NCSSSA
2014 Annual Conference
WEP and GPO
How your Public Pension
may affect your
Social Security Benefits
July 29, 2014
2
Social Security Amendments of 1983
(Public Law 98-21)
July 29, 2014
3
REMEMBER –
Social Security benefits are based on
SS covered earnings
 Yearly SS covered earnings are put in current dollars
 Use 35 years of highest “indexed $$”
 Find the monthly average earnings =
“Average Indexed Monthly Earnings”
 Apply AIME to the benefit formula
July 29, 2014
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Use that Average Indexed Monthly Earnings
Amount (AIME)
90% of the First $816 of AIME
32% of the AIME over $816 through $4,917
15% of the AIME over $4,917
= Gross SS benefit at full retirement age
July 29, 2014
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•Take 35 years of wages….this shows only 34 years, so the
35th year would be $0
•SSA Indexes those amounts into “today’s” dollars
•Total the “Indexed” column (1,546,126), divide by 35 years,
then divide by 12 months to get the AIME (Average Indexed
Monthly Earnings) amount of $3,681
•Using the AIME of $3,681 then plug into the Benefit
Calculation Formula Bend Points:
•90% of the first $816 of AIME
= $ 734.40
•32% of next step AIME up to $4917
(3681 – 816 = 2865 x 32%)
= $ 916.80
•15% of AIME over $4917
=$0
(4917 > 3681 so = 0)
•TOTAL BENEFIT
=$1,651.20
July 29, 2014
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 Employees who have wages in a position
NOT covered by Social Security MAY not
be due a benefit OR the amount could be
reduced by:
 No
additional earnings being credited
 Windfall Elimination Provision (WEP)
 Government Pension Offset (GPO)
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 Windfall Elimination Provision:
If you did not pay Social Security taxes on
your government earnings and you are
eligible for Social Security Retirement or
Disability benefits, the formula used to
figure your benefit amount may be
modified, reducing your Social Security
benefit.
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 The 90 percent factor is reduced in the WEP
formula and phased in for workers who
reached age 62 or became disabled
between 1986 and 1989.
 For those who reach 62 or became disabled
in 1990 or later, the 90 percent factor is
reduced to 40 percent.
The maximum WEP reduction for 2014 is:
$408.00
July 29, 2014
WEP Computation 2014
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Normal Computation
90% of the First $816
32% of the Next $4,101
15% of the Remainder
WEP Computation
40% of the First $816
32% of the Next $4,101
15% of the Remainder
Maximum Reduction possible $408.00
Can not reduce benefit to $0
http://www.socialsecurity.gov/pubs/10045.pdf
July 29, 2014
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 Example, for a worker who turns 62 in 2014 and has AIME (Average
Indexed Monthly Earning) of $6,400.00
Standard Calculation:
 the first $816 X 90% =
 the next $4,101 X 32% =
 and the remainder X 15% =
$ 734.40
$ 1,312.32
$ 222.45
 The sum of the three factors equals the total monthly benefit amount
$2,269.17
 the first $816 X 40% =
 the next $4,101 X 32% =
 and the remainder X 15% =
$ 326.40
$ 1,312.32
$ 222.45
 The sum of the three factors using the WEP calculation equals the total
monthly benefit amount $1,861.17
 A MONTHLY Benefit reduction of $408.00
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 WEP will not reduce your Social Security
benefit by more than half the amount of your
non-Social-Security-covered pension.
Example
 Carl is eligible for a Social Security retirement
benefit, but also receives a $400 non-SocialSecurity-covered pension. WEP will reduce
Carl’s Social Security retirement benefit by
$200 (1/2 x $400) at most.
July 29, 2014
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Years of substantial earnings
formula
30 or more
29
28
27
26
25
24
23
22
21
20 or less
First factor in benefit
90
85
80
75
70
65
60
55
50
45
40
July 29, 2014
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Angela Smith is 29 years old. She made
$32,371.41 last year.
If the referendum:
11 Years of
Substantial
Earnings
Referendum
Passes
Benefit at Full
$1,288.80
Retirement Age:
If WEP applies:
Referendum
Fails
$759.80
$364.30
July 29, 2014
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Susan Jones is 41 years old. She made
$69,454.52 last year.
If the referendum:
15 Years of
Substantial
Earnings
Referendum
Passes
Benefit at Full
$2,047.20
Retirement Age:
If WEP applies:
Referendum
Fails
$1,178.10
$782.60
July 29, 2014
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Sally Britain is 44 years old. She made $28,599.68
last year.
If the referendum:
20 Years of
Substantial
Earnings
Referendum
Passes
Benefit at Full
$1,219.70
Retirement Age:
If WEP applies:
Referendum
Fails
$897.40
$501.90
July 29, 2014
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Hal Ripley is 44 years old. He made $39,354.30
last year.
If the referendum:
23 Years of
Substantial
Earnings
Referendum
Passes
Benefit at Full
$1,460.60
Retirement Age:
If WEP applies:
Referendum
Fails
$1,063.50
$787.55
July 29, 2014
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John Bradford is 56 years old. He earned $106,500
last year.
If the referendum:
33 Years of
Substantial
Earnings
Referendum
Passes
Benefit at Full
$2,158.70
Retirement Age:
If WEP applies:
Referendum
Fails
$1,884.90
N/A
July 29, 2014
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 Government Pension Offset:
If YOU receive a pension from a federal, state or local
government based on work where you did not pay
Social Security taxes, your Social Security benefit from
a spouse, divorced spouse, widow, or widower benefit
may be reduced or offset in whole.
GPO may reduce the benefit to $0.
July 29, 2014
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 Example: a woman worked and earned her
own $800 monthly Social Security retirement
benefit, but she also was due a $500 wife’s
benefit on her husband’s Social Security
record, Social Security could not pay that
wife’s benefit because her own Social Security
benefit offset it.
 When both spouses receive a Social Security
benefit based on their own earnings, the offset
is dollar for dollar.
July 29, 2014
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 Your Social Security benefits will be reduced by
two-thirds of your government pension.
 Example: if you get a monthly civil service pension
of $600, two-thirds of that, or $400, must be
deducted from your Social Security benefits.
 If you are eligible for a $500 spouse’s, widow’s or
widower’s benefit from Social Security, you will
receive $100 per month from Social Security.
($500 – $400 = $100)
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Generally, your Social Security benefits as a
spouse, widow or widower will not be reduced if
you:

Are receiving a government pension that is
not based on your earnings

Are a state or local employee whose
government pension is based on a job
where you were paying Social Security taxes
July 29, 2014
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QUESTIONS????
July 29, 2014