uniformed services – whose members have paid into Social Security since Jan. 1, 1957. They may have worked in private industry before or after they worked for the federal, state or local government.

Before 1985, these individuals were able to receive the maximum possible benefits from Social Security (even though they may have worked just a minimum number of years under Social Security) as well as to receive their guaranteed public pensions in which they were not covered by Social Security.

The Windfall Elimination Provision

However, in 1983 Congress passed the “Windfall Elimination Provision” (WEP) in order to eliminate this advantage. In particular, if an individual has earned and is entitled to receive a public guaranteed pension (such as CSRS) and has less than 30 years of “substantial” Social Security-covered earnings while working in the private sector, then amount of Social Security benefits they receive will be reduced (but not eliminated).

The WEP affects individuals receiving a public pension and who did not pay into Social Security while earning their public pension. These individuals:

(1) Were born after Dec. 31, 1923; and

(2) Became eligible for a government-sponsored pension (like CSRS) after Dec. 31, 1985 based on non-Social Security employment.

Note that the WEP has no effect on a public pension such as a CSRS annuity (that is, the CSRS annuity is not reduced because the CSRS annuitant’s Social Security retirement benefit is affected by the WEP).

How the WEP works

A Social Security retirement benefit is intended to replace only a portion of an employee’s pre-retirement salary and wages. Each year, the Social Security Administration (SSA) computes an individual’s Social Security retirement benefit based on the individual’s average monthly earnings adjusted for average wage growth, called the Average Indexed Monthly Earnings or AIME.

The SSA separates the AIME into three amounts and multiplies the amounts using three factors to compute the individual’s Primary Insurance Amount (PIA). The PIA is defined as the amount of one’s monthly retirement (in current day dollars) at his or her full retirement age (FRA).

For example, for an individual who was born in 1958 and who becomes age 62 during 2020, the first $960 (the first “bend” point) of the AIME is multiplied by 90 percent; the AIME amount in excess of $960 and less than $5,785 (the second “bend” point) is multiplied by 32 percent, and the balance of the AIME in excess of $5,785 is multiplied by 15 percent. The sum of the three amounts equals the PIA which is then decreased or increased, depending on whether the individual starts his or her retirement benefit before, at, or after his or her FRA.

Note that the “bend” points increase from year to year. The 32 percentage that is multiplied by the second factor and the 15 percentage that is multiplied by the excess of the second “bend” point do not change.

Social Security “Years of Substantial Earnings”

Each year the SSA defines for each year what constitutes a year of “substantial” Social Security-covered earnings. Table 1 illustrates for the years 1989 -2020 what constitutes “substantial” earnings.

Table 1. “Substantial” Social Security earnings by year, as defined by the Social Security Administration*


How does an individual who is receiving a public pension such as a CSRS annuity, in which the individual did not pay into Social Security, determine how the WEP will affect his or her Social Security benefits? The first step is to figure out how many years of “substantial earnings” they have under Social Security.

To do so, they must look at their Social Security statement, obtainable online at, and look at the amount of their “Social Security wages” they have earned through the years in Social Security-covered employment. This information has been sent to the SSA each year on behalf of the individual by the individual’s employer via the W-2 form (Box 3 – “Social Security wages”). Here is an example:

Norman, age 62, retired from federal service in 2018 as a CSRS employee with 40 years of service. During the period 1989 – 2014, Norman worked a second job. His reported Social Security earnings during his working career are summarized in the following table:


The Bend Point

Table 2 below shows the percentage used to multiply the first “bend point” depending on the number of years of “substantial” earnings. If one has 21 to 29 years of “substantial” earnings, the 90 percent figure is reduced to between 45 and 85 percent. If one has 20 or less substantial years of earnings, 40 percent is used to multiply the first “bend” point.

Table 2. Percentage used to multiply the first “bend point”* 


Returning to the example above with Norman’s 18 years of “substantial” Social Security earnings: If Norman’s AIME is $2,000, then the formula to compute Norman’s PIA in 2020 would be:

(0.40 x $960) + [0.32 x ($2,000 – $960)] =$716.80

Note that if Norman was covered by a public pension plan in which he also paid into Social Security (such as FERS), he would not be affected by the WEP. Norman’s formula to compute his Social Security benefit would then be:

(0.90 x $960) + [0.32 x ($2,000 – $960)] = $1,196.80

The difference is $1,196.80 less $716.80, or $480.

SSA has a chart on its Web site that presents the maximum amount an affected individual’s Social Security benefit could be reduced as a result of the WEP, based on the individual’s number of years of “substantial” earnings and the year the individual becomes age 62.

The chart may be found at:

Some other items regarding the WEP that should be noted:

1. The WEP reduction applies to the retirement benefit of the individual affected by the WEP and to any family members (spouse, children) who are also receiving a family benefit based on the individual’s Social Security earnings record.

2. The WEP reduction does not apply to the Social Security benefit of an individual who continues to work for the government (federal, state or local) in which the individual will receive a public pension (once he or she retires) but did not pay into Social Security while working for that government.

Consider this example:

Nan, age 67, is a CSRS-covered employee with 42 years of federal service. During her working career, Nan worked in several private industry jobs that allowed her to accumulate about 15 years of Social Security-covered employment. She is “fully insured” with respect to Social Security and has elected to start receiving her Social Security monthly retirement benefit of $720. The $720 monthly benefit is not subject to any WEP reduction because Nan is still in federal service. Once Nan retires from federal service, her Social Security retirement benefit will be subject to the WEP. According to the WEP calculation, Nan will lose approximately 40 percent, or 40 percent of $720 ($288) each month in her monthly Social Security benefit.

More items regarding the WEP that should be noted:

3. A Social Security survivor benefit is not subject to the WEP. The WEP reduction ends upon the death of the Social Security recipient. The following example illustrates:

Same information as in #2 except that Nan is married to Steve. While Nan is still working for the federal government, Steve (who is two years older than Nan) is eligible to receive half of what Nan is currently receiving in Social Security benefits, or 50 percent of $720 equals $360. If Nan were to retire and therefore her Social Security benefit would be subject to the WEP, then Nan would receive: $720 less $288, or $432. Steve would then receive after Nan retired from federal service 50 percent of $432, or $216. If Nan were to predecease Steve, then Steve would be eligible to receive the full widow(er) Social Security benefit of $720 (no reduction as WEP goes away upon Nan’s death).

4. In most years, Social Security recipients receive a cost-of-living adjustment (COLA) that results in an increase of monthly benefits for that year. But the COLA is not applied to the WEP. In other words, once the WEP reduction is calculated, it is not adjusted by a COLA. The WEP reduction could however decrease when a Social Security recipient continues to work and adds additional years of “substantial” Social Security earnings.

Further items regarding the WEP that should be noted:

5. On 12/19/2019, legislation was introduced in the current Congress – H.R.5529 (Social Security Equity Act of 2019) – that would lessen the impact of the Windfall Elimination Provision for some individuals depending on the year they were born. The bill has been referred to the House Ways and Means Committee.

6. A CSRS Offset annuitant’s Social Security benefit could be subject to the WEP depending on how many years of “substantial” years of Social Security-covered employment the annuitant had (including those years paying into Social Security while a CSRS Offset employee). The same is true for the Social Security benefit of a “Trans” FERS employee (a FERS-covered employee who previously had at least five years of CSRS-covered service before transferring to FERS).

Don’t hesitate to contact us today via email or call 856-914-1449 with any questions or concerns you have about your retirement planning, retirement income, and tax planning options.

RJG Financial & CPA Services focuses on providing education and information to help you understand income and CPA guided tax planning as you prepare for retirement.

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