Windfall Elimination Provision’s Effect on a Foreign-Born Spouse’s US Social Security Benefits Calculation

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Topic Author
MichDad
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Windfall Elimination Provision’s Effect on a Foreign-Born Spouse’s US Social Security Benefits Calculation

Post by MichDad »

Here’s the situation:

1. US-born citizen retires at age 62. He opts to delay collecting his Social Security benefits until age 70.
2. US-born citizen’s spouse (a naturalized US citizen) retires at age 59. She begins to collect on her own US Social Security record at age 62.5. She worked in the USA for 17 years. She worked in her country of birth for about 20 years and, of course, didn’t pay into the US Social Security system during those 20 years.
3. At age 63.5, US-born citizen’s spouse applies for social security benefits in her country of birth. Her country of birth has a Social Security Totalization Agreement with the USA. This makes her eligible to collect social security benefits in both the USA and in her country of birth.

Questions:

1. I assume the Windfall Elimination Provision will apply to the US-born citizen’s spouse because she worked for less than 30 years in the USA and didn’t pay into the US Social Security system during the 20 years she worked in her country of birth. Correct?
2. Will the spouse’s US Social Security benefits be reduced for only the years that she collects US Social Security benefits based on her own record?
3. When the US-born citizen reaches age 70 and begins to collect his maximum US Social Security benefits based on his own 35-year work record, his spouse will claim her spousal benefits under the US Social Security system. Will her USA spousal Social Security benefits be reduced because of the Windfall Elimination provision?

Thanks,

MichDad
hotscot
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Re: Windfall Elimination Provision’s Effect on a Foreign-Born Spouse’s US Social Security Benefits Calculation

Post by hotscot »

I think the SS won't be reduced based on spouses SS. Yours yes, but not his.
I was just checking our statements today.
I could be wrong, they're not always clear.
Your question is sound.

incidentally, have you signed up to the SS website so you can get e-statements?
They kinda explain it.
Last edited by hotscot on Thu Sep 16, 2021 1:16 pm, edited 1 time in total.
pshonore
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Re: Windfall Elimination Provision’s Effect on a Foreign-Born Spouse’s US Social Security Benefits Calculation

Post by pshonore »

WEP reduces benefits based on one's own earning record.

GPO (Government Pension Offset) reduces benefits when one collects on another's earning record. I suspect the GPO provision will reduce her spousal benefit.
Topic Author
MichDad
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Re: Windfall Elimination Provision’s Effect on a Foreign-Born Spouse’s US Social Security Benefits Calculation

Post by MichDad »

pshonore wrote: Thu Sep 16, 2021 12:08 pm GPO (Government Pension Offset) reduces benefits when one collects on another's earning record. I suspect the GPO provision will reduce her spousal benefit.
I purposely focused my questions on the Windfall Elimination Provision. The Government Pension Offset does not apply to foreign pensions.

https://rssa.com/ask-martha/pensions/if ... eive-both/

MichDad
Big Mig
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Re: Windfall Elimination Provision’s Effect on a Foreign-Born Spouse’s US Social Security Benefits Calculation

Post by Big Mig »

As I understand it, spousal benefits do not substitute or replace the spouse’s “own” benefit, they just add to it. So if the spouse’s benefit based on their own work record is $1000, and their spousal benefit based on your work record is (up to) $1500, then they will always be receiving their own benefit of $1000 and the spousal benefit will top it up so the total benefit is $1500. I expect the WEP will always reduce the $1000 part of their benefit, but their incremental spousal benefit will still be calculated based on their pre-WEP benefit and so limited to an additional $500. Effectively, the WEP always applies.

But I’m no SS expert…and since we have a similar international marriage I hope I’m wrong! This is what we use for planning though. We’re still a few years from actually collecting Social Security.
hotscot
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Re: Windfall Elimination Provision’s Effect on a Foreign-Born Spouse’s US Social Security Benefits Calculation

Post by hotscot »

So in your scenario spouse gets, [(50% of $1000)+$1500] = $2000
or
'and so limited to an additional $500'

Why limited? I thought the spouses contribution isn't affected by WEP...or is it?

(Why is America so complex?)
Last edited by hotscot on Thu Sep 16, 2021 6:08 pm, edited 1 time in total.
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rterickson
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Re: Windfall Elimination Provision’s Effect on a Foreign-Born Spouse’s US Social Security Benefits Calculation

Post by rterickson »

The windfall that Congress intended to address was pension income from a source where social security taxes were not paid. In the minds of the drafters, this causes the SS benefit to be artificially inflated.

You are obligated by law to notify the SSA of any non-SS pension you receive, and WEP will apply for the duration of the other pension.

The only exception would be if she works long enough under Social Security to phase out WEP.
Big Mig
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Re: Windfall Elimination Provision’s Effect on a Foreign-Born Spouse’s US Social Security Benefits Calculation

Post by Big Mig »

hotscot wrote: Thu Sep 16, 2021 6:06 pm So in your scenario spouse gets, [(50% of $1000)+$1500] = $2000
or
'and so limited to an additional $500'

Why limited? I thought the spouses contribution isn't affected by WEP...or is it?

(Why is America so complex?)
I assume you’re asking me? I think we’ve confused each other about who is the spouse and what their individual benefits are. My understanding (though I’ve totally made up the numbers, and am ignoring the ages and just assuming everyone is at the same FRA):

MichDad’s PIA is $3000
MichMom’s PIA (based on her own work record) is $1000
MichMom’s spousal maximum is $1500 (50% of MichDad’s PIA)
MichMom’s actual benefit is her own PIA of $1000 plus $500 in spousal benefit to get to the $1500 max
(Using the equation from the wiki, MichMom’s full spousal benefit is 3000/2-1000=500.)

My understanding is the WEP will always apply to MichMom’s $1000 “own” benefit, and the amount of her spousal “top-up” won’t change because of the effects of the WEP.

(edited 1 time to reflect the wiki.)
hotscot
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Re: Windfall Elimination Provision’s Effect on a Foreign-Born Spouse’s US Social Security Benefits Calculation

Post by hotscot »

Thanks!
Sorry for confusing matters.
Topic Author
MichDad
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Re: Windfall Elimination Provision’s Effect on a Foreign-Born Spouse’s US Social Security Benefits Calculation

Post by MichDad »

rterickson wrote: Thu Sep 16, 2021 6:08 pm You are obligated by law to notify the SSA of any non-SS pension you receive, and WEP will apply for the duration of the other pension.
When my wife applied for her US Social Security benefits at age 62.5, she added a statement in the notes section describing how she worked for years in her country of birth and should eventually qualify for that country's social security benefits. We also discussed this topic with the SSA representative who called her to confirm her US benefits decision (although, unfortunately, we didn't discuss the WEP). When she recently applied for her country of birth's social security benefits, she presented them with her last US Social Security benefits statement showing her US work history and a more recent document showing her current US Social Security monthly benefits. They told her they would work with the USA authorities to figure this all out. I'm not sure what else she can do.

MichDad
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MichDad
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Re: Windfall Elimination Provision’s Effect on a Foreign-Born Spouse’s US Social Security Benefits Calculation

Post by MichDad »

Big Mig wrote: Thu Sep 16, 2021 6:48 pm My understanding (though I’ve totally made up the numbers, and am ignoring the ages and just assuming everyone is at the same FRA):

MichDad’s PIA is $3000
MichMom’s PIA (based on her own work record) is $1000
MichMom’s spousal maximum is $1500 (50% of MichDad’s PIA)
MichMom’s actual benefit is her own PIA of $1000 plus $500 in spousal benefit to get to the $1500 max
(Using the equation from the wiki, MichMom’s full spousal benefit is 3000/2-1000=500.)

My understanding is the WEP will always apply to MichMom’s $1000 “own” benefit, and the amount of her spousal “top-up” won’t change because of the effects of the WEP.

(edited 1 time to reflect the wiki.)
Big Mig,

Thanks, this is helpful. Using your hypothetical, I'd like to focus, please, on MichMom's $1,000 Primary Insurance Amount (PIA).

In your example, her PIA has already been reduced by the WEP, right? Let's say that if she didn't encounter the WEP, her PIA would have been $1,200. But as a result of the WEP, her PIA is reduced to $1,000. When she begins to collect her spousal benefit, based on my record, She'll still receive $1,500 (one half of my PIA at my Full Retirement Age (FRA))?

What I'm trying to determine is whether the WEP will reduce her US Social Security benefits after she begins to collect her spousal benefits based on my Social Security benefits. Or, does the WEP simply reduce her US Social Security benefits for the years between when she began collecting her US Social Security benefits (at age 62.5) until the month she will begin to collect her US spousal Social Security benefits (at ~ age 67). If it makes any difference, she'll begin to collect her US spousal Social Security benefits when she's reached her own FRA.

Again, many thanks.

MichDad
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Flobes
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Re: Windfall Elimination Provision’s Effect on a Foreign-Born Spouse’s US Social Security Benefits Calculation

Post by Flobes »

MichDad wrote: Fri Sep 17, 2021 4:40 am What I'm trying to determine is whether the WEP will reduce her US Social Security benefits after she begins to collect her spousal benefits based on my Social Security benefits. Or, does the WEP simply reduce her US Social Security benefits for the years between when she began collecting her US Social Security benefits (at age 62.5) until the month she will begin to collect her US spousal Social Security benefits (at ~ age 67). If it makes any difference, she'll begin to collect her US spousal Social Security benefits when she's reached her own FRA.
WEP has nothing to do with spousal benefits. When applicable, it's GPO that impacts spousal (and survivor) benefits.

WEP is an alternative calculation of PIA for anyone receiving a pension based on work at which Social Security was not paid.

WEP mandates how Social Security benefit amount is determined via an alternate PIA formula. It is applied when you receive a pension from a job where you did not pay into Social Security when you were earning to achieve that pension. WEP has nothing to do with the size nor the origin of the other pension.

WEP impact is entirely about calculus of the Social Security first bend point, which is typically 90%. WEP changes the first bend point to 40%.

But impacts of the WEP are subject to limits. Reduction to SS cannot be more than 50% of the pension. There is also a maximum dollar amount published at applicant's age 62.

rterickson wrote: Thu Sep 16, 2021 6:08 pm The only exception would be if she works long enough under Social Security to phase out WEP.
Under current law, there are two exceptions to mitigate the WEP from calculation of Social Security benefits:

• The first: having 30 "substantial" years eliminates the WEP, and 20-29 "substantial" years reduces WEP impacts. Note the word substantial; this is a specified and defined amount, published each year. Spouse only worked 17 years, so WEP will be fully applied.

• The second: if you take a lump sum distribution of the pension before you are eligible to collect those retirement benefits, then the WEP is not applied. Not all pension plans allow lump sum distributions. Note: Once deemed eligible for the pension, taking a lump sum does not remove the WEP; there's an SS formula for evaluating this PIA modification.

Here's the relevant document from Social Security POMS that includes all the very particular WEP definitions of what is a Pension, what is a Withdrawal, what is Eligibility:
Determining Pension Applicability, Eligibility Date, and Monthly Amount
If you match all the ^ specifics, and you withdraw pension funds before eligibility, then you are not subject to the WEP.

However, as a practical tactic, WEP impact can be mitigated by taking Social Security early while starting pension late. WEP is not applied until the pension actually starts paying. So one can get unWEPed SS from 62 to 70, and then start start the pension at 70 with the SS "WEP ding" moving forward. It may be advantageous to do the calculus of delaying the pension to maximize unWEPed Social Security for a few years. Especially if pension benefits continue to grow while delayed. It's a very personal see-saw evaluation: size and growth of SS vs size and growth of pension.
Big Mig
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Re: Windfall Elimination Provision’s Effect on a Foreign-Born Spouse’s US Social Security Benefits Calculation

Post by Big Mig »

MichDad wrote: Fri Sep 17, 2021 4:40 am
In your example, her PIA has already been reduced by the WEP, right? Let's say that if she didn't encounter the WEP, her PIA would have been $1,200. But as a result of the WEP, her PIA is reduced to $1,000. When she begins to collect her spousal benefit, based on my record, She'll still receive $1,500 (one half of my PIA at my Full Retirement Age (FRA))?

What I'm trying to determine is whether the WEP will reduce her US Social Security benefits after she begins to collect her spousal benefits based on my Social Security benefits. Or, does the WEP simply reduce her US Social Security benefits for the years between when she began collecting her US Social Security benefits (at age 62.5) until the month she will begin to collect her US spousal Social Security benefits (at ~ age 67). If it makes any difference, she'll begin to collect her US spousal Social Security benefits when she's reached her own FRA.
MichDad, I understand (and am very interested in) your question but honestly am already in too far over my head to give a reliable answer. Get advice from a better source than me! That said…I’m starting to think you’re right.
hotscot
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Re: Windfall Elimination Provision’s Effect on a Foreign-Born Spouse’s US Social Security Benefits Calculation

Post by hotscot »

Being from the UK, but as a US citizen, I also have to factor in my UK occupational pension, and also my UK state pension.

I never knew having so much income would cause so many headaches.
Good problems to have I suppose...
Topic Author
MichDad
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Re: Windfall Elimination Provision’s Effect on a Foreign-Born Spouse’s US Social Security Benefits Calculation

Post by MichDad »

Big Mig wrote: Fri Sep 17, 2021 12:39 pm
MichDad, I understand (and am very interested in) your question but honestly am already in too far over my head to give a reliable answer. Get advice from a better source than me! That said…I’m starting to think you’re right.
I wish I knew what I was right about. I have no idea what the correct answer is.

MichDad
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