Dear Rusty: I am a retired Indiana State Trooper but I’m working at a second career at the present time. What information would you need to let me know about what percentage of my Social Security I will lose out on because of the WEP. Right now, I’m 57 years old and don’t plan to retire all together until I’m at least 62. Signed: Retired Trooper
Dear Trooper: First of all, thank you for your police service. As a retired employee of the State of Indiana, WEP (Social Security’s “Windfall Elimination Provision”) will apply to you if you have at least 40 Social Security quarter-credits (about 10 years of SS-covered work) and are therefore eligible to collect a Social Security retirement benefit. WEP affects retirees of employers who did not participate in the Social Security system but funded their own retirement plan in lieu of Social Security.
The amount of WEP reduction to your Social Security benefit will factored from your “Average Indexed Monthly Earnings” (AIME). Your AIME is your monthly average earnings for the highest 35 years of your Social Security employment and, if you don’t have the full 35 years, zeroes are plugged into the formula for years you didn’t contribute to Social Security (via FICA taxes). So, to use an example, let’s say the AIME from your Social Security covered work is $1500; your normal SS benefit at age 67 would be about $1000. But because of WEP, your Social Security benefit would, instead, be about $552. This is because of the way they compute (from AIME) your primary insurance amount (PIA), which is what you’re entitled to at your full retirement age. The normal PIA computation takes 90% of the first $895 of your AIME, but when WEP applies they instead take 40% of the first $895 of your AIME (these are 2018 numbers; they change annually). So, in this example, the normal SS benefit amount was reduced by about 45% (that percentage may change somewhat depending upon your actual AIME). I’d note that finding out your AIME requires taking all your years of SS-covered employment, adjusting each year for inflation, finding the 35 highest and totaling those years and dividing by 420 (the number of months in 35 years). And unfortunately, you can’t get your actual AIME from Social Security (though you can get an Earnings Statement which will show all your years of SS-covered employment). If you have more than 20 years of “substantial” employment that contributed to Social Security, the WEP reduction is mitigated by 5% for each year over 20, and WEP goes away with over 30 years of SS-covered employment. There is also a maximum WEP reduction which may apply. And remember too that if you claim Social Security before your full retirement age, your benefit will be further reduced because you are claiming the benefit early.
The information presented in this article is intended for general information purposes only. The opinions and interpretations expressed are the viewpoints of the AMAC Foundation’s Social Security Advisory staff, trained and accredited under the National Social Security Advisors program of the National Social Security Association, LLC (NSSA). NSSA, the AMAC Foundation, and the Foundation’s Social Security Advisors are not affiliated with or endorsed by the United States Government, the Social Security Administration, or any other state government. Furthermore, the AMAC Foundation and its staff do not provide legal or accounting services. The Foundation welcomes questions from readers regarding Social Security issues. To submit a request, contact the Foundation at email@example.com, or visit the Foundation’s website at www.amacfoundation.org.