Wednesday, December 30, 2009

US Social Security Windfall Elimination Provision

USA social security is a great program for retirees. People can opt to start taking social security payments at 62, though the payments are reduced quite a bit from a person's normal payment at full retirement age. To earn social security you have to contribute from your wages over 40 quarters. Once you have made those contributions then you and your spouse are eligible for a number of benefits including pension payments for both, even if only one had worked and contributed. The spouse who had not contributed will receive 50% of the partner's full social security payment at his or her retirement age. There are also benefits for disabled people and widows or widowers. Check it out at

One little known provision however in social security is the windfall elimination provision. (WEP). This was built into social security to ensure that payments are equitable. The formulae in place to determine individual payment is based on the total contributions made over a person's working career. If someone has not contributed for a period of time however, the calculation assumes that they were not earning money and adjusts to give a higher payment. This was intended to make sure poorer people and those who have been out of work for a long time are not disadvantaged by the calculation. if however a person has been contributing to another government retirement program sponsored by a state or a federal department, then the calculation needs to be adjusted to reflect the fact they they are receiving a separate pension payment from the other program.

As a result many people find that their social security payment is reduced when they receive these separate pension payments. This also applies to people who had contributed to the Canadian Social programs and are receiving CPP or QPP. Canada and the USA have a treaty which allows them to exchange information and also provide cross border assistance to help people gain the most pension payment possible. When you apply for social security, one of the questions asked is with respect to receiving government pensions from another country. If you answer yes then you will be subject to the Windfall Elimination Provision. Be careful not to mislead the social security administration or hide this information. They have the power to stop payments if there are questions regarding your status or your pension income.

To learn more about the WEP check:

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