|
The Windfall Elimination Provision
(WEP) reduces your Eligibility Year benefit amount before
it is reduced or increased due to early retirement,
delayed retirement credits, cost-of-living adjustments (COLA), or other factors. The following examples
show how the WEP reduction changes when the Eligibility Year (ELY) benefit
is affected by other factors.
- Retirement Examples: The monthly retirement benefits are increased or reduced based on your age after WEP reduces your Eligibility Year benefit.
If you turn 62 in 2004 (ELY 2004) and you have 20 years of substantial earnings, WEP reduces your monthly benefit in 2004 by $306. Your full retirement age is 65 and 10 months. If your full retirement benefit is $1,306, your monthly benefit after the WEP reduction would be $1,000.
-
Early Retirement: If you start getting retirement
benefits the month you turn 62, you will get benefits before you
reach full retirement age. Your monthly benefit is reduced to 75.8%
because you will get benefits for 46 additional months.
Your age 62 retirement benefit is $758 ($1,000 x 75.8% = $758) per month. If your full retirement benefit had not been reduced by WEP, your age 62 retirement benefit would have been $989. Early retirement changed the reduction for WEP from $306 to $231.
- Delayed Retirement:
Same example as above, but you decided to wait to age 70 to receive
benefits.
Your eligibility year is still 2004. If your retirement benefits
start after your full retirement age (65 and 10 months) the benefit
increases 7.5% for each year before age 70 that you delay retirement.
If your benefits start at age 70, you get credit for the 50 additional
months when you did not get benefits and your monthly benefit will
be 31.3% higher.
Your age 70 retirement benefit is $1,313 ($1,000 x 131.3% = $1,313). If your full retirement benefit had not been reduced by WEP, your age 70 retirement benefit would have been $1,714. Delaying retirement increased the reduction for WEP from $306 to $401.
- COLA Example: The annual cost
of living adjustment (COLA) is added to your monthly benefit amount
after WEP reduces your Eligibility Year benefit.
When you became disabled in 2003 (ELY 2003) WEP reduced your $1,303
Eligibility Year benefit to $1,000.
The following year, the 2.1% January 2004 COLA increased your benefit
by $21 ($1,000 x 2.1% = $21). If it were not reduced by WEP, your
benefit amount would have increased by $27 ($1,303 x 2.1% = $27).
The new benefit would have been $1,330 instead of $1,027. COLA increased
the reduction for WEP from $303 to $309 ($1,330 - 1,021).
Note: The examples above apply
only to benefits paid to the worker and do not include future COLA increases.
The WEP reduction may be larger if family members qualify for benefits
on the same record. However, the total WEP reduction is limited to one-half
of the pension based on the earnings that were not covered by Social Security.
|
|