Many people are unaware of Social Security’s Windfall Elimination Provision, but this provision is a reason some people may see a reduction in retirement or disability benefits.
The Windfall Elimination Provision can affect how Social Security calculates your retirement or disability benefit. If you work for an employer who doesn’t withhold Social Security taxes from your salary, such as a government agency or an employer in another country, any retirement or disability pension you get from that work can reduce your Social Security benefits.
This provision can affect you when you earn a retirement or disability pension from an employer who didn’t withhold Social Security taxes and you qualify for Social Security retirement or disability benefits from work in other jobs for which you did pay taxes.
The Windfall Elimination Provision can apply if:
- You reached 62 after 1985; or
- You became disabled after 1985; and
- You first became eligible for a monthly pension based on work where you didn’t pay Social Security taxes after 1985. This rule applies even if you’re still working.
Exceptions to the Provision
The Windfall Elimination Provision doesn’t apply if:
- You’re a federal worker first hired after December 31, 1983;
- You were employed on December 31, 1983, by a nonprofit organization that didn’t withhold Social Security taxes from your pay at first, but then began withholding Social Security taxes;
- Your only pension is for railroad employment;
- The only work you performed for which you didn’t pay Social Security taxes was before 1957; or
- You have 30 or more years of substantial earnings under Social Security.
This provision can be extremely confusion, to determine how you may be impacted by this provision if you earn retirement or disability benefits from an employer who did not withhold Social Security taxes you can learn more at Social Security’s information page.
