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How the Windfall Elimination Provision in Social Security Works


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Throughout your career, it’s likely that a portion of your income has gone toward Social Security benefits each pay period. The purpose? When the time comes to retire, you are able to draw monthly benefits from this program. This provides you with an additional income stream on top of your personal retirement savings. If your work over the years has made you eligible to draw from a pension, however, those payments can reduce the Social Security benefits for which you would otherwise be eligible. This reduction is called the windfall elimination provision, or WEP.

Consider working with a financial advisor as you make financial plans for your retirement.

What Is the Windfall Elimination Provision?

The windfall elimination provision (WEP) is a formula that effectively reduces Social Security and disability benefits for certain retirees who receive a pension during retirement, in addition to their Social Security payments.

WEP applies to Social Security payees whose pension comes from a non-covered job, or one that didn’t pay into FICA. If you didn’t have Social Security taxes withheld from your paychecks and then receive a pension from that job, you can probably expect your Social Security benefits in retirement to be reduced.

The windfall elimination provision was introduced in 1983 as a benefits safeguard. It prevents certain workers from collecting full Social Security benefits in addition to a pension, without having paid into Social Security for enough of their career.

The WEP formula takes into account the number of years you did have Social Security taxes withheld. It then uses a sliding scale to determine your eligibility year (ELY) benefits.

How the WEP Is Applied

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The windfall elimination provision affects both Social Security and disability benefits. It calculates a fair benefit that is proportional to the number of years that you had substantial earnings from an eligible job (one that withheld FICA). WEP reductions are applied on a sliding scale. If you have 20 or more years of substantial earnings in which you paid Social Security tax then the effect of the WEP begins to lessen. If you have 30 or more years of substantial earningsin which you paid Social Security tax then WEP does not apply to you.

The Social Security Administration has a free online calculator that gives you a WEP-adjusted calculation of your Social Security benefits.

The WEP calculation is applied before other benefit-adjustment calculations, such as early retirement reductions, delayed retirement credits and COLA.

Provision Limits

If you’re collecting Social Security benefits while receiving a pension from a non-covered job, the WEP most likely applies. In fact, in December 2020, more than 1.9 million Americans were affected by the WEP. According to the Federation of American Scientists, most of these were former state and federal employees.

However, there are limits to how much this provision can reduce your Social Security payments. This is especially true if you receive a smaller pension.

The WEP has a maximum reduction equal to 50% of pension or retirement benefits from any non-covered employment. This means that regardless of how many years you spent (or didn’t spend) receiving substantial earnings from a covered job, your Social Security benefits will not be reduced by more than half of your pension payment.

Who Is Exempt From the WEP?

If you get a pension from a non-covered job, your benefits won’t automatically be subject to the windfall elimination provision. There are a few important exceptions.

You have 30 or more years of eligible earnings. If you worked 30 or more years in another job with substantial earnings, which withheld Social Security, you’re exempt from WEP. Substantial earnings are defined as $31,275 or more for 2024 (up from $29,700 for 2023). This exemption generally applies to retirees who started a second career after their first retirement. It may also benefit those who have changed jobs midway through their career.

You were eligible for pension payments before 1986. If you became eligible to accept pension payments from your non-eligible job before the year 1986, you are not subject to a WEP adjustment on your Social Security benefits.

You’re a federal employee whose service and Social Security coverage began on Jan. 1, 1984. The WEP mandatory coverage provision means that federal employees who were in service at the start of 1984 are exempt.

You are receiving a railroad pension. If your only pension comes from railroad employment, it is exempt from WEP.

Bottom Line

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The WEP aims to prevent retirees from the unfair advantage of receiving full Social Security benefits if they are also receiving a pension from a job that didn’t pay into Social Security. The WEP can reduce eligible Social Security benefits by as much as 60%. It has a maximum deduction equal to one-half of your pension payment. To avoid the WEP, you’ll need to work at least 30 years in a qualifying (Social Security-eligible) position with substantial earnings (for 2024, this is $31,275 or more). Other WEP exemptions include railroad pensions, survivorship benefits, pensions that began before 1986 and federal employees whose Social Security coverage began on Jan. 1, 1984.

Tips on Social Security

  • Consider working with a financial advisor who can help you build an investment portfolio. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • If you prefer to go it alone, use SmartAsset’s asset allocation calculator to determine how to best split your money between stocks, bonds and cash. The calculator bases its recommendation on your risk profile and offers a breakdown of each asset class.
  • Think you will be affected by the WEP? Then it’s important to account for this reduction in benefits when planning your retirement savings strategy. In some cases, you may need to save more in order to have a successfully funded retirement. Or perhaps you’ll need to delay retirement in order to hit the 30-year exemption threshold.

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