What Counts As A Pension For The Windfall Elimination Provision?

Previously, we discussed when and how the Windfall Elimination Provision may affect your Social Security benefit if you also receive a non-covered pension from local, state or federal employment. (Examples of types of employment that may be state or local and not covered by Social Security are policemen, fire fighters,or city and county employees. Check your paystub for F.I.C.A. deductions or consult your HR department about whether you pay the F.I.C.A. tax.) What does Social Security consider a “pension” for purposes of the Windfall Elimination Provision?

A pension is a periodic or lump sum payment from an employer’s retirement or disability plan , based on employer and/or employee contributions and based on eligibility factors such as age, length or service, or earnings. Payments from either defined contribution plans (401K) or defined benefit plans (what is usually referred to as a pension) may be considered pensions for Windfall Elimination Provisions (WEP). If employer contributions or employer and employee contributions are used to determine the non-covered (no F.I.C.A. tax paid on wages from employer) payment, it is generally a payment subject to the Windfall Elimination Provision.

You need to consult your Human Resources Department to determine how many different non-covered payments you will receive from your employer at retirement. You are interested in the ones that come from your employer’s plan or system. They can be either a defined contribution plan (401K) or a defined benefit plan (pension). If your employer contributes to one of each on your behalf, both may be subject to WEP. You will need to provide this information to Social Security when you start your Social Security benefits. You will need to provide who pays the payment, when you are first eligible to receive the benefit, the period of employment upon which payment is based, and how much your gross monthly check will be.  An award letter from the organization that issues the non-covered payment should contain the info needed.  If you haven’t started receiving the non-covered pension when you decide to start Social Security benefits, ask your HR department for the information.  (NOTE: The Windfall Elimination Provision only affects the Social Security benefit when you are receiving both a Social Security benefit and a non-covered pension.  If you do not start receiving non-covered payments until after you start Social Security, your Social Security check is not affected until you begin receiving the non-covered payment.  You need to tell Social Security when your non-covered payment starts to avoid any overpayment of Social Security benefits.)

For more information about the Windfall Elimination Provision, visit this link: www.ssa.gov/planners/retire/gpo-wep.html.