718. Windfall Elimination Provision (WEP) - Modified Benefit Formula to Determine the PIA for Workers with Pensions from Non-covered Employment

718.1 What is the WEP PIA formula that is used for workers who are eligible for a pension from noncovered employment based on their own work?

The WEP benefit formula is used to determine the PIA for workers who are eligible for a pension from noncovered employment based on their own work and a Social Security retirement or disability benefit.

718.2 How does the WEP PIA formula affect workers who are eligible for a pension from noncovered employment?

The Social Security benefit formula provides a higher percentage of pre-retirement income for lifetime low-wage workers. The WEP benefit formula eliminates the "windfall" in Social Security benefits received by workers who have only minimal Social Security coverage and who receive a pension based on years of work in noncovered employment. A worker's PIA will never be reduced by more than one-half of the pension amount from noncovered employment. (See §706)

718.3 How is the revised formula used?

The revised formula substitutes 40 percent for the 90 percent factor in the first band of the Social Security benefit formula. The reduction is phased in as follows:

Revised PIA Formula

If you are initially eligible for retirement or disability benefits in...	Then the first percentage factor used in the Social Security benefit formula is...
1986	80 percent
1987	70
1988	60
1989	50
1990 or after	40

A worker may get a full or partial exemption based on earning "years of coverage." The worker receives the percentage that yields the higher benefit amount.

Revised PIA Formula

If your total years of coverage equal...	Then the first percentage factor in the formula is...
29	85
28	80
27	75
26	70
25	65
24	60
23	55
22	50
21	45
20 or fewer	40

A "year of coverage" is calculated as is the special minimum PIA. (See §717). For years 1991 and later, the amount needed for a year of coverage is 25% of the maximum earnings base.

718.4 Are any other methods considered?

In addition to the modified formula, we also consider the simplified old-start formula (see §707) and the special minimum PIA (see §717). We use the computation yielding the highest PIA to determine the amount of benefits payable.

718.5 When does the WEP benefit formula not apply?

The WEP provision does not apply under the following situations:

1. When the noncovered pension benefits are paid under the Railroad Retirement Act;

2. To Federal employees who are mandatorily covered for Social Security purposes beginning January 1, 1984;

3. To most employees of nonprofit organizations who were exempt from coverage before 1984; and

4. To benefits for survivors.

Last Revised: Jan. 20, 2006